Woolworths recommends Carat keeps $240m media account

By (incomplete) | 12 August 2014

Updated: Woolworths says this story is incorrect. A spokesperson for the retailer issued the following statement: "There is no front runner. No decision has been taken."

Carat is set to retain the Woolworths media account with the retailer's management and marketing teams today recommending to the Woolworths board that the agency remains in control of its $240m ad spend.

Carat has been advised that is the preferred choice following the pitch process and is already preparing to invoice Woolworths with a new operating budget and agreed fee. That fee is understood to be around three times higher than its previous retainer.

The news will anger but not surprise MediaCom or OMD, both of which were vying for the one of the biggest accounts in Australia, and which were advised to submit their best and final offer in recent weeks.

Carat's confirmation that it had hired OMD's head of trading Dan Sinfield last week was interpreted by some as a sign that the business had been sewn up. Others suggested it was simply a career move by an ambitious trading director looking to run an agency.

Sinfield was a key member of OMD's management team and had previously overseen the McDonald's account, forging a strong relationship with Helen Lacopoulos, now head of media at Woolworths and a key member of the panel making the decision on the media agency arrangements. However, new CMO Tony Phillips is understood to be the man with most sway in the outcome.

Sinfield's appointment came as Carat also made changes to some of the senior members that had overseen the Woolworths account, with Angus Fraser moving over to lead strategy on the Federal Goverment business, and Andrew Norris also taking on a new role.

Barring board-level intervention, it is thought that Carat will handle the Woolworths account for at least another year and, in return for the higher fee, forego all other related deals with media owners to subsidise remuneration and guarantee transparency. It will likely deploy significantly more staff to service the account, and will look to recruit as soon as the deal is rubber stamped.

A contract is yet to be signed, although it is understood that pen has never actually been put to paper since Carat took on the account.

Unless another Harold Mitchell-esque reversal leads the board to overturn the recommendation of its management team regarding a quarter of a billion dollars of media spend, the decision will bring closure to a drawn-out pitch process.

News of the review broke in February, but it is understood that Woolworths had begun discussions around the pitch some months earlier, following an audit in November.

Agencies pitching for the account had initially expected an outcome by late May. However, in early June Woolworths said that it needed a further two weeks to come to a decision, following the disruption to its marketing arrangements brought about in May when it swapped Droga5 for Leo Burnett Sydney and hired former Coles man Tony Phillips as chief marketer.

At that time speculation mounted that the account was staying put, as the retailer looked to bed-in new people and partners, although Woolworths insisted no decision had been made.

But it appears that Carat, which also hired trading boss Paul Brooks from MediaCom in January, has put together the team and the package required by the retailer to retain its business and in the process pull off an apparent coup: being paid a more realistic upfront fee, albeit with less leeway in other areas.

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