Dentsu announces new structure as a ‘pure holding group’, says there are ‘no green shoots of recovery’ in local market

Dentsu has reported a decline of 12.3% in quarter three of FY2019 and 9.7% in the first nine months of FY2019 for the Australia and Pacific region, excluding Japan. This weakness was driven by Australia and China, according to the company, with “no green shoots of recovery in either market, both of which continue to severely impact the regional and group performance”.

President and CEO of Dentsu Inc Toshihiro Yamamoto also announced that a new group management structure will be effective from January 2020.

Australia’s media agency-funded ad market was back 3.1% for September, the latest Standard Media Index (SMI) figures. After 12 consecutive months of decline, including the first nine of 2019, Australia remains back 4.7% compared to January to September in 2018.

Despite DAN’s despondency at the local region’s chance of recovery, SMI forecasts that the market will bounce back in October (those numbers are yet to be released) and continue to recover in 2020.

The DAN APAC team is led by Ashish Basin, who was promoted to the role in September from CEO of South Asia.

Locally, Henry Tajer took up the CEO post in January, and has spent the year restructuring his team. The network’s agencies have lost significant accounts throughout the year, including the $40m Mondelēz International account, $20m Amart account, Super Retail Group, Virgin AustraliaAsahi, and Bega (which moved to Thinkerbell after a 10-year relationship with Carat).

However, Tajer is looking to reverse those fortunes in hires such as Sue Squillace. Since Squillace’s beginning as CEO in September, Carat has won two major accounts in L’Oreal and the $50m Medibank and AHM business.

The new structure

At a group level, the new structure will see Dentsu Inc become a “pure holding company”, changing its trading name to ‘Dentsu Group Inc’. An in-house company called Dentsu Japan Network will be established “to formulate business plans and build the infrastructure for the Group’s overall operations in Japan”. The result of Dentsu Japan Network, it hopes, will be “a flat and tightly knit network that is able to respond quickly by forming optimal teams to tackle all issues”.

The new structure, Dentsu said, will ensure “people within Dentsu are connected openly across countries and organisations on a global level, bringing together diverse perspectives, and making it a matter of course for innovation to be generated from anyone, anywhere”.

“The aim is to become new Dentsu that continues to create new value and new businesses by forming flexible teams not only within Dentsu, but also with various external partners,” it said in a statement.

The Dentsu Group was back 1% on organic growth in the first nine months, and delivered total growth of revenue less cost of sales of 3.3%. DAN, the international business, had 4.6% growth of revenue less cost of sales, and was also down 1% on organic growth.

DAN faced the toughest comparables in quarter three, with the organic growth result impacted by declines in APAC. Excluding the impact of Australia and China, quarter three’s organic growth was 1.8%.

Yamamoto was hopeful about what quarter four’s results will look like, driven by Japan.

“The Japan business has seen sequential improvement through each quarter of 2019, with the fourth quarter set to benefit from many large scale events, including the successful Rugby World Cup hosted in Japan and the Tokyo Motor Show,” he said.

“In the international business, in order to future-proof our business and serve clients more effectively, we have streamlined and consolidated our offering around three lines of business: Creative, Media and CRM. These lines of business have been designed around client needs and will ensure we are set up to help clients win, keep and grow their best customers—by being data-driven, tech-enabled and ideas-led.

“2020 is a year of transition and by 2021, we will be operating under these three lines of business and be truly integrated by design.”


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