NAY PYI TAW, Myanmar: WPP Plc.,
the world’s largest communication services company, has restarted its
Myanmar operations after exiting the South-East Asian country in 2003
because of sanctions imposed on the military junta that was in power
then.
Martin Sorrell, chief executive of WPP,
was in Myanmar last week. In an interview, he spoke about Myanmar’s
prospects in the Asian context and the risk of expectations being raised
too high. Sorrell also dwelt briefly on India, where he said WPP’s
business is growing significantly despite the economic downturn. Edited
excerpts:
Why are you here in Myanmar?
We don’t know the actual number of people in Myanmar. It
is somewhere between 55 and 60 million. There will be a census in 2014,
but let’s say 60 million consumers essentially. GNP (gross national
product) is growing at 6.5%. Obviously, the sanctions coming off last
year has removed the hurdle for us doing anything here. In fact, we did
own a business here when we acquired Cordiant; we picked up a Bates
business, which we had to disgorge because of the sanctions issue and
people being concerned about it. So, the answer to your question about
why here is—it’s a big market, it’s an important market in the context
of Asia. Growth is not easy in a world economy which is growing at 3%
real, 5% nominal rate including inflation... It’s an economy which is
self-significant.
It will be a challenge. Expectations have been raised to a
very high level. Whether the government and the private sector can
deliver the investment needed is another question.
So, I think expectations probably have been raised too
high. Some people believe that’s good because (it would help) to put
pressure on the government to get everything right. I am not sure that I
totally agree with that because I think that there is a supply-side
constraint.
Obviously, we are going to see the need for more talent. We have bought some equity in Today, the advertising agency here, and (WPP unit) Ogilvy is aligned with that. We have associated ourselves with (Myanmar-based ad agency) Mango and (WPP units) JWT and Burson-Marsteller
are associated with that. COCO is a media planning and buying operation
within Mango and we will also be associated to it. TNS (a marketing
advisory) started from scratch.
On the back of the big consumer study that we have done,
we have done 12,000 interviews here on consumers so we know a lot about
the Myanmar consumer. Then, Burston has associated itself with Mango’s
PR operations. So, we have some really, really good base businesses
here. It’s small. We will do probably around $1.5-2 million of revenue
here in Myanmar this year. We will probably do $3-4 million next year.
So, it’s important now. Dentsu
(Japanese ad agency) has said they are going to set up business
here...well, they are set up here, we haven’t noticed anything. (New
York-based ad agency) BBDO has talked about it too but again we haven’t
noticed anything. But I am sure that they will come. We do think that
being first mover gives us some advantage. We see that in China, we see
that in India. That’s partly due to the history too. We have seen that
in Brazil and we have seen that in Russia. So, I think this market is no
different to that, in that sense. But the key event was the withdrawal
of the global sanctions. We have continued our connection and today
Mango really comes out of that old Bates business, I mean ironically.
So, we have kept the connection but we think it is an important market.
Opening of Myanmar’s market has been compared to the fall of the Berlin wall by Coca-Cola’s CEO. What are your clients who are present in the other markets telling you?
I don’t know what the right analogy is. Some people
compared it to South Africa and some people compared it to Columbia,
which I think is not right. I think the nearest comparison in my point
of view is Vietnam.
And I think coming here, I am the world’s leading expert
on Myanmar, having spent 36 hours here (laughs), so take that with a
truckload of salt. But I do think that it is like Vietnam and in the
sort of the sense that I have, it is very similar to the Vietnam in the
early nineties. We had sanctions there, they came off. They came off
earlier in Britain, so we were British-owned and we got a sort of a
headstart over the Americans. And then when you think about the progress
that Vietnam made, it slowed. It was good, it was lovely euphoria, and
then it slowed and then it really got going... And now, it sort of
slowed again. It is going to be bumpy and the trouble at the moment is
everybody thinks it is going to be a straight line up, which it isn’t.
Are your global clients looking to invest here?
We have two clients; Coca-Cola and Unilever
who opened... Coca-Cola opened a bottling plant. Unilever opened
another plant two days ago... It’s not all pie in the sky and people are
making investments. Nestle, I am sure, will be up and running shortly. So, there are a large number of our clients that are looking—that’s true.
Is it also a case of your clients looking here and hence your need for a larger presence in this market?
Ya (yes), I mean we only reflect, I mean if we are doing
our job right, we only reflect what our clients want or are doing and I
think in the case of Myanmar we saw (that) when we did the 12,000
interview survey. It generated tremendous interest. I do think there is a
group that are looking, who will not do (investments). And you know
some people said that the ethnic issues here and the religious issues
lead people to say no. I don’t think that... Land prices here are very
high and if you want to build a plant in various parts of the country,
it is uneconomic. It’s land prices because there has been a lot of
speculation in land prices. So bringing that under control is going to
be important.
Apart from the ones you mentioned, are there other
businesses that you would like to enter here? What about newspaper
publishing?
No, we are not media owners. I mean there is a blurry
line sometimes. We do own 20%, actually it’s now under 7% because it
merged with a bigger TV station, a Spanish TV station, but it’s more
accident than design. We own content companies... Imagina in Spain,
which owns (a) TV station or part of the TV station. Yes, so we are
making investments in content, but not newspapers or the publishing
industry.
So, when you mention content, are there other businesses in content that you plan to enter here?
I think once we get the basics right, the digital
business will not be significant—75% until these telecom licences are
being assigned on 27 June and they are up and running. Then that will
have a massive impact like you have seen in India.
Will that drive advertising?
Well, it will drive social (media), it will drive search,
it will drive video and eventually when we get the capacity it will
drive social and mobile.
So, the answer is that’s (telecom licence) the key,
because 70% of the market is TV. By the way, TV was up in price by 40%
last year. That’s because of limited supply—four channels, (of which)
two state, two private. State takes advertising but it’s heavily
regulated.
Isn’t that an opportunity?
To own, no. I mean it’s not our business. It is true that the new media owners in my view are Google and Yahoo and everybody else—Microsoft and AOL
and Yahoo—but no, I don’t think so... We manage a portfolio of about
$70 billion and we have to manage that effectively for our clients. I
think, no. Now, would that be an opportunity for entrepreneurs, yes. I
mean the two private licences in TV—people say that should be expanded
and it probably will. You will see the growth of satellite and pay TV
eventually.
You have earlier commented about India’s growth story in an interview to Mint. How do you see India’s growth?
Well, I am not so negative as many Indians are. So, last
year I said something to the effect that there was a lack of belief or
there is an erosion of self-confidence, and then I am very bullish on
the Indian economy. We are in a bit of stasis in India because of the
election and political ramifications. But in the long term, obviously it
is very different to Myanmar—I mean our business last year did about
7.5-8% on the topline. This year, I think it will do 10%. We grow twice
the GDP (gross domestic product) rate at least, usually.
I have confidence in our business in India. The people
are outstanding in all the agencies, in every area we are dealing with,
and are superb. If the lack of self-confidence results in a lower growth
rate and competition falling down or going away, fine. Because in the
longer term, we will benefit from it. So, I just think that it’s a pity
that it’s a little bit less direction politically...what do I know about
the ramifications of that, but I just think that it’s a shame that it
has overshadowed what was a fabulous growth story.
How do you see your plans in China vis-à-vis India?
Well, you can’t say...it’s not either or. It’s like
saying is Myanmar on the map or not. No, it is. So, where can you get
the growth? I mean I look at it very simply, may be too simply, it’s
where you think growth is going to come. Now, our clients who have big
positions in India are doing very well. Our clients having big positions
in China, despite the slower GNP growth (are doing well)...you got to
understand the reason why. The heart of our business is FMCG (fast
moving consumer goods). As it will be in Myanmar, the growth of the
middle class and the lower middle class and the importance of
consumption. The 12th five-year Plan in China is about consumption. It
means that those products and services become more important. You know
one of the questions being asked about this country being so poor, with
70% agricultural, where is the money going to come from? The answer is:
there is a limited amount of money and it has to be stimulated but
people need basic things. Whether toothpaste, washing detergent, soap,
personal care and hygiene, and those things are going to become more and
more important. And that’s where the opportunities are. Cars are
already (owned by) 6% of the population and the traffic jams in Yangon
are bad enough that you wouldn’t want anybody else to have any more
cars, but the fact of the matter is this is going to be a big car
market. And because of the floods, a big SUV (sports utility vehicle)
market. So, I do think we will see growth in capital consumer goods as
well, but the heart of it is FMCG. And all the big FMCG companies want
to get a piece of this pie. And there are some really good local
companies as well. There are superb local companies. Very, very strong
entrepreneurs, which by the law of averages they should be, but I do
think they share a little bit of comparison to Vietnam, and it shares a
little bit of comparison with Thailand, and it’s a virgin opportunity.
And women hold the purse strings but they are not into the workforce
yet, but that will come. It will be another important engine of growth.
You said that you are upbeat about India. When do you see that upswing happening?
First of all, the downswing is less growth than we have
seen but it is still very strong growth for us. So, in a way I don’t
think we have seen a significant downturn. We have seen a greater
growth. We have gone from above 10% to slightly under 10% but it is
stabilizing around 10%. So, still very strong. I would say you have to
wait for the elections more generally and the result is going to be
important. Most people say to me it’s going to be some form of
coalition. I don’t know if they are right or not.
source: Livemint
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