PepsiCo and AB-InBev’s media buying deal in US is said to aim at cost cuts but the threat of others following a similar route might make US media reject it completely
The town of Hoegaarden (pronounced ‘whogarden’) in the Flanders region of Belgium, named much earlier, is virtually a namesake to the iconic spiced wheat or “white” beers produced there since medieval times. The industry, a sacred tradition in Hoegaarden and the biggest employer in town, flourished for over 6 centuries. But in 2005, InBev, the world’s largest brewer and Hoegaarden’s owner since 1985, decided to close down HoeGaarden Brewery forever. But the quick buck bankers had missed the recipe. The beer is made from a rare yeast that is difficult to cultivate and keep alive. The proposed shift of brewing operations to nearby Jupille boomeranged as the desired quality of white beer couldn’t be achieved. The European media lambasted the beer giant for its blunder while brewing resumed in Hoegaarden in 2007. It drew further flak from the media which was at loggerheads with InBev. Since then, the brewer’s camaraderie with the media has remained topsy turvy. The icing on that relationship came recently, when Annheuser Busch–InBev announced a recent deal with PepsiCo to make combined pitches for their media buying – not surprisingly, many in the press police smelled cartelization!

The pact is part of a “joint-purchasing agreement” the two signed in October 2009 aimed to cut costs on items such as travel, computers and office supplies. Barely 3 months had passed and these two – amongst the biggest advertisers in US – tightened their embrace to march in tandem for buying their media for their massive advertising campaigns. A sneak peek into the kind of bucks in the reckoning reveals huge numbers. Apart from the umbrella figure of $1.15 billion as the total media spending of the two entities combined, $490 million was spent on network TV, $182 million on cable, $194 million on magazines and nearly $70 million on outdoors. Importantly, the $1 billion plus media spend number is the highest in the four categories the 2 giants currently collaborate in.

PepsiCo has been among the top 20 advertisers in US for quite some time while AB-InBev holds more than 50% of US beer market and is the biggest advertiser in its category. The single-most significant ad spot that the firms aim to target at a reduced rate is SuperBowl, the most watched telecast on American TV almost every year, which thus commands stratospheric spot rates of $3 million for a 30 second ad spot during the game’s telecast. Although, this year, PepsiCo did not advertise during the Superbowl owing to the aftereffects of recession, its brand Doritos did.

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