Bozell Ad Agency Pulls Out of Russia

Advertising industry heavyweight Bozell SNG has decided to pull out of the Russian market, handing over all its operations to a fellow U.S. advertising agency, an official company announcement said Thursday.


Under an agreement yet to be finalized, Bozell will transfer all its clients to YAR Communications Inc., which would become the managing partner in what both sides term "a strategic alliance."


A lack of core Western clients with the ability to generate a constant flow of revenue lay behind Bozell's decision to pull out of Russia, a source close to the company said. "It's a tough way to grow a business," said the source, who asked not to be identified.


Work with key clients in Russia such as De Beers and Heinz depended largely only on individual projects, the source added. Major U.S.-based, revenue-generating Bozell clients like Chrysler, Bristol-Myers-Squibb and American Airlines have not expressed an interest in the Russian market that would justify the agency continuing its independent operations, said the source.


For the moment, though, it remains unclear whether even Bozell's existing clients in Moscow will switch their loyalties to YAR or look elsewhere.


Characterizing the sudden decision to close Bozell as "completely unexpected" and "really disturbing," Aldo Uva, general manager for Italian domestic appliances company Merloni, said his company will decide whether to keep its account with YAR only after a two-month probation period. "We have no reasons to quit YAR, but no reasons to work with them either," he said.


Bozell departed from its usual strategy of gaining initial footholds in overseas markets by setting up partnerships when it started its Moscow business in 1993. But its decision now to turn over operations to YAR may not mean that the agency, ranked 13th in the world among international ad agencies according to Advertising Age, has left for good.


"It's a very short-term, tactical move," the source close to the company said. "Bozell will be back in this market at the appropriate time."


YAR's New York-based president said Thursday on a visit to Moscow that the alliance with Bozell will strengthen the agency's specialization in targeting ad campaigns to the dictates of local markets. "We know this market from A to Z," said Yury Radziyevsky, a Russian emigr? to New York who founded the company with his wife, Anna, in 1975.


Since setting up shop in Moscow a few years ago, YAR has acquired a lengthy list of major advertising and public relations clients, including AT&T, General Electric, Baskin-Robbins and Aeroflot.


Bozell, which will assume an undisclosed role in the alliance, maintains 52 offices worldwide and earned $2 billion in sales revenue last year. YAR, with offices in New York, San Francisco, Moscow and Odessa, posted a sales revenue of $150 million in 1994.


Several key Bozell employees, including the agency's creative director and public relations vice president, have agreed to stay on with YAR in Moscow, Radziyevsky said.


Sean Wood, public relations manager for the international BBDO advertising agency, said Bozell's decision to cut its losses and shift its responsibilities to a smaller agency does not signal a general retreat by Western ad agencies from the Russian market.


"This is not part of a trend. It's an isolated incident in which the home office of a relatively young company pulled out for financial reasons," Wood said.