When the chief executive of a major packaged goods company addresses Wall Street analysts, the advertising agency is usually mentioned in the same breath as the paper clip supplier — which is to say, not at all. So when Ramon Laguarta, the chief executive of PepsiCo, took time during last week's earnings call to discuss Publicis Groupe, the holding company that won the marketer's consolidated media account earlier this year, something unusual was happening.
Mr. Laguarta described the arrangement as "an important capability for us" and said PepsiCo would be able to invest "with much more data, much more granularity" as a result. The language was notable less for what it said than for what it sounded like: not a client discussing a vendor, but a company describing an acquisition. He spoke about Publicis the way executives speak about things they own.
That framing will not displease Publicis, which, like its holding company peers, has spent considerable energy trying to persuade investors that it is a technology business rather than a purveyor of thirty-second spots. Whether Mr. Laguarta meant to deliver the pitch or not, he gave it a lift.
His comments also arrive at an interesting moment for the broader argument about how advertising ought to be classified on corporate ledgers. Marketers have long contended that advertising should be treated as an investment in the future — closer in spirit to capital expenditure, with returns that compound over time. Accounting rules and most chief financial officers treat it the other way, as an operating expense that hits the current quarter and can be trimmed when margins tighten. (The distinction is not academic; it shapes how quickly budgets evaporate under pressure.)
"You will see more investment in advertising and marketing, and you see better investment," Mr. Laguarta told analysts, adding that the company would be "telling every consumer about our products in a way that they will be much more enlightened."
The focus on marketing is not incidental. PepsiCo's North American business has been troubled for some time, with years of price increases masking volume declines as shoppers traded down. Marketing is one of the few levers a chief executive can pull that might reach the shelf quickly, which explains why it is suddenly getting discussed in venues where the chief marketing officer usually has the floor to herself.
Original story published in Digiday: "PepsiCo CEO on Publicis switch", by Seb Joseph