PepsiCo, the soft drinks and snacks giant, has attributed its ability to simultaneously raise prices and retain consumers to its ongoing marketing efforts.
“Our brands are stronger. The perceived value of our products is better than it was,” said CEO Ramon Lagurta on an earnings call. “We’ve been able to raise prices and consumers stay within our brands.
“It’s remarkable what our marketing teams have been doing to minimize elasticities.”
Why it matters
His comments are a testament to the crucial role that marketing plays, especially in difficult economic times when there’s a temptation to cut spending in this area or to divert it into promotional activity. That ability to raise prices has been vital to delivering 13% organic revenue growth for PepsiCo in Q2.
Consumer behaviour is changing
- Consumers are adjusting to their economic circumstances. “They’re looking for better deals, they’re starting to look for optimization,” said Lagurta.
“They’re going to channels that have better perceived value. They’re buying more in dollar stores or they buy more in mass or in clubs. Every segment of the consumer is making adjustments.”
Increasing mental and physical availability
- Marketing investment will increase. “We’re investing in advertising and marketing and A&M was up 50 bps [basis points] in the second quarter,” said CFO Hugh Johnston. “You’re going to continue to see us invest in A&M.”
- PepsiCo is also addressing physical availability via direct-to-store distribution (DSD) by bottlers.
- In the case of its G2 Gatorade product, for example, Lagurta said “G2 DSD is going to be a structural move that will give us better execution and capacity to respond to weather changes and opportunity in the marketplace going forward”.
Sourced from PepsiCo, Seeking Alpha
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