Lessons from Wieden+Kennedy’s India Exit

Wieden+Kennedy entered India in 2007. Seventeen years on, it is wrapping up operations and exiting the Rs 1,55,386 crore Indian advertising market. By the end of this year, the independent agency will withdraw from India, leaving it with offices in eight locations: Portland, Amsterdam, New York, Tokyo, London, Shanghai, Sao Paulo, and Mexico.

The agency will shutter its Mumbai office by the end of 2024 and trim the Delhi office. The lean India team will support global operations, which won't involve advertising services. The decision to pack up just when the balance sheet had begun to improve is surprising. 

The company that has a headcount of 50 had begun to stem its losses. It showed a revenue of Rs 22.50 crore in FY23 and a loss of Rs 4.4 crore as per its disclosure to the Registrar of Companies. As per the internal calendar year balance sheet accessed by afaqs!, it had clocked a revenue of over Rs 25 crore in 2023 and had delivered an 18% operating margin in the same year after years of being in the red. In FY20, the India arm of W+K earned revenue of Rs 15.94 crore and registered a loss of Rs 3.8 crore. 

The independent global agency was trying to find its place among behemoths without the backing of marquee international clients. W+K is globally recognised as the agency on record for Nike, Coca-Cola, McDonalds, Samsung, and Ford. 

The India arm of the US-headquartered agency did not service any of these clients. The company has left its mark on Indian brands such as Make in India, IndiGo, Royal Enfield, and Oberoi Hotels—brands it no longer services. Recently, the India arm serviced Vida from Hero Motocorp, Jindal’s Steel, Jockey, G Shock, Hero Cycles, Clove-Dental, and Brownkind skincare, among others.  

It is noteworthy that the agency did not invest in building a team for verticals such as social media and new-age media for which brands allocate significant marketing budgets. According to highly placed sources, there were plans to make significant investments in hiring talent for new verticals, but those plans never materialised.

What can global agencies learn from Wieden+Kennedy’s exit from India?

The motivation to open an outpost should ideally be accompanied by a strong client’s expansion plan. That allows the agency to bank on a reliable long-term relationship to kick-start operations in a new market. 

During his visit to India last year, Anselmo Ramos, the founder of ad agency Gut, stated in an interview that the agency's expansion plans in India align with those of its existing clients. No other renowned independent agencies have ventured into India. 

The hope in such a scenario is that the global client’s business in a new country would go to the agency’s new office. “However that’s in theory,” as Tarun Rai puts it. Rai until June 2023 was Executive Director APAC at WPP’s Wunderman Thompson (erstwhile JWT and now VML) and is now heading the India operations for Start Design Group, a London-based design firm.

He adds, “In practice, the local management of the global client’s business has a lot of autonomy, including in choosing their agency.” This results in the lack of financial security for the fledgling agency. 

Sandeep Goyal, who was in charge of Japanese advertising major Dentsu when it entered India in 2003, says it is the solid backing of Japanese clients that provided Dentsu India the support it needed to establish itself. “When Dentsu was launched in India, we had two strong streams of business from Japanese clients and Indian clients. After about 7-8 years of Denstu’s India entry, we had around 90% of the market share of Japanese clients in India. That strategy secured us financially.” 

Dentsu, Goyal says, had clients such as Honda, Suzuki, Canon, Panasonic, Sony, Hitachi, and Yamaha in its kitty in addition to Indian clients such as Aircel, DLF, and Raymond. “The large international clients contributed about 50% of revenue, and the India clients were adding to that,” Goyal adds. He is now the managing director at Rediffusion Brand Solutions.

In the absence of such backing, the Indian outpost will have to invest in local talent and take a long-term approach to achieve financial stability. Competing with global networks with a long history and local agencies with lower overhead costs makes the fight to survive tougher in a market that is highly fragmented. Rai says, “So, revenue growth means developing more capabilities, which requires more cost.”

Many international networks and agencies bought into existing Indian agencies and got immediate scale—Chaitra Leo Burnett, Trikaya Grey, DDB Mudra. A senior creative agency head who spoke on the condition of anonymity says, “These international agencies have survived in India because they married their global learnings with a stronger Indian counterpart.” Starting from scratch is harder and takes longer to scale. 

The aforementioned senior agency leader emphasises that finding the most capable talent is not as important as aligning goals and temperaments across markets. This CXO, who is exploring tie-ups with agencies in other Asian countries, believes that a 3-5 year period should suffice to determine the success of a new venture and the justification of the value extraction for the invested effort.

Another creative agency head who spoke on the condition of anonymity said that it is far easier for local agencies to succeed than international ones. He added that the conversion of Indian rupees to US dollars would mean that the India revenues may form only a blip of the total global revenue. According to Ad Age, W+K’s US operations generated a revenue of $300 million in the US. 

Rai suggests that an asset-lite model that rests on a few centres of excellence could be a viable option for global agencies with international ambitions. 

The lesson to be learnt is simple, according to Rai: “Spend a disproportionate amount of time, money, and resources to secure the local business of global clients. Use that as a springboard to get non-aligned clients. Have an ‘investment’ attitude. Try to grow revenue; don’t look at the bottom line. Not for a long time. (Take some tips from our startups). And if you are not ready to do this, then don’t venture out in the first place, as that’s a total waste of money, time and effort.”