C-E's rebuild may lose zip if USPS contract isn't delivered
There's been chatter for several weeks that Warren-based Campbell-Ewald Co. is nearing a deal to move downtown into the Class A office space in the former seven-story J.L. Hudson Co. warehouse attached to Ford Field.
Agency President Bill Ludwig has acknowledged that the agency is looking around, but he won't say more.
"Campbell-Ewald has been exploring alternative properties, including staying in Warren, where it has been since 1978. We've had architects look at several properties," he told Crain's Aug. 10.
Other rumored downtown landing spots for Campbell-Ewald include One Detroit Center and a building at 600 Randolph St. used by Wayne County's executive offices before a move to the Guardian Building.
"I've talked to Bill and encouraged him to come downtown. I think it could be great for CE to feel some of that drive and mojo," said Tim Smith, president of ad and design agency Skidmore Inc., which moved last year to Detroit's Madison Theatre building after years in Royal Oak.
-- Bill Shea
The ongoing rebuilding effort at Campbell-Ewald Co. since it lost the $600 million Chevrolet account two years ago could be somewhat sidetracked if the Warren-based advertising agency loses a U.S. Postal Service contract that expires next month.
The post office is engulfed in a financial crisis -- it defaulted this month on a federally mandated $5.5 billion payment for future retiree benefits -- and what happens with its marketing is for now a mystery.
What losing the account would mean for Campbell-Ewald isn't yet known. But if recent history is an indicator, it could mean layoffs.
A few years ago, the agency had more than 1,200 staffers. The loss of Chevy -- after 91 years -- in April 2010 was damaging. Even with a successful effort to diversify the client roster to not rely on any one major client, C-E has 450 fewer employees today.
The company won't say anything specific about what would happen if it loses the post office as a client.
"Our staffing decisions are always driven by numerous factors including current business and client needs, potential new business wins, as well as our continued growth plans and our overall vision for C-E to be successful," Pat Baskin, the agency's public relations manager, wrote in an email.
The postal contract, reported at various times over the past decade at about $100 million annually, is to create the post office's broadcast, print and digital marketing and has been held by Campbell-Ewald since 2002 after replacing Chicago-based incumbent agency Leo Burnett Co. Inc. The contract ends Sept. 30.
A request-for-proposal for the work was originally published in March 2011, but the post office has repeatedly tweaked the process and what it's seeking. The contract with C-E was extended a year during that time.
A new RFP is expected to be issued at the end of this month or in early September, said Susan McGowan, USPS senior manager of public relations.
The RFP is expected to include creative, media planning and buying, direct marketing and multicultural advertising. The RFP process will involve inviting interested agencies to submit interest bids, and after a vetting process, finalists will be asked to make their official pitches, McGowan said.
Campbell-Ewald intends to retain the work, for which it has won more than 30 awards.
"We're proud of the work we're doing on behalf of the U.S. Postal Service to help them advance their business, particularly in the shipping category. We will participate in the mandatory government review and we will defend the business," said Bill Ludwig, chairman and CEO of Campbell-Ewald, in an emailed statement.
The fate of the post office work comes at a time of transition for the ad agency.
Foremost, it represents a high-profile portion of its national portfolio and a large enough piece of the agency's bottom line that losing it would be felt to some degree -- but not as large of a blow as losing Chevy.
The post office work is less that 10 percent of the agency's business, Baskin said.
The agency said it has seen 20 percent revenue growth over the past two years, but it didn't specify what that figure means.
C-E had estimated U.S. revenue of $121 million in 2011 and is the nation's 66th largest ad firm by that metric, according to the Advertising Age DataCenter's most recent industry rankings. That's down from $157 million in 2010 and a dramatic drop from 2007, when it brought in an estimated $239 million.
Chevrolet was reportedly $30 million in revenue and $600 million in media billings in 2009, Crain's sister publication Advertising Age reported.
In October, Ludwig told the publication that a third of the Chevy business had been replaced. The account at one time was 80 percent of C-E's billings, but was down to 25 percent when the work was stripped by General Motors Co. and given to a competitor.
The agency's largest account for years has been the U.S. Navy, which it first won in 2000 and defended during mandatory reviews in 2005 and 2009. It handles the service's recruiting marketing.
Now, the Navy is one of several large contracts of a similar size. The agency declined to name the other clients.
Ad Age noted that C-E's 2010 ad revenue on the Navy account, the most recent figure available, was $58.9 million, compared with $68.3 million in 2009 and $163.6 million in 2008, citing a report from Bloomberg News.
The revenue has fallen because the Navy needs fewer sailors as the wars in Iraq and Afghanistan wind down and the Pentagon cuts budgets.
Campbell-Ewald deployed the Navy's current national marketing campaign, "America's Navy -- A global force for good" in October 2009.
"We've had a direct financial impact from their in-limbo things, while they're waiting for the post office to make its mind on what to do," said Tim Smith, president of Detroit-based ad and design agency Skidmore Inc.
Skidmore does storyboard testing and animation for Campbell-Ewald internal and external campaign testing. The agencies have worked together since Skidmore was founded downtown in 1959.
The USPS is under pressure and scrutiny from Congress and others to reduce its losses. The post office is losing more than $25 million a day this year and expects to lose $14.1 billion total, The
New York Times reported July 31.
It reported a $5.2 billion loss for the fiscal third quarter on Aug. 9 for the fiscal year that ends Sept. 30. The total loss was $5.1 billion for fiscal 2011.
In March, the post office rolled out a new marketing campaign from Campbell-Ewald for the Web-based "Every Door Direct Mail" service aimed at helping small businesses target potential customers in specific areas.
The service has raised $153 million in new revenue since it was launched in April 2011 through December, the post office said.
Campbell-Ewald, which turned 100 in 2011, also has offices in Los Angeles, San Antonio, Miami and Washington, D.C.
Its client roster also includes Alltel Wireless, Carrier, Ghirardelli, Kaiser Permanente, Olympic Paints and Stains, U.S. Mint and USAA. It also retained some General Motors work after losing Chevy.
In December, the agency added Jackson-based Consumers Energy Co. to handle marketing and communications work for the electric and natural gas utility's customer engagement initiative.
C-E is owned by New York City-based Interpublic Group of Cos. (NYSE: IPG).
Bill Shea: (313) 446-1626, firstname.lastname@example.org. Twitter: @bill_shea19