The bond between PepsiCo and Anheuser-Busch InBev is about to get tighter. The two marketing giants will team up on joint promotions and in-store marketing that will for the first time plug Bud Light and Pepsi together.
PepsiCo, A-B InBev Strengthen Ties With Joint In-Store Marketing Program
The promotions, which will get heavy play leading up to the Super Bowl, come after the two companies had previously touted snacks such as Doritos alongside beer brands.
"We've worked well together as official [NFL] sponsors," said Paul Chibe, AB- InBev's VP for U.S. marketing, told Ad Age. This year's effort is "just building upon the success of our work together last year." Asked if the partnership would extend to other channels, such as digital or in-game promotions, Mr. Chibe said, "No, not yet."
One image of an in-store sign shows two bags of Doritos, two bottles of Pepsi and two bottles of Bud Light, along with the Super Bowl Logo. The caption reads: "Super Bowl. Super Team. Super Party." The partnership takes PepsiCo's Power of One efforts a step further. In the last year, it has stepped up efforts in that area, with a summer campaign promoting Mtn Dew alongside Doritos and Lay's with Pepsi.
In an internal memo sent by A-B InBev to distributors that was obtained by Ad Age, the brewer refers to the program as a "National Big Bet." The memo also shows a "save up to $8" coupon next to images of Bud Light, Doritos and Pepsi (with a mail-in rebate). "We have always worked with cross-merchandising partners in the past, but for 2013...all three [brands -- Doritos, Pepsi and Bud Light] are trying to work together to have flawless execution at retail," an A-B InBev distributor told Ad Age. He noted that the arrangement requires coordination between three sales and delivery teams.
"In-store marketing and merchandising is getting more and more important, and having these three brands on the same displays could potentially be very powerful," said John Sicher, editor and publisher of Beverage Digest, which first reported the news. "Based upon what I've heard from Pepsi bottlers, they believe this could have strong competitive potential."
"The promotions between PepsiCo and Anheuser-Busch offer convenience and value to consumers during a variety of occasions. Since we are both official National Football League sponsors, we are in a unique position to kick off the year by helping our consumers celebrate Super Bowl XLVII with brands like Pepsi, Doritos, Budweiser and Bud Light," said the companies in a joint statement. "This is a continuation of the longstanding relationship our companies have had in several areas of our business."
Coca-Cola, PepsiCo's primary competitor in the beverage space, declined to comment.
"In our view, the packaging of soft drinks, snacks and beer around a large event makes a great deal of sense, particularly in these channels, and this may be an indication of more to come down the road," wrote Andrew Lazar, an analyst with Barclays, in a research note. "While execution of a cross-company marketing and promotional agreement certainly brings its own challenges, this plan basically brings together three formidable go-to-market systems with the potential to unleash substantial value for the organizations."
It's not the first time, A-B and PepsiCo have teamed up. In 2009 they signed a "joint-purchasing agreement" meant to save on items such as travel, computers and office supplies. A few months later, the pair pooled their vast scaleto wring savings out of media companies. Together they spend nearly $1.17 billion on U.S. measured media. The response from media companies was tepid, however.
"The news will certainly fuel speculation that ultimately [A-B InBev] might acquire PepsiCo's beverage business," wrote Bill Pecoriello, CEO of ConsumerEdge Research, in a report. However, Mr. Pecoriello says for now a deal seems unlikely, given A-B InBev is about to close a deal to acquire Grupo Modelo and PepsiCo is still trying to turn around its beverage business.
Calling 2012 a "transition year," PepsiCo pledged to invest an additional $500 million to $600 million to advertise its brands last year, with a focus on North America. Mr. Lazar believes this latest partnership with A-B is an example of how PepsiCo is "taking positive steps to meaningfully improve" performance in its beverage division. He noted that division will still require ongoing investments in marketing and advertising in the year to come.