The company plans to focus the additional spending on a dozen
core brands, rather than spreading it across a wide swath of its
beverage and snack brands. The trademarks it will focus investment
on include: Pepsi, Gatorade, Tropicana, Mtn Dew, Sierra Mist,
Lipton, Mirinda, Lay's, Sun Chips, Cheetos, Doritos and Quaker.
Analysts have been calling for increased investment,
particularly in the North American beverage category. PepsiCo 's ad spending on beverages has trailed
Coca-Cola's in both absolute terms and as a percentage of sales
for years. In each of the past three years, Coca-Cola spent
close to $3 billion on advertising, while PepsiCo spent less than
$2 billion promoting its beverage brands.
To free up cash for the new investments, PepsiCo said it will
reduce the number of agency partners and leverage the global scale
of its key brands. TBWA /Chiat/Day manages the Pepsi
trademark in the U.S., as well as Gatorade and Tostitos. BBDO works
with Mountain Dew and remains involved with the Pepsi trademark
globally. Goodby Silverstein
& Partners handles Cheetos and Doritos, while Energy BBDO is responsible for Lay's
and Sun Chips. Agency reductions will be limited to the beverage
side of the business, where it plans to go from 150 agencies to
50.
Recently, the company has added marketing execs that have a
global focus, including Brad Jakeman, president-global enjoyment
and chief creative officer, and Lorraine Hansen, senior VP-global
hydration. As Ad Age first reported earlier today, Massimo d'Amore,
president-Global Beverage Group, is retiring at the end of February, however. The
first global campaign for brand Pepsi is expected in the coming
months.
Plans are also in place to lay off 8,700 employees, or about 3%
of PepsiCo 's global workforce, across 30 countries. The company
says it will reduce costs by an incremental $1.5 billion in the
next three years, with $500 million in savings each year.
"As we implement our strategic priorities in 2012, we've had to
make some tough decisions," said Hugh Johnston, chief financial
officer, in a statement.
CEO Indra Nooyi is looking to boost U.S. beverage sales and
regain market share from Coca-Cola. The company brought investors
together in New York today to reveal a multi-year plan to boost
earnings and restore confidence after two years of lowered profit
targets.
Coca-Cola, however, announced its own marketing investments and
productivity initiatives earlier this week. Coca-Cola said it plans
to cut $550 million to $650 million in annual costs by the end of
2015. That money will be reinvested in marketing and brand
building, as well as used to address rising commodity costs. The
company also said it exceeded its goal of cutting $500 million in costs
during the past four years.
"The long-term brand-building piece is really where [PepsiCo ]
has fallen down in the last 10 years," John Faucher, an analyst
with JPMorgan, told Ad Age last month. "But, if you've got the
money and are still in front of the consumer, which
direct-store-delivery brands always will be, there's the ability to
bring the brand back. Consumers might forget what they liked about
Pepsi, but they still see it every time they go to the store."
PepsiCo projects earnings per share will decrease by 5% in the
coming year. Following the "transition" year, PepsiCo anticipates
high single-digit earnings per share growth. Fourth-quarter net
income advanced to $1.42 billion, or 89 cents a share, from $1.37
billion, or 85 cents, a year earlier, PepsiCo said.
~~~Bloomberg News contributed to this report.~~~
