PepsiCo has announced that it will increase its marketing budget in order to remain competitive against Coca-Cola, especially in North America.
Despite reporting higher-than-predicted earnings of $12.56 billion, revenue for PepsiCo beverages in North America fell one percent in the first quarter of 2018.
In response, PepsiCo will invest in additional marketing, including its “Pepsi Generations” campaign that debuted during SuperBowl LII. The company previously announced in February that it would invest its GOP tax cut savings in ecommerce and digital capabilities.
“The overwhelming driver is that, despite moderately increasing our media on trademark Pepsi over the past three years, our share . . . has fallen dramatically relative to our key competitor, who has substantially stepped up their media spending on colas over the past two years,” PepsiCo chairman and CEO Indra Nooyi told investors on Tuesday.
That “key competitor,” of course, is Coca-Cola, whose rebranded Diet Coke products drove volume growth in North America during Q1.
“Although we continued to face challenges in North America Beverages, the sector had sequential improvement in top line momentum since the fourth quarter of 2017,” said Nooyi. “We continued investing in and growing share in a number of faster-growing, future-facing categories. However, competitively we recognize the need to step up investments in core carbonated soft drinks, which we intend to responsibly do.”
Pepsi reported that it saw “improved sales performance and trajectories,” for Gatorade. It recently launched Gatorade Zero, a version without carbohydrates as the company reacts to consumer demand for healthier options.
PepsiCo may not increase ad spending across all divisions, however. The company reduced advertising and marketing expenses in the snack category during Q1 to offset rising freight and commodity costs and may continue to do so. The snack division, which includes Doritos, reported growth in Q1 despite under scrutiny over snacks that were being designed for women. Dubbed “Lady Doritos” by the internet, Pepsi quickly backpedaled against public outcry and mockery.
