- Nestle is reportedly launching a review to consolidate its North American advertising business from eight to only four to six agencies, multiple anonymous sources confirmed to Adweek in a report. It wouldn't be the company's first considerable trim in recent years: it reduced the number of digital agency partners it works with from 20 to eight in 2014.
- The latest review includes creative and digital for some of Nestle's largest brands, including in prepared foods. Details of the scope of the review were unavailable, but Adweek said it's to be procurement driven, with an external audit instead of creative pitches. Sources told Adweek that WPP may be a winner in the review. The ad giant's former CEO Martin Sorrell, who recently stepped down, reportedly had close relations with Nestle leadership. GroupM, a WPP shop, also won Nestle's U.S. media account in a review in 2013.
- Nestle works with several independent and holding company-owned agencies in North America, including McCann and its Hispanic marketing division Casanova, J. Walter Thompson, Leo Burnett, Grey, Ogilvy, FCB, Doner, Reach and Deep Focus, but it's unclear which agencies will go under review. Nestle spent $633.4 million on paid media in the U.S. in 2017, according to Kantar Media data cited by Adweek.
Nestle moving to further consolidate its ad business after an already considerable cut back just four years ago points to how large corporations, particularly in high-spending categories like packaged goods, are continuing to rethink their existing marketing structures, namely by peeling back budgets. Nestle's decision is primarily a cost-saving measure, as Adweek notes, but other motivators could include a desire for transparency, more control over creative, quicker responses to consumers' needs and adapting to digital disruption.
The advertising landscape — and agencies, in particular — are facing some serious existential crises as traditional CPG marketers continue to streamline ad operations and shrink their agency relationships. The telecom Sky, for example, overtook Procter & Gamble in the U.K. in ad spending on traditional media in 2017, according to Nielsen data cited in The Drum. Spending dropped 3.5% on TV, radio, direct mail and other formats.
P&G, like Nestle, is significantly consolidating how it handles its ad operations, and plans to reduce the number of its agencies it works with by 50% over the next several years with an eye toward saving $400 million. The CPG giant has already reduced the number of agencies it uses by 60%, and previously said it's saved $750 million in agency and productions costs.