Pepsi raises budgets

30 April 2012

NEW YORK: PepsiCo is ramping up its marketing spend as it embarks on a centralised programme to build its core global "mega brands".

Indra Nooyi, the FMCG firm's CEO, told investors that the was on track to increase its global expenditure on ads from 5.2% of total revenues in 2011 to 5.7% in 2012.

During the first quarter of this year, expenditure was raised by 25% in the US, she added.

In February, the company announced a shift away from its decentralised brand strategy. This involves an increased focus on 12 top-selling beverage and snack brands, including Pepsi Cola and Lay's.

PepsiCo has also been paring back the number of ad agencies it works with, and has now cut the number of its North American partners from 150 shops last year to just 50.

Nooyi added: "As we execute our brand-building initiatives, our expectation is to see our brand equity scores strengthen over the course of the year, building off of a solid base. And this should begin to translate to incremental top line benefits later this year and into 2013."

Increased centralisation has also involved more sharing of ideas between national teams. In practice, this means that marketing campaigns that were successful in one market are being rolled out to others to a greater extent than before.

Nooyi cited the Do Us A Flavour initiative, originally launched for snack brand Walkers in the UK, as an example of this trend. The campaign has since been launched in markets as diverse as Holland, India and the UAE.

The CEO's comments came as Pepsi announced its Q1 2012 financial results, which show that overall sales for the brand owner increased by 4.1% year-on-year to reach $12.4bn.

Growth was driven by emerging markets, with revenues up 13%, including an increase of 21% for India.

Data sourced from Seeking Alpha; additional content by Warc staff