Annus horribilis? An overstatement. Still, when you find yourself no longer agency of record for BCE Inc. (your largest client), and you see what's happening in the auto sector (another big client), and you observe an economic collapse for which you can find no apt comparison, it's a good idea to find a new way to look at the world. Or a new way to get the world to look at you.
With that in mind, Cossette Communication Group Inc. has rebranded itself simply as Cossette, and the folks who work there are now trademarked as the "People From Cossette" to better convey the message that the multidisciplinary advertising agency is powered by the innovative and the inspired.
The top motivator is Claude Lessard, who led the buyout of Jean-Claude Cossette's graphic arts agency in 1972. Twenty-seven years later, the Quebec City-based company went public and spread its creative wings beyond Toronto and Vancouver to the United States and Britain with a client roster that includes McDonald's Restaurants of Canada Ltd., Bank of Montreal and Sony Ericsson Mobile Communications AB in Britain. Cossette has more than 1,600 employees and Mr. Lessard, chairman and CEO, has more than a few things to say about the advertising landscape today, and what he forecasts for tomorrow.
What was your point of awakening, the moment at which you realized the economy was headed for a dramatic reshaping?
I would say beginning in the second quarter of 2008, where, of course, all the credit discussion began in the U.S. and even a bit here. On our side, we certainly saw, how can I say, a softening in terms of the demands or commitments from some clients. Let's call that a prudence ... on their part in terms of mid- or long-term commitments. So, clearly, there was a kind of apprehension that I began sensing in April, May of 2008.
Did you stop sleeping then or have you stopped sleeping since?
Well, no, not really. I've been in the business now for 38 years so I've seen other recessions. ... The worst reaction to have [is to think]each recession is the worst. Try to put yourself in the '70s and the '80s. I remember [people saying]that's the worst we ever had. It's always the worst. I agree that this one has some special thing. But I remember that the best reaction in each of those was not to panic.
Your firm had already been exposed to a financial shock of its own last spring, after Bell's decision to end its long-time relationship with Cossette as its agency of record. Bell was your largest customer. What was the impact?
If you look at the results of the year-end, you see that the shock has been well absorbed. [The company's gross income rose to $253.3-million from $234-million for the year ended Sept. 30, though income from Canadian operations fell 2.1 per cent] ... You know we lost our biggest client in the last six months. We are being very aggressive in getting new clients. We still grew as a company at the end of our fiscal year 2008. ... I think it was an example of our inner, I would say, dynamism, to react to something that is a shock, clearly, emotional and financial.
What did the Bell account contribute in revenues?
We always said in our general statement that it was well above 10 per cent ... of total gross revenues. [Cossette continues to provide some communications services to Bell.]/p>
How many workers were laid off?
I think, in total, probably something like 130 in all offices.
Was that the hardest thing you've ever done?
Oh clearly, clearly. Because you know Cossette, for the 38 years I have been at the helm, we have grown every year. So that was certainly something that was very, very tough to do. But you know what? In those times, you have to think about the future and the other people who are still there.
At the beginning of December, you alluded to "liquidity problems" being felt by some clients. Can you elaborate, please, on the scope of the problem.
Well, it's a client that stated publicly that they were going through liquidity problems and that's GM. It's a client with whom we have had a great relationship for a while - 20, 25 years. It's still a very good client and we really hope that they will go through what they have to go through right now, because I think they have a bright future.
What is the scope of you client work for GM?
We do all the domestic cars for Quebec. ... We also do Saturn and Saab nationally.
What have you experienced thus far?
Business as usual. They're still spending. They're still aggressively marketing the products. And they're still paying their bills, very well.
Is GM your second-largest client?
No. They're in the top 3. ... They're one of the clients that represents between 5 and 10 per cent. There are others, like McDonald's.
You've been with Cossette since its inception, almost 40 years now. What were the toughest times?
To be honest I would say it's probably today. ... As I said, recessions are recessions. But here, it's like it feels more than recession. It's a question of confidence in the total system. That's the way I feel it. So it's a bit scary.
Give us your take on what you expect in 2009 for the advertising industry generally.
I have our client list here in Canada, the U.K. and the U.S., and clearly the first quarter of '09 will be pretty tough in terms of spending. I think everybody will be in a cautious mood. ... I think second, third quarter, we may have some more positive news, but it won't be an easy year. It won't be a year of growth. ... You have some clients who perform very well in recessions. One of our big clients, McDonald's, clearly, they're performing very, very well.
Are you able to discern any trends being exhibited by those companies that are retrenching?
Yes ... they will look at other means of reaching their consumers. ... As you know, our industry has gone through a huge change in the last five, six years. ... Clearly, we'll see some clients now, because of the context, looking more seriously at their alternatives in terms of maximizing their investment. ... For example, putting more money in the digital world because it's a world where you can measure results. ... A recession is a great time for leaders to become ever stronger. Yes, they have to cut, but they have to stay very, very aggressive. The good companies, and we have many in our portfolio, are leaders in their categories. I suspect that they will try to stay very aggressive, maybe doing more with less money. That's where we come in. ... The visibility after March, April, 2009, is a little tougher.
You picked up the launch of Metro in Ontario and a couple of Quebec government accounts. Anything else?
No, I think that says it pretty much.
You mentioned visibility in the spring period. Why is that the cutoff point for you when things get murky?
Because the commitment we have from our clients pretty much stops there. At this time of year, Q1 is booked, but afterward our visibility is very, very small. So it will depend on their state of mind. It will also depend on their sales in the Christmas period on the retail side. I think there will be a big wait-and-see from January to March. It will be as much psychological as economic. The thing we don't know is what we're seeing right now from an economic perspective, will it get worse or not? I'm asking the question of many CEOs I know. ... Nobody really knows.
COSSETTE
(KOS-TSX)
Yesterday's close $4.22, up 21¢
The threat: Heading into the headwinds of the crash of '08, the company took an early hit when BCE Inc. ceased being its largest client.
The impact: The company quickly cut costs to contain the damage from the Bell loss.
The reaction: Cossette moved quickly and aggressively to land new client business.
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