PepsiCo says lack of high-quality assets a barrier in shift to digital

PepsiCo is planning to increase its investment in marketing and put more money into digital despite concerns over finding “high-quality properties” to advertise on online as big data enables it to better measure ROI and prove revenue growth and returns for shareholders.

Speaking on an earning calls following the company’s fourth quarter results, PepsiCo’s CFO Hugh Johnston credited an increase in advertising, alongside research and development, for the between 4% and 5% revenue growth the company has experienced over the past couple of years.

Organic revenues were up 4% in the quarter ending 26 December although net revenues declined as the firm was impacted by a strong dollar. Net profit increased 31% to $1.73bn.

Johnston highlighted its major new marketing properties including the NBA and UEFA Champions League as examples of how it is focusing its marketing around major events. Pepsi was also the sponsor of the half-time show at the Super Bowl.

“As you’ve seen as recently as the Super Bowl, we are investing in big properties because these big properties do enable breakthrough types of messaging. And I think we, over the last several years, as well as for a longer period of time, have been quite successful in investing in those big properties,” he explained.

“We added major new marketing properties with the NBA and the UEFA Champions League. And we expect to derive value from them through our rapidly expanding global marketing and design capabilities.”

Johnston also promised that more money would be going into digital but cautioned that the shift would not be as pronounced as some might expect as the company focused on finding high-quality assets to invest in.

“The big constraint on moving more to digital is identifying high-quality properties to advertise on. It’s not just a matter of going for pop-up ads anymore. It’s really more sophisticated digital advertising. More than anything, the rate-limiting factor is finding high-quality assets to invest in,” he said.

Nevertheless, Johnston said marketing is giving “good payback for the shareholders”, with big data enabling the company to better determine ROI.

“Measuring advertising and a marketing return is a little trickier than measuring return on price reductions and things like that. That said, with the advent of big data, we actually are getting more sophisticated in terms of our ability to measure those returns,” he said.

“You’ll see continued investments in advertising and marketing, as you have over the last couple of years. And the reason we continue to invest in that is we continue to get good returns on it, hence the 4% to 5% revenue growth you’ve seen over the last couple of years.”

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