Pepsi, InBev's A-B Join Forces in Landmark Media Pact

Giants Wield Combined $1.15B Budget to Get Better Prices From Broadcast, Cable, Mags and Outdoor Sellers

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CHICAGO ( -- In a landmark deal, mega-marketers PepsiCo and Anheuser-Busch InBev -- which together spent more than $1.15 billion on U.S. measured media last year -- are pooling their vast scale to wring savings out of media companies.

The arrangement is an evolution of a "joint-purchasing agreement" the two marketers signed in October. That pact was originally supposed to save the partners money on items such as travel, computers and office supplies. In fact, a PepsiCo spokeswoman at the time said that "the consortium is not related to media costs or marketing."

But less than three months later, A-B and PepsiCo have moved beyond scoring cheaper paperclips and onto network, cable, print and outdoor media buys. A-B and PepsiCo are believed to have already made joint approaches to media concerns such as NBC Universal, Turner and Condé Nast.

An examination of the two companies' $1.15 billion on U.S. media as measured by Kantar Media shows that their combined heft was greatest in the four categories where they are now cooperating. They shelled out $490 million on network TV, $182 million on cable, $194 million in magazines and another $70 million on outdoors, Kantar reported.

"This follows on the relationship we started last October to purchase goods in the U.S.," said a PepsiCo spokesman. "It's a way to allow both companies to purchase media more effectively and efficiently and reinvest savings in our businesses."

More clout
Richard Bellas, VP-global procurement for advertising and marketing, is leading the endeavor at PepsiCo, and Mark Wright, VP-media, sports and entertainment marketing, is running point on the A-B side.

While the spokesman declined to offer any estimates about what the company might save, there's little doubt that combining with A-B gives a company that already boasted considerable clout with advertisers significantly more sway, and vice versa.

PepsiCo, a giant in the U.S. beverage and snack business, boasts a stable of billion-dollar brands that includes Pepsi, Gatorade, Mountain Dew, Tropicana, Lay's, Doritos and Quaker. A-B, for its part, dominates the U.S. beer business with a market share of nearly 50%; its leading brands include Bud Light, Budweiser, Busch, Natural Light, Michelob and Stella Artois.

The partnership figures to have a dramatic impact on advertising's biggest stage, the Super Bowl, as the two companies are the game's two largest advertisers by a significant margin over the last two decades.

(A-B had five minutes of air time in last year's game; PepsiCo did not advertise any of its beverage brands for the first time in 23 years, but it did buy four 30-second spots for Doritos.) Fox will carry the game next year.

Putting on squeeze
If this effort plays out anything like other aspects of the joint-purchasing agreement, it figures to save A-B and PepsiCo millions -- and cause media outlets a few headaches. And then there's the potential that other marketers, eyeing PepsiCo and A-B's move, will decide to launch their own consolidated buying agreements in an effort to wring costs out of ad time. It's not hard to envision it happening. It's also not hard to envision who could be next in line for the big squeeze: agencies.

Spokesmen for both companies said the cooperation is limited to media spending and will not impact advertising production or agencies. Both A-B and PepsiCo are major clients of Omnicom Group. A-B's primary ad agency is DDB, while PepsiCo uses Omnicom creative shops such as TBWA and Goodby, Silverstein & Partners, and also retains Omnicom's OMD for media services. A-B's media buying and planning is handled internally, by its Busch Media Group unit.

According to an A-B spokesman, the individual companies will continue to handle their media planning separately, but, after that, "a team of executives from each company will review plans and priorities, focus on common areas of spending and negotiate purchases on behalf of both companies." The actual ordering and payment will be handled by the individual companies separately.

At PepsiCo's recent analyst meeting in New York, Exec VP-Global Operations Hugh Johnston said that PepsiCo and A-B have addressed spending that amounts to nearly $1 billion in areas including logistics, travel, office supplies and couriers. Media spending is not accounted for in that figure.

"While our productivity results to date have been significant, we believe there are many additional opportunities to realize further savings," he said of the company's decision to team up with A-B InBev. "We built a joint team, co-located them and just turned them loose. So far, they're delivering ahead of expectations, and we're looking at adding more categories of spend even faster than we had anticipated in our plan."

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Contributing: Brian Steinberg, Nat Ives

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