WPP looks to bag Tesco as media buying contract put to pitch
Tesco has decided to put its massive media buying and planning contract out to pitch after more than 25 years with its current supplier, according to people familiar with the matter.
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Favourites in London's adland to win the contract from the troubled supermarket group include agencies owned by FTSE-listed WPP and France's Publicis Group.
The grocer is estimated to spend between £110m-£140m on media but is expected to significantly increase its spending as it looks to stop the rot in the fiercely competitive supermarket industry environment, which has seen several rounds of price cutting in the last 12 months.
Tesco's planning and buying account has been handled by Interpublic Group (IPG) agency Initiative for over 25 years but many such contacts have been switched since Tesco appointed chief executive Dave Lewis last September.
In January Tesco shocked adland when it moved its creative ad contract to Publicis agency Bartle Bogle Hegarty without a pitch, ending a two-and-a-half year relationship with Wieden & Kennedy London.
It is understood, however, that the media buying and planning contact is being put out to pitch, allowing Initiative the chance to try and retain its long-time client against rivals that is likely to include agencies of WPP, Publicis and other giants of the industry.
Having got a foot in the door, Publicis will be hoping its Starcom and ZenithOptimedia agencies will be in with a good chance to pitch for the buying and planning deal.
However, WPP chief Sir Martin Sorrell has been much thwarted in his efforts to bag Tesco over the years and will be hoping that group agency relationships with Lewis from his former job at Unilever will see him lean towards the FTSE 100 company.
Sorrell was feeling upbeat about the year ahead on Monday as WPP unveiled a £1.5bn annual profit in 2014, saying the group continued to benefit from consolidation trends in the industry, “winning assignments from existing and new clients, including several very large industry-leading advertising, digital, media, pharmaceutical and shopper marketing assignments, which partly benefitted the latter half of 2014, but the full benefit of which will be seen in group revenue in 2015".
Potential links between the two companies are extensive, with the industry rumour mill recently suggesting that WPP may be a potential bidder for Tesco's Dunnhumby data arm, which has been estimated at around £1bn.
Recent results from Tesco impressed the market as Lewis announced major price and cost cuts, closure of 43 unprofitable UK stores and the moving of the company's head office as part of his plan to revive the struggling supermarket chain.
The company also unveiled a “broad-based improvement” in UK trading with the recent like-for-like sales decline easing to just 2.9% in the 19 weeks ended 3 January, compared with a 5.4% slump in the second quarter.
What’s more, UK LFL sales fell by just 0.3% over the pivotal Christmas trading period thanks in part to its ‘Festive Five’ deal where five key produce items were reduced to 49p.
Analysts warned that the grocer was by no means out of the mire, after it emerged that the company’s store-pruning strategy has reached central Europe, and with myriad domestic issues remaining.