OPINION14 September 2011

GfK – the Asia question


If you are a GfK investor there’s little to be upset about in its business performance – but the agency is underweight in customised research in Asia. John Wigglesworth looks at what the company can do to bulk up.

But dig a little deeper and the perennial issue facing GfK soon surfaces. To quote:

“The key growth drivers [for customised research] in particular were the Western Europe/Middle East/Africa and Germany regions, as well as Central and Eastern Europe.”

Asia is notable by its absence, but this is unsurprising. GfK has a relatively weak customised research (CR) presence in a region where its competitors are benefiting from the continued growth in CR spend – one just needs to look at some pretty stellar numbers from Ipsos in Asia.

“After their attempt to merge with TNS was derailed by WPP and with Synovate now off the menu, there is very limited opportunity for the acquisition of an agency with a pan-Asian CR footprint”

GfK is surely looking to change this. But after their attempt to merge with TNS was derailed by WPP and with Synovate now off the menu (and frankly the cultural mismatch between the two companies was always going to be too great for that particular marriage to work), there is very limited opportunity for the acquisition of, or merger with, an agency with a pan-Asian CR footprint.

So what is GfK’s strategy? We are beginning to see some clues. Sid Malhotra has been appointed MD of GfK Customised Research in Singapore, presumably with a remit to build a substantial customised business in what is one of the key Asian hubs, especially for multi-country work. While the market is highly competitive – both in terms of pricing and the number of players – there are factors that give Malhotra a fighting chance of delivering strong organic growth over the next few years.

First, there is the opportunity to take advantage of strong client relationships from GfK’s retail side of the business in Asia (primarily with manufacturers of consumer electronics and white goods). The retail business is well-developed in the region, client relationships are deeply embedded, and so there’s a genuine opportunity for cross-selling – provided, that is, that GfK’s senior management ensure the two sides of the business collaborate.

GfK also has relationships with the market research leadership of a wide range of multi-nationals. These can be leveraged as the company’s capabilities in Asia grow. If GfK is delivering great work in EMEA, Latin America and North America to the big global consumer goods companies, it provides a solid platform for new business development with the same clients in Asia.

Finally, GfK can turn to an existing book of global tracking work; the Asian elements of these projects will increasingly move in-house meaning quick wins in terms of revenue. The company will also improve its chance of winning global pitches as its reputation in Asia strengthens. And that will benefit the business not just in Asia, but globally.

While there is ample scope for strong organic growth, GfK will also be looking to make acquisitions – as it did in Thailand recently, buying MarketWise. Circumstances dictate that future acquisitions will similarly be of a country-specific, rather than pan-regional, nature. There are some very successful independents in Asia, and bringing these into the GfK fold could rapidly provide the company with local expertise and local/regional client relationships. But how quickly a series of acquisitions can be melded into a coherent network is another matter; historically, GfK’s modus operandi has been to identify successful independents with strong management teams, acquire them, and then largely leave those acquisitions alone for several years.

Either way, it seems likely that there will be plenty of interesting activity from GfK CR in Asia over the next few years. And no doubt the owners of leading independents across the region will be tidying up their balance sheets and waiting for that call from Germany.

John Wigglesworth is a former GfK director, now running Asia Research Recruitment in Singapore