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PepsiCo scraps procurement

News, 16 November 2015
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NEW YORK: PepsiCo, the snack foods giant, has announced it is scrapping its global marketing procurement department and will be handing these responsibilities back to brand executives.

"We continue to evolve our operating model to be more efficient and effective. These changes are made with careful consideration and are necessary for us to stay competitive while meeting the future needs of our business," a PepsiCo spokesman said in a statement to Advertising Age.

The changing media landscape is a factor behind this decision, as a centralised procurement function is not well placed to deal with the needs of a marketing community that finds itself having to produce content on much shorter timescales than in the past when television dominated their thinking.

"You can realize better effectiveness and efficiencies by putting this responsibility on brand teams who are closer to the consumer and allows them to more quickly balance cost value and quality in all of their decisions," a PepsiCo executive said.

Agencies have never been big fans of procurement. In a survey carried out earlier this year by the Association of National Advertisers, procurement emerged as a particular bugbear: just 10% of agencies felt it added value to the client/agency relationship.

As one procurement executive explained, agencies often find themselves caught in the middle, having on the one hand to deliver savings to procurement and on the other having to deliver sales to marketing.

And while the clients in the ANA survey were more enthusiastic about the function, the fact that only 47% backed it indicated that even they weren't completely convinced of its worth.

The PespiCo executive rejected suggestions that brand executives would now find themselves bogged down in dealing with issues like contractual compliance and financial due diligence.

There was, he explained, playbook of procurement practices and procedures in place for brand teams to use. "I don't think it's burdening them," he said. "I think it's actually helping them to quickly react and get things done."

Data sourced from Advertising Age; additional content by Warc staff

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