PepsiCo's decision to axe marketing procurement department 'not part of wider trend'

26 November 2015

PepsiCo’s decision to close down its marketing procurement department in order to become more “efficient and effective” will not become an industry trend, according to two thirds of professionals surveyed by the Association of National Advertisers (ANA).

The food and drink maker has closed down its centralised marketing procurement department, which had responsibility for managing agency and media relationships across different brands, and moved a number of the 12 team members to elsewhere in the business. There have also been some redundancies.

Procurement responsibilities will now sit with marketing executives within each of PepsiCo’s brands, including 7UP, Walkers and Tropicana.

“These changes are made with careful consideration and are necessary for us to stay competitive while meeting the future needs of our business,” a company spokesperson said. “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.”

However, 68 per cent of 148 procurement and finance professionals surveyed by the ANA answered “no” to the question: “Do you think PepsiCo’s move is indicative of a wider industry trend toward the elimination of marketing procurement departments?” Some 17 per cent said they weren’t sure.

Respondents stated that procurement has expertise in areas such as negotiation, supplier management and risk management that marketing and brand teams lack, and the role of marketing procurement is to bring value and efficiency that allows marketers to focus on marketing. “If marketing teams are responsible for procurement, they risk becoming less effective,” one respondent added.

But respondents also said the goals between marketing and procurement must be aligned, marketing procurement must “add strategic value beyond price” and to be effective procurement must understand marketing.

Bill Duggan, group executive vice president of the ANA, said: “Procurement can still bring significant value to marketing. That allows marketers to do what they do best: marketing. At the vast majority of ANA member companies, marketing procurement is not going away.”

Marketing procurement expert Tina Fegent agreed that PepsiCo’s decision does not suggest the decline of marketing procurement. “It is one company making one decision,” she said. “The more advanced organisations that have had marketing procurement in place for many years are really embracing the vital role procurement plays in between marketing, the agencies and the CFO and finance department.”

She also suggested PepsiCo may reverse the decision in a few years. “Managing commercial relationships with agencies is a complex area now and I don’t feel that the marketing teams have the bandwidth or the skillset to do what a really good marketing procurement team does for an organisation,” she added.

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