PepsiCo axes global procurement operation

Here’s story to bring a wintry smile to agency faces.

Ad Age reports that PepsiCo, one of the world’s biggest advertisers, has decided to nix its global procurement department, giving cost responsibility back to brand teams.

PepsiCo says: “We continue to evolve our operating model to be more efficient and effective. These changes are made with careful consideration and are necessary for us to stay competitive while meeting the future needs of our business. Unfortunately, as a result of these changes, some positions have been impacted. These are never easy decisions but we are committed to supporting affected employees by offering severance packages and comprehensive career transition support.”

So it sounds as though PepsiCo has axed the cost cutters to save money – a somewhat ironic outcome.

Whether or not this leads to a more widespread change in marketing practice we’ll have to wait and see. An Association of National Advertisers (ANA) survey in the US earlier this year said that only 47 per cent of clients believed procurement added value, while ten per cent of agency respondents said it did. Where did they get the ten per cent from?

It may be that clients now think they have costs under such scrutiny that they don’t need ‘specialists’ inserted into every business relationship any more. One factor in this, we suspect, is digital. The price of digital media has been ground down even while advertisers are buying much more of it. But, it seems, half or so of these ads aren’t being seen by anyone – which makes the cost rather irrelevant.

This is one big element in the current ANA inquiry into undisclosed media rebates going to agencies.