Pepsi CEO May Spend More on Marketing to Challenge Coca-Cola

PepsiCo Inc. (NYSE:PEP) may increase its advertising and marketing budget for its namesake cola and other beverages by 50 percent, or $600 million, to $1.7 billion when it reports the results of business review on Feb. 9, Bloomberg reports, citing a survey of analysts.

Pepsi Chief Executive Officer Indra Nooyi hopes to reclaim market share from Coca-Cola Co. (NYSE:KO) and reassure investors who aren’t sold on the company’s recent focus on healthier products, including the 2010 acquisitions of the One Natural Experience coconut-water company and Wimm-Bill-Dann dairy in Russia. Some analysts and investors have also suggested that the world’s largest snack-food maker be split, said Bloomberg.

Nooyi took the helm as PepsiCo’s CEO in October 2006 and accelerated the firm’s foray into more health-conscious snacks and drinks, while spending less on television advertising and direct product pitches, according to the report. PepsiCo’s shares have gained about 2 percent during her tenure while Coke has risen more than 50 percent.

“PepsiCo overall needs to step up investments behind their brands to reinvigorate them,” said Wells Fargo analyst Bonnie Herzog.“If you go back 10 years, they have definitely been under-investing relative to Coke.”

Sanford C. Bernstein & Co. analyst Ali Dibadj estimates PepsiCo needs to spend $579 million more this year than in 2011 to market its products, with the bulk of that focused on beverages in North America, which account for about a third of the company’s sales worldwide.