NEW YORK: PepsiCo, the food and beverage giant, is planning to transform its approach to advertising and brand management, including halving the amount of agencies it works with worldwide.
Following a strategic review of its operations, the firm announced it will prioritise 12 brands – such as Pepsi, Sierra Mist, Mountain Dew and Lay's – which will all now adopt a global model, instead of the existing fragmented structure.
"In PepsiCo, our marketing approach has historically been highly decentralised with each country introducing brands as needed," Indra Nooyi, PepsiCo's CEO, said on a conference call.
"These 12 brands will have aligned positioning globally. They'll have consistent campaigns and scaled innovation platforms."
Adspend on these assets will rise by 15%, or $500m to $600m, in 2012, with North America receiving a "disproportionate share" of this amount. By 2015, PepsiCo, which has 400 brands in all, is to dedicate 6% of revenues to advertising and marketing (A&M), versus 5.7% at present.
"There's no point stepping up the A&M investment if it's going to be fragmented across 400 brands," Indra Nooyi, PepsiCo's CEO, said on a conference call. "This brand proliferation over the years has diluted the incrementality of our initiatives."
As part of this process, the company wants to cut its agency relationships from the current level of 300 worldwide by more than half, having already reduced its number of North American shops from 150 to 50.
"Over the last five years, North American A&M did not decline, but the spending was supporting too many brands and was spread across too many agencies. We allowed nonworking A&M to squeeze out working A&M. So we went to work and we cleaned house," Nooyi said.
The impact of this change was to "amplify" the effectiveness of PepsiCo's advertising and media expenditure, a move equally encouraged by basing remuneration packages on actual results.
"We're implementing a pay-for-performance model, which makes sure that we get the best talents and agencies devoted to PepsiCo's businesses," said Nooyi.
In monitoring the outcomes of its new strategy in the marketplace, PepsiCo has also developed a "common way" to measure brand equity around the world, according to Nooyi.
"Our goal is to track the brand equity evolution of each of these global brands regularly and intervene, when appropriate, to make sure we hold or increase the brand equity with our overall consumers in every one of the key countries in the world," she said.
Data sourced from PepsiCo; additional content by Warc staff