Restructuring and layoffs hit Publicis following P&G's production cuts, Adweek reports

Dive Brief:

Publicis Groupe's Publicis Communications hub confirmed plans to restructure the production units of three of its creative agencies: Saatchi & Saatchi, Publicis New York and PG One, according to a report in Adweek.
The restructuring included a round of layoffs, two unnamed sources with direct knowledge of the situation told Adweek. The move primarily stemmed from Procter & Gamble's (P&G) decision to eliminate or reduce production work for its advertising campaigns, one of the people let go as part of the restructuring told Adweek. P&G is one of Publicis's major clients, and PG One is the marketer's dedicated agency unit.
Several executives, including Publicis New York's head of production and an executive producer, were reportedly laid off. Jenny Read, Saatchi & Saatchi's director of integrated production, will oversee the teams at all three agencies, the sources told Adweek. Last year, P&G, the largest advertiser in the world by media spend, spent about $2.7 billion on paid media in the U.S., per Kantar Media data cited in the report.

Dive Insight:

Reported executive departures and organizational realigning at Publicis mark another big agency reverberation from P&G's ongoing quest to cut marketing costs and streamline operations with an eye toward efficiency. P&G's Chief Brand Officer Marc Pritchard has previously urged agencies to simplify their structures to better meet client demands, and the packaged goods giant has continued to reinforce a commitment to trimming down its agency roster over the next several years.

The latest news underpins, in part, how much influence brands wield over the large traditional ad agencies, which are struggling with growth almost across the board and are more frequently losing clientele to newer competitive threats like global management consultancies. Publicis missed its revenue targets in second-quarter earnings reported last week despite winning some major accounts in the first half 2018, including Marriott's paid media business, and ramping up a focus on it artificial intelligence platform Marcel.

P&G plans to cut its agency roster by 50% over the next several years with a goal of saving $400 million, having already reduced the roster by 60% since fiscal 2015. The marketer is additionally taking a greater number of marketing functions in-house. In April, P&G announced plans to pilot three new agency models for its fabric care business, including creating a standalone creative agency combining talent from three rival holding companies: Publicis' Saatchi & Saatchi, WPP's Grey and Omnicom's Marina Maher Communications and Hearts & Sciences.

The reported impact of P&G's production cuts on Publicis are a standout example of a broader industry trend. Seventy-four percent of major multinational marketers surveyed by the World Federation of Advertisers (WFA) are reviewing their current agency arrangements. Nearly 60% of marketers in the WFA report mentioned a desire to reduce the number of agencies on their roster.