Holmes Report 24 Mar 2013 // 12:00AM GMT
It’s no secret that the Iberian market has been challenging for public relations firms over the past few years. The global economic crisis has hit Spain and Portugal even harder than it has the rest of the world. Clients have cut their marketing and corporate communications budgets, and even those who have not expect more return on their PR investment. In such an environment, growth has proven elusive.
As a result, some of the leading firms in both Spain and Portugal have been looking to international markets—typically those that share a common language—for growth.
The pioneer in this regard is Spanish corporate and financial communications specialist Llorente & Cuenca, which opened its first Latin American office in 1998 and now has a regional network that includes wholly-owned offices in Bogotá, Buenos Aires, Lima, Mexico City, Panama, Quito, Santa Domingo and Rio de Janeiro—and since the end of 2008 an Asia-Pacific outpost in Beijing.
Full-service Spanish agency Inforpress has opened offices in Colombia, Brazil and Peru, and plans to add an office in Chile in 2013. Financial specialist Estudio de Comunicación has its own offices in Argentina, Chile and Mexico (the latter through its acquisition of AB Comunicación) and partners with firms in Peru, Colombia, Uruguay, and Brazil.
Portuguese firms, meanwhile, have been more likely to look to Africa, perhaps because the Brazilian PR market has numerous strong, indigenous competitors. Corporate communications firm Cunha Vaz & Associados has opened offices in Luanda (Angola) and Maputo (Mozambique). Grupo GCI launched Uanda, an Angolan agency, in 2010; has a presence in Mozambique, in partnership with a local agency, and is planning a new venture in Cape Verde.
And Spanish consumer firm Marco de Comunicación has followed a similar route, opening an office in Casablanca to service one of its key clients, the Moroccan Investment Development Agency, and to provide PR support across the Maghreb region.
For firms that got there early enough, international expansion has been a source of growth and profitability through difficult times. Llorente & Cuenca has seen its core Spanish business grow by just 5 percent over the past three years; it has been able to maintain double-digit growth overall because of its Latin American operations, which now account for 60 percent of its business. And founder Jose Antonio Llorente says he expects that contribution to be closer to 75 percent in three to five years.
“We don’t expect to see much growth in the Spanish market over the next few years,” he says.
Inforpress is growing in Spain—by about 8 percent last year, thanks in part to a relentless focus on innovation and new product offerings—but is seeing strong growth in Latin America, much of it from European clients, not only Spanish businesses, but German and other companies that have chosen to manage their forays into Latin America from Spain.
Founder Nuria Vilanova sees a world that is increasingly defined by language, transcending geographic boundaries.
“Language is the new frontier,” she says. “The internet search does not end at a country’s frontier. You can find any information about a mining company if you search for ‘Brand X and medioambiente,’ [environment, no matter if the origin is Spain or Mexico or Argentina. And it will totally different information than if you search ‘Brand X and environment’ in English. That means that it will become increasingly necessary to coordinate communication by language, not only by country or region.”
L&C, meanwhile, serves primarily local Latin American clients—even the Spanish companies it represents in Latin America tend to be won in the local market—and has benefited from growing sophistication among clients in the Latin world, which has driven increased demand—and willingness to pay a premium price—for L&C’s financial communications, corporate reputation and public affairs expertise, particularly in the financial services, mining and energy, and food and beverage categories.
Even so, Llorente says he believes it will be difficult for other Spanish firms to duplicate L&C’s success in the Latin American market as a response to the current crisis.
“You don’t go to a foreign market because you have difficulties in your domestic market,” he says. “Because you will not make money in the first year, and that will only make the difficulties you have worse.
“And you don’t go to a foreign market with one or two people, and expect to compete with local agencies that have 30 or 40 people.” L&C has 35 people in Argentina, and 15 to 20 in several of its other overseas offices, enough critical mass to compete with the local market leaders.
Another challenge is talent, particularly at the senior level. Many of L&C’s senior people in Latin America learned their craft in Spain or Portugal; the firm transferred four people from its Iberian operations to Latin America last year (while also welcoming some younger Latin American staff to the Madrid office to develop their skills).
The talent gap is closing, however, and those European firms that already have a presence in Latin America are making it a priority to promote from within and to develop indigenous leadership.
That’s just one of several reasons—the size of the Latin American market and its anticipated growth—to believe that in the long term, the Latin American market is going to be an attractive one for any ambitious Spanish agency.