Failed merger with Staples leaves Office Depot in limbo

Journal Record, The (Oklahoma City), Aug 7, 1997 by Tamar Charry N.Y. Times News Service

Pity the bride who has changed her name on her business cards, only to be left standing at the altar.

Office Depot, the nation's largest office retailer, is in a similar position. Last September, Office Depot reined in its advertising when it expected to merge with its closest competitor, Staples Inc. But since the merger was rejected by the federal government in late June, Office Depot was left empty-handed, having lost its executive in charge of advertising, dropped its agency and intentionally lowered its profile.

"They cut back advertising substantially because they didn't want to build recognition for a brand they were then going to go and change," said Christopher E. Vroom, a retailing industry analyst with Alex Brown & Sons Inc. in Baltimore. Office Depot executives pulled all television advertising when the company expected to be folded into Staples and to dissolve the Office Depot name.

"Given the fact that the company will now be on a stand-alone basis, they want to reinvigorate their merchandising," Vroom said.

At Office Depot, based in Delray Beach, Fla., management is tight- lipped about its plans. When asked about the next agency to be chosen and a new approach for advertising, Barry Goldstein, the company's executive vice president for marketing and its chief financial officer, was noncommittal.

"You always look to freshen up your advertising and change it periodically, and we'd be looking at that," he said. Office Depot spent $67 million on advertising in 1996, according to Competitive Media Reporting, which monitors advertising spending.

But others have more definite views on the topic. Mark Mandel, an analyst with ABN Amro Chicago Corp. in New York, said the slogan the company had been using for at least five years -- "Takin' care of business," which comes from a 1974 song by the rock band Bachman- Turner Overdrive -- was getting stale.

"They've been using that campaign for a long time," he said."One could see a need to get something fresher." The best he could say of Office Depot's advertising was that it had been "consistent."

The merger of Office Depot and Staples would have created a company with $10 billion in annual revenue. While Office Depot and Staples had planned a full agency review for advertising after the merger, the new company would probably have stayed with Staples' current agency, Cliff Freeman & Partners in New York, a unit of Cordiant PLC, according to people with both companies.

Staples' solid relationship with Cliff Freeman stems in part from the agency's development of the successful "The most wonderful time of the year" spot in 1994, which is geared toward back-to-school season. That spot shows a father rejoicing as his children buy school supplies for their return to school, and it has won several awards, including a Clio and an Essie. Staples, based in Westboro, Mass., spent $38 million on advertising last year, according to Competitive Media Reporting.

The marriage, of course, was star-crossed. At the urging of the Federal Trade Commission, a federal judge rejected the merger proposal on June 30, saying it would drastically reduce competition in the office products business. Back on its own, Office Depot must now regain its status as a high-profile brand.

Following the government's rejection of the proposed merger, Office Depot returned some of its old spots to television. Perhaps more important, though, the company immediately set out to replace its current agency, the Chicago office of J. Walter Thompson USA, a unit of the WPP Group.

J. Walter Thompson has handled Office Depot advertising since March 1996. In that time, the agency created one campaign, which was geared at small business owners. The theme Thompson used, "This is where I take care of business," was meant as an update of the "Takin' care of business" theme, which was created by a previous agency, Gold Coast Advertising in Miami. Office Depot declined to discuss why it was still parting with Thompson even though the merger is off.

In advertising management at Office Depot, Harry Brown, the executive vice president of merchandising and marketing, had decided to leave because he would not have the top marketing spot in the merged company, Goldstein said. After the merger was canceled, however, Brown, who did not return phone calls for comment, still chose to leave, joining a clothing retailer, Stage Stores, in Houston. Office Depot is currently searching for his replacement, Goldstein said.

With the merger out of the way, Office Depot is looking to resume its push into the office supplies market. The company announced on July 17 that it planned to open 40 new stores this year. During merger negotiations, Office Depot lost ground in retail store openings and focused its energy more on direct sales to large companies. Now, it plans to return next year to its target of opening 80 new stores a year.

"Office Depot would've gotten a real boost if the merger had gone through, because Staples advertising is second to none in the industry," said Aram Rubinson, an analyst with Paine Webber in New York. "Now, they're back to square one."