New ad strategy paying off for PepsiCo

19 October 2012

NEW YORK: PepsiCo, the food and beverage group, is benefitting from its new advertising strategy, which has involved boosting budgets, concentrating expenditure and taking a more integrated approach.

On a call with analysts, Indra Nooyi, PepsiCo's chief executive, reported that attempts at reinvigorating its advertising performance were starting to "see some results, which is very, very comforting".

In financial terms, the company will raise adspend levels from 5.2% of sales in 2011 to 5.7% in 2012, a gain from $500m to $600m. Nooyi added it would then "increase that steadily" in the next three years. 

PepsiCo is also focusing resources behind what Nooyi described as 12 of its most "muscular" global brands, a list including Pepsi, Lay's, Gatorade, Quaker, Doritos, Lipton and Tropicana.

"Our brand equity scores for these 12 brands is already pretty high. And we wanted to make sure that we continued to hold it or increase it in an advertising environment that was extremely cluttered," she continued.

Elsewhere, this process has seen the company shift funds away from "non-working media to working media", alongside "culling the tail" with regard to the backing given to non-core products.

"Doing a 360-degree activation, not just spending money on television advertising, but in the digital world; executing better; [and] doing the right promotion[s]" has proved equally useful, Nooyi said.

In determining the results, the organisation is tracking "tailpipe metrics", according to Nooyi. The primary measure in this area is brand equity scores, a field where gains are already being made.

"Typically, brand equity scores take 12 [to] 18 months to really show improvement, sustained improvement," said Nooyi. "We are beginning to see improvement across most of the brand portfolio.

"And I think as the quarters go on, you'll see even more benefit and that will then translate to higher value share ... We're watching this virtuous circle very, very carefully, and making adjustments as we go along."

In keeping with its new ad strategy, PepsiCo is emphasising "breakthrough" innovation, with recent launches including Quaker Real Medley, Pepsi Next and Gatorade Energy Chews.

"I think going forward, ... [for] branded companies like us, we have to think through carefully which parts of the portfolio we actually add value [to]," Nooyi said. "And that's why I think we're playing a much more focused, deliberate and differential game."

Data sourced from Seeking Alpha; additional content by Warc staff