US: Cola giants cut costs and jobs to boost marketing

The world’s two super-cola powers, PepsiCo and Coca-Cola, have outlined business plans this week to better compete against each other and please shareholders: both are looking at cutting costs dramatically while at the same time investing those saved millions into marketing…

PepsiCo, the US drinks and snacks company, said on Thursday it would shed 8 700 jobs worldwide to cut costs as it ramps up investment in its core cola and crisps brands that investors claimed have been neglected in favour of its healthier products.

Indra Nooyi, chief executive, said the moves represented a once-in-a-decade “major reset” for the business. After more than a year of tough criticism that she was too focused on “good for you” products such as juice and oatmeal, Nooyi expressed a firm commitment to brands such as Pepsi, Mountain Dew and Doritos.

“Any time you make a mistake, it’s a mea culpa, the buck stops with me,” Ms Nooyi said, acknowledging that personnel changes could have been made earlier and that the company could have reaped more benefits from the acquisition of its bottlers.

The job cuts represent about 3 per cent of PepsiCo’s global workforce and are part of an effort to reduce costs by $1.5bn in the next three years. The long awaited announcement came as the company reported strong fourth-quarter earnings and said it would invest $500m-$600m in marketing and advertising this year, with a special focus on the flat US beverage business that has been losing market share to Coca-Cola.

Ms Nooyi said that after a six-month internal analysis of the company, she rejected the idea of splitting it into separate snacks and drinks businesses, which some analysts have advocated….

Financial Times: Read the full article

PepsiCo’s plan leaves some investors thirsting for more – Reuters

PepsiCo to Cut 8700 Jobs Even as It Spends $600 Million More on Marketing – Bloomberg

Coca-Cola reinvests in marketing

Just 48 hours before PepsiCo announced millions in additional marketing investment, Coca-Cola beat it to the punch.

In announcing its fourth-quarter results, Coca-Cola said it plans to cut $550 million to $650 million in annual costs by the end of 2015. That money will be reinvested in marketing and brand building, as well as used to address rising commodity costs. The company also said it exceeded its goal of cutting $500 million in costs during the past four years …

“This program will further enable our efforts to strengthen our brands and reinvest our resources to drive long term profitable growth,” said Coca-Cola CEO Muhtar Kent. read the full article

Pepsi & Coke: Two soda stocks with no pop

Have the kings of carbonated beverages lost their fizz? PepsiCo and Coca-Cola both reported Street-beating quarterly earnings this week, but shares in the soft-drink companies are languishing in 2012.

Maybe it’s because both firms find themselves bottled up by higher commodity costs, less-than-robust global demand and unfavorable foreign currency effects.

Neither Coke nor Pepsi dares to raise prices much and pass higher costs on to consumers. Not when they’re locked in a market-share battle, when folks are increasingly opting for healthier snacks and beverages, and when the weak global economy makes their brand names more and more of a discretionary purchase.

But higher costs for juices, sugar, corn-based sweeteners and packaging are squeezing margins. Coke said Tuesday that juices and sweetener will add up to $350 million in costs this year alone. And so, both companies have to fall back on a combination of expense cuts, share buybacks, dividend hikes and marketing investments to boost business — and shore up share prices…. Read more