Fonterra has faced a tough few years. Photo / File
Dairy giant Fonterra is understood to be conducting a pitch, seeking a global advertising partner for an account estimated to be worth as much as $40 million.
This comes as Fonterra prepares to unleash a significant new strategy and change of direction tomorrow morning.
While a lucrative opportunity, the advertising account comes with the challenge of working with a legacy behemoth struggling to put out fires on many fronts, local and abroad.
Asked for details of the pitch, a Fonterra spokesman told the Herald it wasn't the company's policy to disclose information about commercial agreements.
Industry sources have told the Herald the agency involved will be required to develop Fonterra's brand in New Zealand as well as a number of international markets.
Fonterra's brands include Anchor, Kapiti and Symbio in New Zealand; Western Star, Perfect Italiano, Bega, and Australian Dairies in Australia; and Anlene, Anmum and Anchor Food in China. At this stage it is not clear which of these brands may be treated independently from the overarching pitch.
Nielsen advertising spending statistics show the co-op spent around $7.7 million advertising the Fonterra brand in New Zealand over the past year, down from about $11 million in each of the two years before that.
Add to this the value of Fonterra's activities in countries such as China, Chile and the wider Asia-Pacific region and you have arguably the biggest advertising pitch of the last few years. One industry source told the Herald the overall account could be worth as much as $40m.
It's understood the move is being driven by the procurement department, which is looking to tighten up wherever it can.
However, a source warned that it could be a while before the chosen advertising agency is put to work, given the sheer number of structural changes the dairy giant is working through at the moment. These have included this week's announcement of the 50 per cent sale of DFE Pharma as well as offloading Tip Top earlier in the year.
There is also a broader theme of belt-tightening at the moment, with the company canning executive bonuses and freezing the pay of all 6000 employees earning more than $100,000 a year.
This all comes as the company reports a $605 million loss – only the second since it was formed in 2001 (its first loss came last year, at $196m).
Fonterra was initially meant to report its financial results on September 12 but these were deferred to the 26th due to "accounting adjustments".
The question now is which agency will inherit the responsibility of mending the damaged brand as it steps into 2020.
Until now, Fonterra has worked closely with agencies from the BBDO group, most notably Colenso BBDO here in New Zealand.
Colenso BBDO is still Fonterra's agency of record, but the dairy company this year shifted the relationship from a retainer to project-based work.
A spokesman from Colenso BBDO declined to comment for this story.
Recently, BBDO's hold on Fonterra was broken across the ditch, with TBWA Melbourne picking up the account from Clemenger Melbourne, which has had the business on its ledger since 2006.
Given TBWA's success in Australia, it seems likely the agency could also be interested in snapping up a bigger slice of the global business.
An industry source suggested there was also potential for Fonterra to negotiate a deal at holding company level with one of the four advertising juggernauts: WPP, Publicis, Omnicom and Interpublic.
The source speculated that one of the holding companies could perhaps create a bespoke ad agency, dedicated specifically to managing Fonterra's reputation across the world.
This isn't without precedent. In 2016, Omnicom confirmed the launch of We Are Unlimited, an ad agency dedicated specifically to the McDonald's business. At the time, it was widely trumpeted as a new way of doing business. But as is often the case with such bold claims, it all unravelled this year when McDonald's returned to more traditional roots by appointing independent ad agency Wieden + Kennedy.
The question now is whether Fonterra will travel down a similar route as McDonald's or stick to a more familiar relationship with its advertising partners as it looks to rebuild its reputation.
Marketing and communications consultant Paul Gunn says Fonterra needs an ad agency that can deliver more than just window dressing.
He says the company's reputation has been hurt because it simply hasn't responded quickly enough at a structural level to the changes in the media landscape.
"You've got a legacy company that's rooted in very traditional behaviours and moves at a particular speed," says Gunn.
"What you are seeing is a gap between the need for instant communication and the ability for large organisations to organise their responses – and that leaves a vacuum."
Gunn says this vacuum can quickly be filled by people who might have a vested interest or agenda to promote.
"It's very easy these days to seize on something and push it from a certain point of view. That's the great leveller of social media. All of sudden the people who didn't have a voice, now have a voice – and it's an instant and very widespread voice. It's very easy for any issue to be magnified."
An example Gunn points to is the environmental debate, which has seen Fonterra condemned in both local and international media in recent years.
"Even if you're saying the right things, sometimes a delay can be very problematic.
"They are trying to tell their stories, but they almost always have to cut through the noise that's adding confusion."
Gunn says that if Fonterra is to repair the damage done to its brand in recent years, it needs to rebuild the company's internal communications structures to something more reflective of the way the media works today.
While it's always difficult to turn around a legacy business, it has been done in this market. The clearest example in recent years can be seen in Spark's ability to shed the baggage of the legacy Telecom brand.
This example might come at bad time given Spark's calamitous Rugby World Cup streaming effort, but even after that mishap, the company was still commended for how quickly it responded and explained its decisions.
"That's a good example of a legacy company that's updated its communications and its behaviour," says Gunn.
"What you've got now at Spark is a group who understand what the brand is about and then have the mandate to act immediately."
