Searching For The Beef

He was an unlikely choice for chairman of the world's second largest advertising group. When Robert Louis-Dreyfus took the helm of Saatchi & Saatchi Company PLC six months ago, most New York ad executives didn't even recognize his name, let alone pronounce it properly. Frenchmen knew him better as an heir to one of Europe's great grain-trading fortunes than as a global advertising mogul. Today, charged with the task of breathing new life into the troubled company, LouisDreyfus still maintains a low profile. He is banking on a disciplined, no-nonsense form of leadership to revive the once mighty ad giant. "I am not a tap dancer," he says. "What Saatchi needs most now is peace. "

Peacefulness is rare at Saatchi & Saatchi these days. Gone are the glory years of the 1980s, when the acquisitive-minded company gobbled up advertising agencies like the American firm that produced the famous Wendy's "Where's the Beef? " spot. Now the agency that helped position everything from Margaret Thatcher's Tory revival to British Airways vacations is searching for a new strategy of its own. After 19 years of continuous profits the company lost a whopping 58.6 million pounds ($98.9 million) in 1989. Last week its stock price hovered at 85 pence ($1.50), near a record low. As Louis-Dreyfus moves to sell some of the company's acquisitions analysts are watching Saatchi's decline as avidly as they did its rise. "On its way up and its way down," says London analyst Mark Shepperd, "this company gets more attention for its market size than any company I know."

For years, the main target of the ad world's attentions were Charles and Maurice Saatchi, the brothers who founded the agency two decades ago. Most say the brilliant, if quirky, sons of an Iraqi-born textile merchant played a major role in the company's decline. At the peak of their expansionist game in 1986 and 1987, the Saatchis promoted the company as a business-services supermarket of tomorrow--a store for the global village that would help corporations with everything from consulting to market research to public relations. This idea, known as "one-stop shopping," merged neatly with another called "globalization"--the notion that the world has become a small enough place to market the same products the same way everywhere.

Both ideas helped the brothers, already known as "Snatchit and Snatchit," bankroll an even wider-ranging shopping spree. (The pair's exploits became so famous in England that they were caricatured on the TV show "Spitting Image.") Yet with each purchase, the company's debts mounted. In 1986, after finance director Martin Sorrell jumped ship to build the rival WPP Group, Saatchi's fortunes began to decline. Most companies plunged in value during the 1987 stock-market crash, but Sastchi continued its downhill slide. At the annual stockholders' meeting in March of this year, Charles was not present, keeping with his reclusive custom. His brother, Maurice tried to draw courage from the novel "Typhoon" by Joseph Conrad. Standing before the board, he paraphrased a beleaguered Captain MacWhirr, "When you are in a storm, you must face it."

Enter Louis-Dreyfus, a 44year-old Harvard Business School graduate who was called in to help brace the winds. His company, a research firm named IMS International, had been the target of a Saatchi takeover bid. Louis-Dreyfus had sold it elsewhere, for $1.7 billion, and had retired to the ski slopes when the Saatchis approached him about taking over their company.

In his first six months on the job, Louis-Dreyfus has moved to downsize the company and take it back to its roots in advertising. The Frenchman has sold unrelated subsidiaries, jettisoned top executives and cut salaries, staff and bonuses at headquarters and in the field. Some field troops, put off by new spending limits, have dubbed him "Jaws"--a far cry from "the sexiest thing that ever wore socks," which is how one female employee described the newly arrived boss for a London tabloid earlier this year. Louis-Drevfus's 12-hour workdays are devoted largely to reducing debt and improving profits in in a decidedly hostile advertising cIimate. "I don't need to be No. 1 in size," he told NEWSWEEK. "I need to be profitable, and in the top five."

It's too early to tell how Louis-Dreyfus's quest for profitability will affect the ad business. So far, the client base has proven surprisingly loyal, and in some parts of the empire (Saatchi's New York office, for instance) the outlook is improving. But on Charlotte Street, home of the legendarily imaginative London agency that has always been the empire's flagship, new accounts are harder to come by this year. After three straight years as No. 1 in the U.K.'s new-business rankings, the crack Saatchi unit ranks seventh so far in 1990. Whatever its rank, the company continues to churn out eye-catching ads. Saatchi recently hired 4,000 extras of all races to film a critically acclaimed British Airways commercial. The spot, which shows the crowd forming a giant face against a canyon landscape, carries the message that "every year ... British Airways brings 24 million people together."

Meanwhile, Louis-Dreyfus is working to bring people in Saatchi's boardroom together. He describes Maurice as the group's "best salesman." (Maurice has begun wooing clients again, which was rare during the takeover era.) Charles, says Louis-Dreyfus, is "creative, brilliant." In Louis-Dreyfus's view, "Wall Street and the City made the brothers overreach."

Can Louis-Dreyfus, who masterminded a turnaround at his old company, succeed again? "I am not Lee Iacocca," he says with a smile. "But I'm reasonably sure I can." Saving the empire means avoiding the sale of one of Saatchi's two global ad networks--Saatchi & Saatchi Associates Worldwide and Backer Spielvogel Bates Worldwide--a move suggested by some bearish analysts to defuse the debt bomb, almost half of which may come due in 1993. "They have to do something radical." says David Forster of Kleinwort Benson Securities, who expects the firm to improve on last year's performance but end the year in the red. "He's got 36 months and two weeks to figure the debt bomb out," counters Alan Gottesman, advertising analyst for PaineWebber in New York. "That's a lot of time."

Selling one of the core ad networks would push the company into the bottom half of the world's top 10 ad groups, arguably completing the fall of the house of Saatchi. Its epitaph might then read that the global market was larger than the brothers" ambitions. But Louis Dreyfus insists he's working on a resurrection story, not an obituary. How did it feel to hear Conrad's "Typhoon" cited at the meeting The Frenchman shrugs. "I think it was a very good quote," he says. Saatchi watchers take note: in the end, Captain Mac Whirr survives the storm. Barely.

In the heyday of Saatchi & Saatchi, "to Saachi" meant to sell aggressively. Then, in the late '80s, the advertising firm started buying companies the way it sold goods. A plunge in fortunes followed.

When Charles and Maurice Saatchi, the brilliant if quirky sons of an Iraqi-born textile merchant, founded their ad agency in the Soho section of London in 1970, they had only three clients. But growth came rapidly. They established their reputation with a blend of salesmansip and showmanship, and by 1975, had acquired a client roster that included heavy-weights like Proctor & Gamble, United Biscuits and Rowntree.

The Saatchis made an international name for themselves with their go-for-the-throat political advertising. Their ads for Margaret Thatcher in 1978 and 1979 helped bring the Tories back to power. One featured an unemployment line and the words: "Labour Isn't Working."

During the 1980s, the Saatchis snapped up so many advertising companies in the United States and elsewhere around the world that they earned the nickname "Snatchit & Snatchit." Among their acquisitions were the New York-based agency Dancer Fitxgerald Sample, creators of the now famous "Where's the Beef?" commercials for Wendy's restaurants, and Backer & Spielvogel, a fast-growing agency best known for its Miller Lite ads.

At the peak of their game, the brothers invested heavily in exotic marketing theories like "globalization" and "one-stop shopping." But after the stock-market crash, it became clear that the Saatchis' party was over. Overextended into consulting businesses that were a drag on their profits, the Saatchis were suddenly faced with a delining stock price and a mounting debt burden. In January 1990, Louis-Dreyfus was installed as CEO to help turn the company around.