But the verdict on whether the deal will pay out or boomerang will take this year at least. Prof. Timothy Calkins, Clinical Professor of Marketing at the Kellog’s School of Management, tells 4Ps B&M from Northwestern, “I suspect this deal will have little impact on media spending budgets, at least in the short run. By working together the companies will try to stretch the planned spending. I suspect the individual business units at the companies won’t adjust spending levels until it is clear precisely how much there is in terms of savings. Companies are aggressively looking for ways to stretch marketing dollars and this is one promising approach. I suspect we will see more companies teaming up to negotiate with the major media companies, particularly if this venture delivers real benefits”
The deal’s specifics include that a team of executives from each company will review plans and priorities, concentrate on common areas of spending in media apart from their other supplies and negotiate purchases on behalf of both companies. But the media planning of the two companies would continue to be handled separately. There are rumours galore that the advertising agencies of the two companies might also face the brunt of this deal despite repeated statements by the two companies that advertising budgets and decisions will be handled solely by the respective companies as earlier.
But early signs that the new terrain for the brothers-in-arms would be treacherous are already appearing. Recent rumours suggest that big media companies like Turner, NBC, Conde Nast and Time Inc. have all rejected the proposal by the duo to jointly buy time and space at sharply discounted rates ranging up to 50%. The networks might just be right on this one. Omnicom, the parent advertising giant whose sister firms like TBWA and DDB are the agencies for PepsiCo and AB-InBev respectively also handles PepsiCo’s media buying through its media arm OMD. OMD handles more than $13 billion worth of media budgets for a plethora of big and small advertisers in the US. If the deal has to work, not only will OMD lose its bargaining clout with networks, networks themselves will be risking the ire of their other advertisers demanding similar rates. “This program will have the biggest impact on traditional media outlets such as network television and print. Since everyone understands how to evaluate these vehicles, it is an easy place to go after savings. The deal could have a big impact on events like the Super Bowl, since both companies have been Super Bowl advertisers over the years,” says Prof Calkins.
But the biggest issue that might just end this tryst between the giants sooner than later is the culture collision. Both Pepsi and Inbev come with legacy baggage, and that would be a bigger worry than actually making money out of the alliance. Come to think about it, when did a puritan aficionado of white beer ever allow itself to be mixed with Pepsi and sold as a new combo?
For more articles, Click on IIPM Article.The deal’s specifics include that a team of executives from each company will review plans and priorities, concentrate on common areas of spending in media apart from their other supplies and negotiate purchases on behalf of both companies. But the media planning of the two companies would continue to be handled separately. There are rumours galore that the advertising agencies of the two companies might also face the brunt of this deal despite repeated statements by the two companies that advertising budgets and decisions will be handled solely by the respective companies as earlier.
But early signs that the new terrain for the brothers-in-arms would be treacherous are already appearing. Recent rumours suggest that big media companies like Turner, NBC, Conde Nast and Time Inc. have all rejected the proposal by the duo to jointly buy time and space at sharply discounted rates ranging up to 50%. The networks might just be right on this one. Omnicom, the parent advertising giant whose sister firms like TBWA and DDB are the agencies for PepsiCo and AB-InBev respectively also handles PepsiCo’s media buying through its media arm OMD. OMD handles more than $13 billion worth of media budgets for a plethora of big and small advertisers in the US. If the deal has to work, not only will OMD lose its bargaining clout with networks, networks themselves will be risking the ire of their other advertisers demanding similar rates. “This program will have the biggest impact on traditional media outlets such as network television and print. Since everyone understands how to evaluate these vehicles, it is an easy place to go after savings. The deal could have a big impact on events like the Super Bowl, since both companies have been Super Bowl advertisers over the years,” says Prof Calkins.
But the biggest issue that might just end this tryst between the giants sooner than later is the culture collision. Both Pepsi and Inbev come with legacy baggage, and that would be a bigger worry than actually making money out of the alliance. Come to think about it, when did a puritan aficionado of white beer ever allow itself to be mixed with Pepsi and sold as a new combo?
Anchal Gupta
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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