PepsiCo takes new approach

04 October 2012

NEW YORK: PepsiCo, the food and beverage giant, believes consolidating its agency roster will provide benefits in terms of strategy and cost savings, as well as yielding resources to be reinvested in marketing.

Speaking to Forbes, the business title, Salman Amin, PepsiCo's chief marketing officer, reported that a review of its operations conducted earlier this year had prompted a profound change in strategy.

"It was clear to us for some time that we needed to reinvest, and up our investment, against consumers," he said. "As part of that, one of the things we looked at very closely was: Were we spending our money the way we should? Were we spending it the most efficiently?"

"Obviously we had to look at agencies and agency consolidation, and as part of that we realised there was a huge opportunity for PepsiCo to focus our efforts behind fewer relationships."

As an example of this process in practice, PepsiCo's beverages unit in North America reduced its number of shops from 150 to around 50, a move the firm will apply more broadly in 2012 and 2013.

The objective, according to Amin, is to "leverage our activities with fewer partners so they understand our business more deeply, as well as ... drive some economies of scale with that."

Having worked with agencies forming part of the Omnicom Group for roughly five decades, many key accounts will be subsumed by the holding group's networks, offering a unified approach.

"The goal is not to cut money; the goal is to refocus money ... against consumer facing activities," Amin said.

More broadly, he argued that the funds ultimately freed up by this more streamlined agency roster will be reinvested by PepsiCo into a diverse range of marketing programmes.

"They'll go into paid media, they may go into owned media, They'll go into all the various things that we think can help build our brands," Amin said. "We're building very careful plans on which businesses [and] which countries we'll be investing in."

Overall, PepsiCo plans to boost its adspend supporting 12 so-called "power brands" – such as Lays, Mountain Dew, Pepsi and Sierra Mist – by $500m to $600m this year across the globe.

These resources will be focused on North America in particular, partly in response to high levels of scrutiny being placed on Pepsi cola after it lagged behind Diet Coke in sales terms for the first time in 2011. 

Data sourced from Forbes; additional content by Warc staff