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PepsiCo to wind down 2019’s ad spend blitz as it rethinks marketing of the ‘classics’

Pepsi heavily featured Zero in its Super Bowl commercial

After ramping up its global ad spend by more than 12% year-on-year, PepsiCo is preparing to decelerate marketing investment while “improving” the way it sells its classic brands to consumers.

The company increased its global advertising and marketing spending by more than 12% for the full year across its full portfolio of brands as part of its 2019 goal to become “faster, stronger and better”.

The business additionally invested in data technology and analytics in a bid to better target consumers.

Pepsi’s full-year earnings revealed a fresh focus on data collection to “create more relevant and personalized experiences for consumers” and “satisfy demand at the store level”.

In the first half of 2019, the company’s North American division began building out an in-house team dedicated to bridging data with media planning.

These year-long data, advertising and marketing investments coincided with organic revenue growth of 4.5% for 2019. Chairman and chief executive Ramon Laguarta said it was its biggest annual bump since 2015.

He noted socioeconomic issues such as the coronavirus and political uncertainty failed to impact on sales, even in developing and emerging markets, which all “delivered high single-digit growth”.

However, the company now plans to pull back on its marketing spree.

Hugh Johnston, the company’s chief financial officer, said: “I don’t think you’ll see the same level of growth in advertising and marketing this year. It will still grow – it might even grow a little bit in excess of the rate of sales growth.

“To a great degree, it’s going to depend on the opportunities that we see in front of us. We’ve certainly funded our advertising line well going into the year. But frankly, if we see innovation taking off or if we see an opportunity in the marketplace to accelerate investment in order to capture even more growth, we’re not going to be shy about doing that.”

Laguarta said that while newer, “permissible” brands such as Simply and Smartfoods

had delivered, its North American Frito-Lay customers were notably drawn back to its “classics” such as a Lay’s, Doritos, Cheetos and Tostitos.

The modernization of this group will be a key focus for PepsiCo’s marketing teams going into 2020.

“We’re trying to improve the way we market those brands in a way we are personalizing the messages, the way we’re creating unique content for different types of consumers and the way we innovate against those large brands,” he said.

Meanwhile, in drinks, Rockstar and Pepsi Zero have been earmarked as brands to develop. The former was cited as one with potential for development and investiture to compete in the increasingly crowded energy drinks market, while Laguarta said he hopes to replicate Zero’s international success in America.

“We’re trying to develop [Zero] faster in the US,” he said, noting its prominence in Pepsi’s Super Bowl campaign.

He added: “Pepsi regular is growing back again. Again, I think [it’s] ... our execution and the fact we’re able to execute with more granularity and better precision that’s helping the Pepsi brand, along with the brand equity development.

“So that’s what makes us feel very strong about Pepsi continuing to grow 2020 and in the coming years.”

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