Tesco Ads: Lowe's back in business

Sir Frank Lowe shook the advertising world when he took the Tesco account from under the nose of his old agnecy. Alex Benady talks to Lowe's sidekick Paul Hammersley about their plans for the new venture

n 2 November last year, Paul Hammersley, the 43-year-old chief executive of the London office of advertising giant DDB, received a phone call from his old boss and mentor Sir Frank Lowe.

It was an invitation to lunch. Lowe, founder of the global advertising network that bears his name, is one of the biggest stars in the industry. So Hammersley was flattered by the call and pleased at the chance to catch up with the man he had worked with for 10 years.

Two days later they met at fashionable Chelsea eaterie Lucio's. At first the talk was just social chitchat. "I wondered where the conversation was going," says Hammersley. But as Sir Frank finished his osso bucco, he finally revealed the purpose of his call. "He asked me if I would be interested in 'doing something with a bunch of people'? I had been thinking about setting up my own agency off and on for five years, so I gave him a guarded yes."

Lowe had been acrimoniously ousted from his own agency two years previously by its US owners, Interpublic Group. His two-year non-compete clause had expired in March and now the 64-year-old Lowe was anxious to get back into the business.

Sir Frank outlined to Hammersley his audacious plan to approach Tesco, the country's largest retailer, for its £50m advertising account - then with Lowe Advertising. Hammersley admits he was sceptical. "It is one of the great prizes of British advertising and they must have received many, many approaches. Why would they go with us?"

Just six weeks later Hammersley is sitting relaxed and happy in the Carnaby Street offices of his PR agent. He is no longer chief executive of DDB, but chief executive of what was, in terms of new business, the third most successful advertising agency in the UK last year. And it hasn't yet even got a name.

Sir Frank's plan worked. All it took was a phone call and one meeting with Tesco's marketing director Tim Mason and he had pulled off one of the greatest coups in recent advertising history.

With no pitch, no offices, no staff other than a heavyweight management team, no outside funding, no equipment, no binding form of incorporation, the new agency persuaded the phenomenally successful and very proper Tesco to commit its strategically vital advertising to them. All in a matter of days. And just to make it more exciting, the agency with no name now has just six weeks before Tesco's notice period with Lowe expires and they take up the reins.

Hammersley is nicknamed Buzz by friends in the industry because his comic-book hero's square chin and school captain's "straight bat" demeanour are so reminiscent of Buzz Lightyear, star of the 1999 film Toy Story.

It will be a heroic achievement indeed if Hammersley can get his agency going within 30 working days to produce the advertising that keeps the tills jingling at the nation's favourite shop. But Hammersley exudes quiet confidence. He is not alarmed for instance by Sir Frank's reputation as one of the most difficult and volatile people in the industry. This may be because of the length of their association. Hammersley was brought up in the West Country where his father was managing director of Clark's children's shoes. The account man at their advertising agency was one F Lowe.

"Frank has an absolute dedication to quality and he never lets up. It can drive you mad. Can he be unreasonable to people? Absolutely. Can he be inconvenient to people? Absolutely? But I worked for Frank for 10 years and I enjoyed it most of the time. I have no doubts about working with him again."

And he's not daunted by the half-hearted legal action started last week by IPG at the American Arbitration Association in New York, designed to slow down his new operation. IPG claims that Sir Frank has violated "contractual and fiduciary duties arising from his tenure at the head of its Lowe Worldwide agency network". IPG also said it will hold any Lowe employees joining the new agency to their full notice period - which could be up to a year.

It's not even in a court of law and in any case its remit and jurisdiction are limited, argues Hammersley. Last week he signed a temporary lease on 5,500 square feet of Soho office space and says: "I'm certain that we will be ready for them (Tesco) by the beginning of March."

He'd better be because advertising is the life-blood of his new client's business. Over the past 10 years Tesco's advertising has been some of the most successful around. It has won two prestigious IPA advertising effectiveness awards, one of which showed that every pound spent between 1995 and 1999 on the long-running "Dotty" campaign generated £38 pounds in sales. Another study in 2001 claimed that £3.2m spent on advertising produced £350m in revenue.

If these figures are even vaguely accurate, Tesco's £50m advertising budget could account for between £1.5bn and £5bn of Tesco's £30bn UK turnover. You cant' help but wonder what could motivate the normally conservative grocer to put all its eggs into a basket that doesn't exist yet.

Hammersley is reluctant to impute motives to his client and Tesco declined to comment. However, some in the industry say that the move is an expression of Tesco's anger at the conduct of Lowe's owner Interpublic Group. The US financial regulator the Securities and Exchange Commission started investigating IPG in 2002. Perhaps the highly principled Tesco simply took exception to its "novel" accounting methods.

More likely say insiders, it has been concerned by instability within the Lowe group itself. In 2003 Sir Frank was forced out. Last year two key executives on the account, Mark Cadman and Russ Lidstone, resigned from Lowe London after a new chief executive was brought in. Since then the most senior remaining figure on the business, Lowe chairman Paul Weinburger, is said to have become increasingly disenchanted. The last straw came in the autumn of 2005 say insiders, when IPG handed back £3m to Tesco in volume discounts that Lowe London had received from suppliers but not passed on. Weinburger is said to have been mortified and expressed his unhappiness to Sir Frank.

So what kind of agency does Hammersley hope to run? Sir Frank is associated with the golden era of British advertising in the 1970s and 80s when agencies called the shots with clients but produced outstanding work - albeit at their own pace. Some say it is precisely such outdated thinking that contributed to Lowe's (the agency) recent business problems. Hammersley responds that firstly, it is not Sir Frank's agency but a roughly equal partnership involving eight people. "Frank will be in the director's box while we are out on the pitch doing the work."

And, he says, they all recognise that things have changed since the glory days. Clients need to move faster; they need ideas that cross media and they can no longer rely on television to do all the work for them. "We will have a wide range of planning skills - in media, interactive and direct marketing. However, we will only execute advertising."

If the new agency does have an agenda, it is to re-establish the primacy of creativity. "One of the reasons television has lost its efficacy is that advertising has become less engaging and creative. We killed our own golden goose," he says.

Sir Frank rarely speaks to the press, but he is undoubtedly the driving force behind the new agency. Last week he told an associate: "This business has always been about individuals. But since agencies went public, they have had to reassure their stockholders that it is about networks and media clout and the number of people put on a project. One thousand monkeys on typewriters in the end will never produce the works of Shakespeare. That's why clients still need individuals, not corporations."

It could be blather and bullshit. But the fact that Tesco is prepared to put £50m of its money where his mouth is suggests very strongly that it is not.