The Richards Group's multicultural arm Lerma has split from the independent ad giant, taking some execs and clients with it
- Lerma has split off from The Richards Group, the biggest independent ad agency.
- Lerma accelerated the split after a controversy last year where The Richards Group founder made racist comments.
- Its split has helped it win bigger accounts, including some from The Richards Group.
- See more stories on Insider’s business page.
Multicultural agency Lerma split off in April from The Richards Group, the largest independent ad agency.
Lerma was founded in 2009 as a Hispanic marketing agency by principal Pedro Lerma with the backing of The Richards Group founder Stan Richards, who stepped down last October after he called a proposed ad campaign for Motel 6 “too Black.” The incident led to a string of client losses including Motel 6, Home Depot, The Salvation Army, and Keurig Dr Pepper. Lerma bought out Stan Richards, who had owned 49% of the company.
Lerma said he always wanted the agency to be independent but that the controversy sped up the process.
“When everything happened in October with The Richards Group, it just accelerated a path we were already on,” he said.
The Richards Group did not immediately return a request for comment.
Lerma said the agency has benefitted from its independence and new positioning as a “cross-cultural” marketing firm helping brands market to multicultural and general market audiences. It’s increased its staff by 32% and won new clients, including general market work, even poaching some executives and brands from The Richards Group, and its work is now evenly split between multicultural and general market assignments, Lerma said.
Though Home Depot fired The Richards Group after last October’s incident, it retained Lerma as its lead agency for its Hispanic-focused marketing and has also given it more work. Lerma also won the entire accounts – including brand advertising, media planning and buying, and data-driven strategy work – of The Salvation Army and Interstate Batteries from The Richards Group.
Most brands only spent 5% of their total marketing budgets in 2019 on targeting multicultural audiences, despite the US Census Bureau reporting that in 2020 four out of every 10 Americans identified with a race or ethnic group other than white. But since last year’s racial justice protests, marketers like General Motors have increased spending on diverse audiences.
But Lerma said brands are increasingly looking for agencies like his as the line between multicultural and general market work blurs. He said Lerma no longer splits employees into multicultural and general market groups – they’re all one team.
“Inquiries have increased, and I think a lot of it is driven by companies making real commitments to become more multiculturally relevant,” Lerma said. “There are not a lot of minority owned media outlets and agencies. Our independence now makes us a minority owned agency.”
Lerma has made new hires to handle the business growth, including principal of brand management Jon Lee, who spent 16 years at The Richards Group leading accounts like The Salvation Army and who will continue managing that client at Lerma.
“I joined Pedro for the same reason it made sense for The Salvation Army and other clients to select Lerma as their [lead agency],” Lee said. “This team understands the profound transformation happening in American culture and how to help clients navigate those changes.”
Born in Texas to Mexican immigrants, Lerma moved to Dallas and joined The Richards Group in 1998 after winning leaders over by mocking up an Ad Age cover with a photo of himself and a headline boasting about how he had joined the agency.
He developed The Richards Group’s first dedicated Hispanic division and ran the agency’s digital practice before forming Richards/Lerma in 2009 with its first client Advance Auto Parts. In February 2020, the agency rebranded to Lerma to establish a stronger identity and to show its expansion to underrepresented audiences including Black and LGBTQ Americans while retaining The Richards Group’s backing.
On the back of its recent growth, Lerma is now looking to expand to add new divisions including a diversity, equity, and inclusion practice and is searching for a larger office in downtown Dallas to enable collaboration and a hybrid work model.
“It feels like the market is right for us to accelerate our growth,” Lerma said.