Arun Sudhaman 13 Feb 2014 // 4:00PM GMT
PARIS—Waggener Edstrom is withdrawing from France, blaming poor market conditions for the decision to shut its eight-person Paris office.
The move follows declining MNC client budgets in a market that is proving increasingly tough for US PR networks.
Waggener Edstrom will now handle its French requirements via local agency Cap & Cime, which joins its Global Alliance affiliate network.
Wag-Ed opened its Paris office in 2003, employing around 10 people at its peak. Key current clients include Aruba and Progress Software.
For the past 18 months, the Wag-Ed Paris office has operated under the oversight of Munich GM Manuel Hüttl, following the departure of former France head Xavier Latil.
According to sources, Wag-Ed assets are expected to transfer to Cap & Cime. Some of the agency's former Paris workforce may also join the French firm.
Wag-Ed EMEA GM Chris Talago told the Holmes Report that the decision reflected the difficulties international networks face in France as MNCs look to spend their PR budgets in emerging markets elsewhere.
Talago noted that the French PR market is dominated by the major groups — Publicis Groupe and Havas — and "a number of very capable French boutiques", such as Agency Elan and Cap & Cime. "A lot of major French enterprises will buy from those groups," said Talago.
That, said Talago, leaves international firms reliant on MNC business, which has stagnated in an economy that is struggling to grow.
"The problem for a lot of the networked agencies, especially US ones, is that a number of MNCs are divesting from France," explained Talago. "There’s a barely a year that goes by where our clients haven’t said we’d like to spend X amount less in France and Y percent more in emerging markets."
"You’ve got a bad economy, low budgets, the rise of boutiques — agencies need to come up with a different cost model that protects their margin," added Talago. "These are not low cost markets. They are highly regulated in terms of labour, and yet the budgets are shrinking."
Talago noted that Wag-Ed would look to expand in emerging markets, citing the success of the firm's three-year-old South African operation. He also reiterated that Wag-Ed operations in the UK and Germany "are doing fine."
"Why be in a market whose economy is not growing?" said Talago. "The pressure on budgets means that networks cannot carry passengers anymore."