7 February 2014
WPP and PBN H+K Join Russia’s New Revolution
On February 7, a glittering ceremony saw the opening of the 2014 Winter Olympic Games in Sochi, already billed as the most expensive Games in history. It also represents a coming of age for democratic Russia, the first Olympics it has hosted since the break up of the Soviet Union.
The event will put Russia on the sporting map, with football’s World Cup to follow in 2018, but also looks set to cement Russia’s status as one of the world’s most powerful economies, at a time when other BRICS have been faltering. Martin Sorrell, WPP’s CEO, told Bloomberg last autumn:
“I’m bullish on Russia... The big problem in Russia used to be that people were very short-term. It’s getting much more long-term.”
Sorrell also noted that WPP has a market share of around 25 percent in the country’s advertising and media markets, making it easily the biggest player in the industry, with more than 2,000 WPP people. But Russia is also significant to WPP because of the ‘eastward shift’ that is taking place within Europe, which leaves Moscow as an important hub for operations in the region, particularly for former Soviet nations like Ukraine and Kazakhstan.
Russia’s advertising market has been enjoying strong double-digit growth for a decade with the single exceptional year of 2008, easily outpacing growth in the economy as a whole, which has been slowing.
This reflects a growing consumer culture. Peter Necarsulmer, CEO of Moscow-based PBN H+K Strategies, says:
“For the first time the similarities between Russia and other markets in Europe are greater than the differences.”
Twenty years ago, he explains, there was no middle class in Russia; today they account for 35-40 percent of the population.
Compared to most countries, wealth is enormously concentrated in two cities, Moscow and St Petersburg, where there is a very significant market for luxury goods. But much of the population remains relatively poor – some 40 per cent still grow their own fruit and vegetables at their dachas – and the polarization of wealth is extreme. In some cases, brands even adopt separate strategies for the more cosmopolitan cities and the less sophisticated regions. Yuri Pashin, president of Y&R companies in Russia, argues:
“Russia is not one place, it’s many. It is a multinational Eurasian country where significant differences exist from region to region; many areas with many different people and cultures, that all speak Russian.”
There is certainly a degree of conservatism among both marketers and consumers. Research carried out by Landor last year showed that Russians prefer Russian brands to their Western counterparts, even though the Russian versions often don’t deliver in terms of quality and performance. “The implication for international brands is that they need to ‘Russify’”, said Landor. And among companies, understanding of branding and integrated marketing is still at a nascent stage. Emma Beckmann, managing director of Landor in Russia, says: “For many of our corporate clients in Russia we are doing the type of corporate identity programs that we were doing in Germany three to four years ago and in the UK six to seven years ago.”
In advertising too, things change slowly. Pashin says Russian men still expect brands to talk to their ego, and “the average consumer finds it hard to understand more emotional, smart and engaging advertising”.
Category-wise, cooking and home improvements are on the rise, along with travel and health. Advertising for alcohol and tobacco is banned.
TV – largely state-owned – is still the dominant medium, with over 50 per cent share, but digital media are making rapid progress. Necarsulmer says:
“This is the fastest growing Internet accessible country in all of Europe; Russian consumers are highly tech savvy.”
Russia’s Internet is a separate planet, with Yandex and Vkontakte both much bigger than their counterparts Google and Facebook.
For now, Russia is still in transition, but as it continues to catch up with advanced consumer markets, there’s everything to play for.
This article is based on a piece that appeared in the Q1 2014 edition of WPP Wire.
PBN H+K Strategies has been in Russia since 1990 when Mikhail Gorbachev invited PR company PBN to set up operations. It became majority owned by WPP in 2012 and has 60 people in Moscow, Ukraine and Kazakhstan with clients including Abbott, Bank of America Merrill Lynch, Evraz, Castorama, Praxair and Sanofi Pasteur.
GroupM Russia was established in Russia in 2005, bringing together WPP’s existing media agencies in the country. It operates Maxus, MEC, MediaCom and Mindshare as well as just-launched digital specialist Quisma and it is actively launching Xaxis.
Ogilvy & Mather was the first western agency in Moscow, opening its doors in 1988. Other Ogilvy companies are: OgilvyOne, Ogilvy CommonHealth, Neo@Ogilvy, Promo Interactive and Redworks, with 210 people in total. Key clients include TCCC, Ford, KC, Unilever, IBM, Phillips, Nestle, Amway, AstraZeneca, GSK and Johnson & Johnson. O&M was awarded Russia’s most effective agency for the last three years.
JWT arrived in Russia in 2005; it has 80 people and clients include Bayer, Mazda, Johnson & Johnson, Nestle, Unilever, Nokia and Shell.
Y&R Brands has been in Russia since 1989 and operates Y&R, Actis/Wunderman, Landor and Sudler & Hennessey, with 100 people in total. Its key clients are Danone, Colgate-Palmolive, Philip Morris, LandRover/Jaguar, Barilla, Azerfon, Pirelli, Baltika and Nycomed.
Landor opened its office 18 months ago, offering services including insights and strategy, corporate identity, packaging design, consumer experience, and has 16 people; key clients are: Russian Copper Company, Aeroflot, Evraz Rail, Mareven Foods, Ikea Shopping Centres, PMI Russia, Verne Capital in Kazakhstan, VETEK Fuel & Energy Holding in Ukraine and Russian Standard.
Grey Russia was established in 1992 and operates under the Grey Moscow and Grey Healthy People brand with 75 employees. Clients include P&G, ABInBev, General Motors, MasterCard, GSK, Teekanne and Sportmaster. The agency has invested heavily in digital: its Pantene video for P&G recently went viral with five million views.
TNS has been in the country since 1989, and is the biggest research company with 400 full-time employees and 1,000 including freelancers. It offers custom, syndicated and media services.
Millward Brown has been in Russia since 2002 when ARMI-Marketing joined the Millward Brown International network.
Other WPP companies with a presence in Russia include Added Value, Brand Union, FITCH, Grape, Geometry Global, Kinetic and Mikhailov & Partners (Burson-Marsteller).