pepsi philippines net profit drop -21% due to +529% increase in marketing expense. what marketing??? where???

PDI news article (march 13, 2008, business section) headline says: "Marketing costs hit 4Q income of Pepsi". article goes on to say net profit dropped -21% to P143M versus year ago period. marketing expenses rose to P232M from only P37M or a whopping +529% increase during the period from previous year.

what marketing effort??? did anyone notice pepsi spent +500% more during that quarter? just looking at that huge increase, you would have expected pepsi to be ubiquitous and must have created so much buzz that our consciousness should have been filled with nothing but pepsi. don't think that really happened.

makes you wonder where they spent all that marketing money supposedly spent over a 3 to 4 month period. that's an amazing amount for such a short period of time. they spent in 3-4 months marketing budgets of many brands that are spent over 1-3 years! so where did they spend that? with that kind of money spent and yet consumers didn't feel it's impact, the proper conclusion is - they threw all that money into the bermuda triangle, not the philippines.

the article states over-all sales rose ONLY 5%, with non-carbonated drinks remaining flat while non-carbonated drinks rose +34%. ahh..... so it seems those sales performance data is telling us -whatever it is they did in marketing, they were very ineffective that their sales growth was minuscule.

we can assume that since pepsi's core business is their carbonated drinks brands, it stands to reason that they must have spent a large chunk of that marketing expense behind that business. for their carbonated drinks sales to remain flat after such a huge marketing expense mean their marketing efforts were a dud!

when pepsi philippines did an IPO (initial public offering) and listed in the philippine stock exchange last year , i avoided it like hell. i thought pepsi has in their hands very huge challenges in the philippine market. and a key problem is lack of quality marketing and lack of marketing funds. now we know that marketing funds were put behind it, but the results were dismal!

of course it depends in what areas of marketing they put all those money. different companies define marketing expense in many ways. these could be marketing funds put behind consumer-oriented activites or for some companies, they see distribution or logistics as a marketing expense.

the other key weakness of pepsi in this market is weak distribution. they are up against coca cola and san miguel who have been giants in distribution muscle and depth in this market for many years. but in the case of pepsi, consumer marketing is a bigger need. also, any marketing person know that to get a jolt on sales and market share, consumer marketing is the way to go. so we can assume bulk of those marketing funds were channeled into consumer marketing.

conclusion? not only is it a lack of quality marketing, its pathetic quality. how else do you explain a +500% increase in marketing expense yielding only a pathetic +5% in sales? will any of the marketing staff put that kind of achievement in their resume? (time to change the marketing team and ad agency!)

nope, their marketing effort didn't have fizz! sigh!