Vons Drops Thompson; Big Blow to Ad Agency

Vons grocery chain on Tuesday fired its ad firm, the Los Angeles office of J. Walter Thompson, stripping the office of its largest client and an estimated $20 million in annual advertising business.

Arcadia-based Vons Cos., the largest supermarket chain in Southern California, has vowed to place its ad business at another local agency within two months. Even so, its change in allegiance comes at a time when many agencies in the Los Angeles ad community are struggling to stay alive.

A number of clients--hurt by the recession--have slashed their advertising budgets. And some are blaming their ad agencies for the business downturn.

“We don’t take agency changes lightly,” said Joseph F. Raymond, senior vice president of sales and marketing at Vons, which has hired just three agencies in 40 years. “We’ve had some players change. And they are not the same company they were when we hired them.”

The move has fueled speculation that troubled JWT will, at the very least, vastly downsize its local office. Executives at the agency strongly deny that they are considering closing the office, but industry executives say another key account loss or two could force a closure.

Indeed, over the past year, JWT’s Los Angeles office has lost or dismissed its three biggest clients and nearly 75% of its total business. By one estimate, its annual billings have now dropped to about $40 million from a peak of nearly $200 million about a year ago.

The agency is owned by the financially troubled British marketing conglomerate WPP Group, which has cut costs severely at the firm. Some say those economizing moves have changed the nature--and even the advertising standards--at the agency.

Senior executives at J. Walter Thompson insist that the Los Angeles office will remain open and continue to seek new business.

“It’s business as usual and full speed ahead,” said Ronald S. Burns, the agency’s New York-based chief executive of North American operations. “We’ve seen the history of ups and downs in the Los Angeles market.”

“We have been in Los Angeles for three quarters of a century,” added William M. Lane, executive vice president of the Los Angeles office. “We’re not going to get out now.”

Lane, who has been at the agency less than a year, said he planned no immediate layoffs at the office. He also said he intends to stay at the agency. “I’m going to be here to see this through,” he said.

But if the agency fails to pick up substantial new business within the next few months, it may have to let go of up to half of its remaining 80 employees, industry executives estimate.

Vons has had its share of headaches too. The grocery chain appears to be losing its lead in a three-way race with Lucky and Ralphs for market share in the Los Angeles area. In 1990, Vons led all stores locally in the number of shoppers who said they bought most of their groceries at the store, according to a telephone survey of 6,000 consumers by Los Angeles Times Marketing Research.

Last year, 21% of those surveyed named Vons and 18.2% named Lucky as their top grocery pick. But those positions flipped in the first quarter of 1991. Lucky is now ahead, with 19.5%, and Vons suddenly is in second place with 18.5%.

Also, Vons underwent a key management change last February. At that time, Dennis K. Eck, former chairman of American Food & Drug Inc., was named Vons’ chief operating officer for retail operations. It is very common for an advertiser to change agencies after new management is hired.

For years, Vons has stressed quality as its advertising message, while rival Lucky has always touted its lower prices. In a recession, lower prices inevitably win out. Executives say Vons’ next agency may have to consider redefining the store’s ad mission.

Still, Los Angeles ad executives were sympathetic Tuesday toward troubled JWT. “There is no more competitive agency market in the United States than Los Angeles,” said Miles J. Turpin, chairman of Grey Advertising/Los Angeles. “When you take the kind of hits they’ve taken, it’s tough.”

Von’s Declining Share In a telephone poll, the following percentage of Los Angeles and Orange County consumers said they bought the majority of their groceries at the following stores. 1990 Vons: 21.0% Lucky: 18.2% Ralphs: 17.9% Alpha Beta: 8.4% Hughes: 5.3% Albertsons: 5.0% QFI: 4.5% Jan-March 1991 Lucky: 19.5% Vons: 18.4% Ralphs: 18.2% Alpha Beta: 6.8% Hughes: 4.7% QFI: 4.3%Albertsons: 3.9% Source: Consumer Trend Analysis, Los Angeles Times Marketing Research