PepsiCo readies multi-million dollar investment in brands

PepsiCo plans to cut 8,700 jobs as part of a strategy to save an extra $3bn (£1.9bn) over the next three years as it looks to free up funds for new marketing initiatives to take on rivals Kraft Foods and Coca-Cola.

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The marketing investment will have a particular focus on PepsiCo’s 12 core brands including Pepsi-Cola, Tropicana, Doritos and 7-Up, as the company looks to increase ad spend by as much as $600m (£378m) to boost beverage sales.

PepsiCo says that its marketing will have a “particular focus” on North America, which will be in part funded by the 3% cut to its global workforce.

It will also spend up to $100m (£63m) on in-store activity and displays this year, alongside reducing the number of rostered agencies to support the new marketing direction. PepsiCo will increase investment each year as a percentage of its revenues.

Coca-Cola the world’s largest soft-drinks maker by revenue, earlier this week announced a global cost-cutting imitative, that aims to make up to $400m (£253m) in annual savings by 2015, which will be reinvested into marketing campaigns.

PepsiCo’s announcement comes as its net profit rose 3% in the fourth quarter year-on-year to $1.4bn (£882m), while revenues were up 11% to $20.1bn (£12.7bn). Revenue in Europe and Asia rose 31% and 16% respectively.

The strategy marks a new direction for the business, which has in recent years focused on healthy foods in favour of its core brands. Some analysts have called for the company split its drinks and snacks business to revive its drinks brands, similar to Kraft’s decision to split its North American grocery business from its global snack business.

Indra Nooyi, CEO and chairman at PepsiCo, says: “In a year characterised by a challenging macroeconomic environment and political turbulence, we took advantage of gains from strategic adjustments to our portfolio to reinvest in key capabilities and markets.”

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