PepsiCo to up ad spend, trim agencies from 150 to 50

MUMBAI: Calling 2012 a transition year, PepsiCo announced that it will be adding to the advertising spends kitty. In a strategy to position itself for growth, the company also said it will reduce the agencies on its roster and lay off employese while adding to the A&P spends.

As reported in the Ad Age, the company will invest an additional $500 million to $600 million to advertise its brands this year following a six month review, with a focus on North America. Up to $100 million in additional spending will focus on things like in-store display racks.

In the coming years as well, PepsiCo will maintain or increase that rate of support to maintain ad spending as a particular percentage of revenue.

According to an analysis from Jefferies & Co. as a percentage of sales Coca-Cola spent 8 per cent on marketing in 2010 while PepsiCo spent just 3 per cent on its beverage brands.

PepsiCo CEO Indra Nooyi is looking to boost U.S. beverage sales and regain market share from Coca-Cola.

It is reported that the additional spending will focus on a dozen core brands like Pepsi, Gatorade, Tropicana, Mtn Dew, Sierra Mist, Lipton, Mirinda, Lay‘s, Sun Chips, Cheetos, Doritos and Quaker rather than spreading it across a wide swathe of its beverage and snack brands.

PepsiCo said it will reduce the number of agency partners in the beverages section from 150 to 50 in order to make way for the new investments. Currently 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.

The company recently added Brad Jakeman as president-global enjoyment and chief creative officer and Lorraine Hansen as senior VP-global hydration.

It has also been reported that the company is in plans to lay off 8,700 employees or about 3 per cent 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.

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