A rumored sharp drop in global ad spending by Philip Morris could spell big trouble for Leo Burnett/Chicago, where the cigarette giant has long been one of the agency’s flagship accounts.
The pullback in ad spending, sources say, could prompt sizable layoffs at the legendary agency, where between 400 and 500 people in Chicago and other Burnett shops overseas are believed to be involved in the Philip Morris business. One high-level Burnett exec familiar with developments said as many as 300 people at Burnett could be cut as early as June 1.
It’s unclear exactly how many of the affected staff are based in Chicago, but a large group of local Burnetters have a hand in the Philip Morris business. Burnett executives did not immediately return calls seeking comment.
Sources say Philip Morris has signaled it is scaling way back its global spending on almost all of its key cigarette brands, including Basic, Parliament and Virginia Slims. Only Marlboro, reportedly, will continue to get anywhere close to the ad spend the iconic cigarette brand typically enjoys. Burnett famously helped transform the image of the popular Marlboros with the rugged cowboy imagery widely used in the brand’s advertising for decades.
Because Philip Morris is not a major advertising presence in the United States, many people forget the giant cigarette maker is still a going ‹ and very profitable ‹ concern overseas, where Burnett has over many years been instrumental in helping fuel cigarette sales through its advertising.
Burnett has long enjoyed a hugely lucrative relationship with PM, but the agency, Chicago’s second-largest ad shop, rarely talks about its cigarette accounts because of the many negatives Americans now associate with smoking.
A sizable scaling back in advertising by Philip Morris and the accompanying cutbacks at Burnett would be the latest of several major setbacks at the agency in recent months. Earlier this year Burnett was rocked by a scandal involving the U.S. Army account, which left the agency several years ago.
The U.S. government filed suit alleging overbilling on the Army account, but Burnett settled out of court for $15 million without admitting wrongdoing.
The agency laid off 75 people in January, as it grappled with a huge downturn in ad spending by another major client, General Motors. The agency also dumped its Chief Creative Officer John Condon several weeks ago and has just begun a search for his successor.