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Local ad agencies expect "shakedown" of their industry.

Local ad agencies expect "shakedown" of their industry

Advertising agencies in Northern Ontario are bracing for a shakedown of the industry's ranks in the coming months.

Several agency owners and managers are predicting that a number of small firms will close up shop in the next six to 12 months.

"There is definitely going to be a shakedown," says Real Fortin, president of 50 Carleton & Associates in Sudbury. "This is not a protected market.

"It's already happening internally. Companies are starting to reduce their staffs."

Fortin points out that Sudbury in particular has more advertising agencies per capita than does Toronto.

As part of the paring down process, agencies in the north are increasing the use of freelancers.

Another agency official says consolidation within the industry is common during a recession.

"I'm not sure if it's going to be a shakedown or a shakeup," notes Gerald McEachern, president of Henderson Delta in Thunder Bay. "The entire industry is consolidating and it's moving downward to the smaller firms."

The consolidation movement has already affected several major advertising agencies in southern Ontario.

Since 1988 there have been several large-scale mergers which have placed major marketing services in the south in the hands of four firms - Interpublic Group of Companies, Imnicom Group Inc., WPP Group PLC and Saatchi & Saatchi Co. PLC. The four control about a fifth of the revenues earned by all Canadian advertising agencies.

The group controls such well-known agencies as MacLaren: Lintas and McCann-Erickson, both based in Toronto.

"The day of the great Canadian agencies is over," says Jack Hudolin, a partner in Mallon, Hudolin & Associates of Thunder Bay.

Despite the distance from Northern Ontario, the mergers in southern Ontario are having an indirect effect on the region's agencies - especially in government related work, a mainstay for a number of Northern Ontario firms.

"It's cascading through the system," says McEachern. "The larger firms are taking the work away from the medium-sized regional firms, which takes work away from the small firms."

He notes that the Sault Ste. Marie-based Ontario Lottery Corporation recently awarded an advertising contract to a Toronto advertising firm.


McEachern's firm, Henderson and Associates, merged with Delta Advertising of Sudbury to form Henderson Delta earlier this year. However, he says the move was not motivated by survival.

According to McEachern, the merger has proved to be a blessing for the combined agency.

"It gives us more visibility in two major markets in Northern Ontario," he says. "The market in Northern Ontario is very small and all agencies are looking at how to maximize the marketplace. Mergers are just one option to do that."

According to several agency heads, there are more mergers on the horizon.


While McEachern views his company's recent merger as positive because it broadened the company's services and client base, Fortin calls mergers "a route to suicide.

"I don't see any validity of merging, because you don't gain anything," Fortin says. "Usually, mergers are based on the acquisition of talent or of capital. You can do both without expanding."

Fortin's firm has taken another approach to expanding its client base and overcoming the limitations of the north's marketplace. It expanded south.

While the natural business direction is for Toronto firms to establish a branch office in Northern Ontario, Fortin bucked the tide and opened a branch office, North on the Bay, in Toronto a year ago.

"The natural thing to do was to go towards the southern market," he recalls.

The move south was also necessary because approximately 60 per cent of Fortin's billings are generated by the southern market.

Fortin explains that 50 Carleton's strategy in establishing itself in Toronto was to approach a "well-defined vertical market."

The firm targetted the market for French-language advertising services as well as companies which are associated with the mining and forestry sectors.

As a result, 50 Carleton has billings from such well-known Northern Ontario corporations as E.B. Eddy and has been the agency of record for the Office of Francophone Affairs for the past four years.

Other advertising firms, such as Mallon, Hudolin & Associates and Sudbury's Petryna & Associates have taken a different approach to the current economic climate.

Both firms have expanded their services in order to handle a broader variety of accounts.

"You need to be diverse in your clientele and in your applications," says Dave Petryna, whose firm offers advertising in a variety of media.

At the time of the interview, Petryna was in the midst of opening an office in Kirkland Lake. Coupled with his Sudbury and Sault Ste. Marie operations, the new office places his firm in a commanding position in the northeastern Ontario marketplace.

Petryna and Mallon, Hudolin recently secured a shared contract from FedNor.

"I think you're going to see more account sharing and agencies co-operating across the region," McEachern predicts.

Meanwhile, Hudolin predicts some agencies will fail because of poor management.

"The important question for agencies is whether they have a firm hold of their own finances or not," he says.
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Title Annotation:Northern Ontario's advertising agencies expect recession
Author:Krejlgaard, Chris
Publication:Northern Ontario Business
Date:May 1, 1991
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