Gideon Spanier
Jul 16, 2020

PepsiCo: More in-housing has been 'terrific' way to cut costs during Covid-19

Soft-drinks giant has been 'a bit more selective' about adspend.

PepsiCo: More in-housing has been 'terrific' way to cut costs during Covid-19

PepsiCo has been building up its in-house agency capabilities during the coronavirus lockdown because it is a "terrific" way to speed up working and save money.

The US soft-drinks and snack-foods giant cut "non-essential" advertising spend as global revenue slipped 0.3% and it ran up extra Covid-19-related costs in the last quarter.

Advertising remains "a key component of our strategy" and "we still think that it's critical that we continue to use that lever to drive penetration of the brands and trial", Ramon Laguarta, chief executive of PepsiCo, told investors on its earnings call.

"We also have become a bit more selective about the type of A&M [advertising and marketing] that we're doing," he said.

That has meant stopping "some of the activities that had lower ROI" and "we're putting more money against the initiatives that had more return on investment".

Laguarta went on: "Sometimes a crisis helps [a company] to be more selective and to be more impactful [in its decision-making]."

In the case of PepsiCo, it has been looking for "simplification" and a focus on "fewer and bigger" initiatives, according to Laguarta.

"Part of that has been building some more capability to do A&M in-house," chief financial officer Hugh Johnston said.

"It's got a couple of benefits. One, it improves our speed; and number two, it has proven to be more efficient over time

"So, we can actually get [the] same or more value for less money, which is obviously a terrific outcome for the company."

PepsiCo spent $3 billion on advertising expense in 2019, up from $2.6 billion in 2018 and $2.4 billion in 2017, according to its annual report.

The company suffered a blow in 2017 when an in-house creative team, Creators League, made a Pepsi ad featuring Kendall Jenner at a civil-rights demonstration that critics said trivialised police brutality. 

PepsiCo has continued to invest in in-housing, including media and data capabilities.

Josep Hernandez, senior director of media and total connections planning at PepsiCo, told the Programmatic Pioneers Summit in London last year that the industry was being held back by siloes and short-term concerns about "the threat of in-housing".

"It’s not about in-housing. It’s about upskilling and building capability internally, so you can get greater control of your advertising spend," Hernandez explained. "Instead of having a digital marketing team, we have a marketing team that is suited for the digital age."

PepsiCo uses a number of Omnicom agencies, including OMD, around the world.

Source:
Campaign UK

Related Articles

Just Published

20 hours ago

Uproar: Are animal portrayals in ads a new brand risk?

Advertisers and agencies love animals, because animals sell. But a Year of the Tiger Gucci campaign that made activists growl shows that the definition of what’s appropriate may be evolving when it comes to using the world's fauna.

21 hours ago

Mark Heap on ‘moving across the aisles’ to ...

Media agencies offer broadly the same services as one another, and use propositions like ‘good growth’ and ‘people first’ to establish an identity. But what do these mean, in practical terms, and how do they influence leadership strategies? Mark Heap takes us inside the industry.

21 hours ago

The ride of the tiger: Feast your eyes on BMW's ...

While other brands make long, dramatic Chinese New Year films, the carmaker and TBWA's Bolt have programmed in a very different route: 90 seconds that's 'nothing but sheer joy'.

21 hours ago

The Beijing Olympics: A non-starter for global sponsors

SHANGHAI ZHAN PODCAST: Beijing-based sports-marketing expert Mark Dreyer says the games will see largely Chinese brands targeting the China market, with many employing Chinese-American skier/model Eileen Gu.