Media Pushback Stalls Pepsi, InBev Quest to Buy Cheaper Ad Space
NEW YORK (AdAge.com) -- PepsiCo and Anheuser-Busch InBev's landmark media deal, which applied their joint procurement agreement to media buying, hasn't exactly been a success. But they're not calling it quits.
The companies plan to continue seeking media deals, even as most major media players have rebuffed their efforts.
It's been six months since Ad Age first reported that the pair had teamed up in a landmark media pact, stemming from a joint-purchasing agreement they signed a year ago. It's been six months since Ad Age first reported that the pair had teamed up in a landmark media pact, stemming from a joint-purchasing agreement they signed a year ago. The duo has already evaluated some $1 billion in spending in areas including travel, office supplies and couriers for potential savings. But the plan to save money on media deals by combining their scale hasn't proved as lucrative. There have been overtures to companies such as Cond? Nast, Time Warner's Time Inc., NBC Universal and Time Warner's Turner. And while PepsiCo and A-B have found some success in the print world, they've met with stiff resistance from TV outlets.
One media executive said that PepsiCo and A-B execs promised potential spending and share increases from both companies that did not pan out. In the end, the alliance failed to put anything on the table that was attractive enough to have merited pricing concessions, this executive said.
In the magazine industry, one company rebuffed the joint buying effort early on, according to executives. This company told the marketers that it works with clients one at a time, according to an executive there who said that was the end of the conversation. But another major publisher did make some deals with the alliance this year, an executive at that company said. The executive said there haven't been any talks yet about ad buys for 2011.
TV outlets including Time Warner's Turner cable declined to do deals based on the terms the consortium was seeking, according to ad buyers and TV executives. TV ad-sales groups found the companies' pricing terms unattractive. Several executives at TV outlets and buying firms suggested the alliance had a small amount to spend compared to the amounts the bigger ad-buying firms have at their disposal, and thus lacked sufficient leverage to drive their deal home.
While PepsiCo and A-B have proved to be good partners in many ways, buying media together has not been as natural of a fit as, say, buying travel or office supplies. PepsiCo tends to do more magazine buys than A-B, for example. And PepsiCo's brands are also apt, in some cases, to focus on different networks, TV programs and time slots than A-B's beer brands. PepsiCo, a giant in the U.S. beverage and snack business, boasts a roster of billion-dollar brands that includes Pepsi, Gatorade, Mtn Dew, Tropicana, Lay's, Doritos and Quaker. A-B, meanwhile, dominates the U.S. beer business, boasting a market share of nearly 50%. Its leading brands include Bud Light, Budweiser, Busch, Natural Light, Michelob and Stella Artois.
"The sad thing is there is a lot of potential in this [concept]," said one executive. "The problem here is Pepsi and A-B are not the best fit from a company standpoint. They are not good fits from a pure media standpoint, except in the sports area. And that's why there aren't a lot of fits when they are trying to buy TV and print together, especially in areas like cable."
Thus far, the pair seems to have focused on media where their combined heft is the greatest. According to Kantar Media, the pair spends some $1.15 billion on U.S. media, including $490 million on network TV, $182 million on cable, $194 million on magazines and another $70 million on outdoor media.
PepsiCo and A-B both said they've been happy with the collaboration between the two companies. And the group will continue to work together on media deals, said Dave DeCecco, a PepsiCo spokesman.
"Our overall joint-purchasing agreement is going very well," said Mr. DeCecco. "On the media side, while the alliance is still young, we've seen some benefits already this year, and we both believe we'll continue to find opportunities across multiple channels in 2011 and beyond."
"We've been working with [PepsiCo] on commercial purchasing projects and will continue to look for opportunities down the road," added Keith Levy, VP-marketing at Anheuser-Busch.
However, there are still no plans to team up in a bid to put the squeeze on agencies. Both A-B and PepsiCo are major clients of Omnicom Group. A-B works with 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.
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.
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Contributing: Brian Steinberg, Nat Ives, Michael Bush, and E.J. Schultz