By Akanksha Nagar and Alokananda Chakraborty
The two partners of advertising firm RK Swamy BBDO, the agency that put Madras — now Chennai — on the advertising map of India, are ready to go their separate ways. Under a new agreement, R K Swamy will buy out BBDO’s stake in the joint entity while BBDO will buy out R K Swamy’s stake in BBDO India.
Starting out as RK Swamy Advertising Associates in 1973, the company got on board global agency network BBDO, initially as a non-equity partner in 1985, and then as a equity partner in 1990. BBDO Worldwide later took a majority stake in R K Swamy, which it bought back in 2009 when it set up a wholly-owned subsidiary in the country — BBDO India. However, both the companies continued to have minority interests in each other.
After coming together, RK Swamy BBDO ranked among the top 5 Indian advertising agencies in its first decade. It now features between No 15 and No 20 in various industry sweepstakes.
A company statement said the split was necessitated by ‘strategic reasons’. Shekar Swamy, Group CEO, R K Swamy Hansa, sees tremendous opportunity in consolidation. “This (consolidation) is one of the key strategic directions for our group. Our clients include institutions at the foundation of the nation, large private business groups, and emerging Indian brands. Our digital offering is extensive and opportunities are plenty to pursue,” he says. The business entities of the group include – the ad firm R K Swamy (BBDO), Hansa Vision, Hansa Research, Customer Equity Solutions, iVista Digital Solutions, Hansa Estates and Hansa Zone in India and HANSAIGCR and HANSA Marketing Services in the USA.
The group’s priority is the Indian market and Swamy says it will ‘invest deeply’ here. “That is hard to do in a partnership structure, where priorities can vary,” he adds.
Srinivasan K Swamy, chairman and managing director, RK Swamy Hansa Group, has told media that the separation would not impact any of the partners much as they had minority stakes in each other.
Sandeep Goyal, managing director, Rediffusion Brand Solutions, says that it is good to see Indian agencies become ‘independent’ and self-sustaining. “The ‘network’ subservience is no longer a necessity — there is enough local business to grow, prosper and be profitable. R K Swamy is a well-respected Indian ad agency and I am sure they will do well as a standalone brand,” he adds.
BBDO has been present in India with its 100% subsidiary for over a decade now and will only grow stronger with full network ownership and control, believe many industry experts. “It is a fair development since some were speculating a break-up would happen as early as in 2009 when BBDO entered India independently,” says Lloyd Mathias, business strategist and angel investor. Mathias adds that BBDO did help R K Swamy get a sizeable number of global businesses. However, since BBDO India was set up in 2009 ‘the Indian partner must have realised parting ways amicably would be a good idea so they can compete as two different brands in the marketplace. There is no acrimony and less confusion (between BBDO India and RK Swamy BBDO),’ adds Mathias.
Some, however, see this as a signal that BBDO ‘is getting impatient with the Indian market’. “A big reason for the two coming together was that BBDO wanted a foothold in India,” says an industry insider. “For its part, R K Swamy would have hoped to get large parts of the Pepsi business with BBDO on board. Obviously that calculation didn’t work out. Then BBDO India was set up and now with Pepsi going hook, line and sinker for Leo Burnett, there is really very little reason to carry on like this.”
Globally too, relations between PepsiCo and BBDO have seen many ups and downs. The agency and the brand parted ways in 2008 ending their 48-year relationship, when Pepsi moved its business to another Omnicom shop, TBWA\Chiat\Day. They came back together in 2008.