'Procurement-led agency relations a problem' - PepsiCo's Jakeman

Arvind Hickman
By Arvind Hickman | 22 June 2016
Brad Jakeman, PepsiCo

PepsiCo has seen a marked improvement in the relationship it has with its agencies since it placed the job back in the hands of brand managers rather than procurement, Ad Age has reported.

PepsiCo president-global beverage group Brad Jakeman told a session at Cannes that one of the major sources of tension in the agency relationship was that it was being driven by procurement on the client side.

He admitted clients often treat agencies as "these not-for-profit CSR organisations".

"We don't realise that for the most part they are held by publicly-traded companies just like ours. They have margin commitments to hit just like we do," he said.

Jekeman added that the response to fee cuts was to put more junior people on the accounts.

The issue of procurement-led pitches is also causing fee tensions in Australia with agencies lowering prices to win work.

This inevitably leads to agencies either putting lower paid staff on accounts or looking to find margins by providing other services. 

At media agencies it can encourage firms to look at media buying strategies that potentially allow the agency to return some value back into the equation, such as buying digital inventory via group DSPs.

Jakeman's admission shows that marketers are aware that this race to the bottom on fees is a problem.

"The quality of the dialog we had with our agencies was exponentially improved," Jakeman added. "They saw us responding to an issue they had and understanding that they had to make money."

The PepsiCo senior executive also said that there was a lot of "crap" creative out there and that the beverage maker had established its own content studio.

He warned there were a lot of creatives who had been drawn to work in PepsiCo's content studio because the "other options available to them are unattractive".

"They don't want to work in models that are failing. They don't want to work in tiny little places working project by project. They want to work on big powerhouse brands," Jakeman said.

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