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PepsiCo to boost marketing spend, consolidate agencies

PepsiCo plans to increase marketing spend on its brands by between $500 million and $600 million this year, cut costs and trim its agency roster, the company said in an earnings statement Feb. 9.

Most of the increased marketing dollars will go to a dozen key brands, including Pepsi trademarked soft drinks, Mountain Dew, Gatorade, Lay’s, Doritos, and Tropicana.

PepsiCo reported an 11% increase in fourth-quarter 2011 revenue to $20.2 billion, compared with the fourth quarter of the previous fiscal year. For its full fiscal year, the company reported revenue of $66.5 billion, a 15% year-over-year increase. The company’s net income rose to $1.42 billion in fiscal Q4, a 4% increase year-over-year. The company’s net income increased 2% for the year, to $6.46 billion.

PepsiCo chairman and CEO Indra Nooyi said in a statement that 2012 “will be a transition year, in which we will be taking the appropriate steps to build a stronger, more successful company going forward.”

The Purchase, N.Y.-based company announced it will launch a new global advertising campaign in the spring around its flagship Pepsi-Cola brand. It will also invest about $100 million on display racks and delivery routes.

The changes are part of an effort by PepsiCo to regain its slipping market share and to compete with Coca-Cola, which announced on Feb. 7 that it would be making significant new marketing investments of its own.

PepsiCo also said it would reduce its agency partnerships by more than half. Agencies the company currently works with include BBDO for Mountain Dew; Energy BBDO for Lay’s and Sun Chips; TBWA/Chait/Day for the Pepsi trademark in the U.S.; and Goodby, Silverstein & Partners for Cheetos and Doritos.

The company also announced plans to cut 8,700 jobs over the next three years, which is about 3% of its global workforce. It expects the restructuring will save $1.5 billion by 2014.

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