Chips and Dips

PepsiCo’s Frito-Lay snacks division in January moved its promotion and retail merchandising account back to Dallas-based Tracy Locke Partnership after three years at Frankel. The account is estimated to be worth more than $100 million in billings.

The move was made to “combine the marketing scale of Frito-Lay North America and Pepsi-Cola North America for all consumer promotions and customer marketing,” Frito-Lay said in a release. The sister companies create joint programs under a “Power of One” initiative.

Frankel and long-time Pepsi shop TLP were both considered for the combined account in a lengthy shootout that ran through the fall. “We are convinced each is highly capable of managing our business,” says Frito-Lay senior vp-marketing John Compton.

“It was a long, hard pitch, so the victory was very sweet,” says Lon Schwear, president of TLP’s Wilton, CT, office (and the person TLP ceo Gary VonKennel credits with directing the win). “We’re looking forward to using the systems we’ve built with Pepsi to build great programs with Frito-Lay.”

TLP had deeper ties with Pepsi than Frankel did with Frito-Lay. In addition to its relationship with the soda giant’s brand marketing group, it also works with its fountain and international divisions and its sales and marketing group. TLP operates more than 20 branch offices within Pepsi locations.

The 88-year-old shop is also agency of record for some of Pepsi’s largest bottlers — and support from the bottlers was a major factor in the shop’s win, according to a source close to the review.

“Having one unified agency working on the Power of One campaign makes sense from a cost-savings standpoint, ensures consistency in our market executions, and allows [us] to leverage the scale of national programs,” says a Pepsi-Cola North America spokesperson.

Tapping TLP also deepens PepsiCo’s ties to Omnicom Group, New York City, which solidified its standing as the company’s lead advertising agency by taking on the Gatorade, Tropicana, Aquafina, and other ancillary brands last fall.

The Frito-Lay account could boost TLP’s billings more than 20 percent and add $10 million-plus in net revenues. The shop had $64.6 million in net revenues in 2000.

Speaking Frankel

Conversely, the loss could drop Frankel’s billings by 15 percent and its net revenues ($99.6 million in 2000) by about 10 percent.

The loss is even more of a disappointment considering the success Frankel achieved with its work on the account. The shop won PRO Awards in 2000 and 2001 for campaigns that set results records during the crucial July 4th promotional period (PROMO, November 2001, November 2002).

And the news couldn’t have come at a worse time for the shop, which was preparing to announce a corporate restructuring in the works since last summer. The reorganization reportedly includes a staff reduction of as much as 20 percent (with the Frito-Lay loss a factor in the total). It was Frankel’s third round of layoffs since January 2001, when the shop had about 740 employees.

The cuts included president Dan Rose, a 15-year Frankel veteran who volunteered to be among those let go. “We laid off a lot of really good people this year, but we hadn’t laid off anybody on the executive committee,” says Rose, who plans to take a year’s sabbatical.

“When the economy shut down as abruptly as it did, we got caught,” explains Rose. “We’ve always been staffed for growth. Agencies just can’t do that anymore.”

His departure puts ceo Jim Mack, who has been with the shop since 1978, firmly in charge — especially since Mack also assumed the title of chairman from founder Bud Frankel in early January. (Frankel will remain part of the agency’s executive committee and stay active on several long-standing accounts.)

The reorganization will seek to streamline Frankel’s structure by breaking down internal department “silos” and present a more “business-unit approach,” says Mack. “We’ll be more focused on the clients and on business development.”

But the changes do not signal deep financial distress at the agency, the executives profess. “The bad news is that some of our clients reduced spending, and we lost the Frito-Lay account,” says Rose. “But five of our top 10 clients increased spending last year. We are still profitable.”