More brands should follow PepsiCo’s marketing lead

“Marketing provides good payback for shareholders,” declared PepsiCo last week. This was not a statement uttered by one of the soft drink giant’s senior marketers but its chief financial officer Hugh Johnston.

Russell Parsons

The endorsement was delivered as the company announced organic revenue growth of 4% and Johnston was keen to make the case for investment in top-line growth on a call with analysts: “The reason we continue to invest in that [advertising and marketing] is we continue to get good returns,” he added.

PepsiCo is in cost-cutting mode. To offset the challenges of a tumultuous global macroeconomic environment and inexorable declines in some of its key categories, it has targeted $1bn (£700m) in cost savings, for example through overhauling its supply chain.

As well as driving an increase in revenue growth, the company’s marketing activity is also helping PepsiCo achieve its other strategic aim: margin improvement. PepsiCo, which owns brands including Pepsi, Gatorade and Quaker Oats, is looking to increase the average price of its brands globally and knows this can be achieved only by increasing brand equity and new product innovation.

The company’s marketers are not being given a blank cheque, however. Responding to a question about where its marketing spend will be focused, Johnston said “digital”, but added the caveat that not all that glittered in digital was gold, bemoaning the lack of “high quality assets” and “properties” to invest in.

As an FMCG company reliant on the value of its brands for success, marketing investment should be business 101. However, PepsiCo is demonstrating admirable faith in the ability of its marketers to boost its appeal to existing and prospective shareholders. It also demonstrated its trust in marketing when it eliminated its marketing procurement function and handed its marketing team responsibility for agreeing agency and contract fees.

Both in the statements of its most senior executives and in the procurement play, PepsiCo is treating marketing as business strategy and vice versa.

Less manageable societal and economic headwinds could yet derail PepsiCo’s grand business plan, but for now its senior executives are doing everything they should (and the opposite of everything our Secret Marketer is railing against) in placing marketing at the top table.

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