NEW YORK — While the volume of work going through marketers’ in-house agencies has ebbed and flowed over the years, modern production demands — particularly the high volume mandated by social media apps like TikTok — are leading some organizations to think beyond an all-or-nothing approach to third-party marketing services partnerships.
PepsiCo in June expanded its relationship with VaynerMedia, a partner of over a decade, by integrating the social-first agency closer with its own teams, with the aim of helping beverage brands under its portfolio, including Pepsi, Mountain Dew and Starry, move faster and stay “culturally fluent.” Rather than in-housing or outsourcing, executives on a panel at Advertising Week New York on Tuesday (Oct. 7) described their new relationship as one built on “co-sourcing,” an interdependent approach where the two companies more closely share business KPIs and are less formal — read: speedier — when it comes to processes like briefing.
PepsiCo ultimately recognized that, for all its talent, scale and legacy, social remained a difficult nut to crack, but also an increasingly essential one for reaching content-hungry consumers and propelling sales.
“We understand the brand strategy, we understand creative strategy. We have great creatives and production capabilities,” said Mark Kirkham, who was promoted to CMO of PepsiCo Beverages U.S. earlier this year. “But in a world where the dynamic nature [of marketing], especially in social, is so fast-moving: Do we have the agility, do we have the resourcing, do we have the creative flexibility to understand how algorithms drive how consumers behave? We probably didn’t have that if we were really honest.”
Ramping up marketing production
Kirkham acknowledged that much of marketing success today is determined by platform algorithms, creating a reliance on experts who understand what takes off in those environments. VaynerMedia argues the social-first evolution is ushering in an era where marketing is finally graded on merit versus raw media-spending power: Good content will gain traction because people are actually interested in watching it, and then can be amplified by a paid campaign.
“When you post organically on these social platforms, it either gets views or it doesn’t, and there’s a lot of brands and agencies here that use working media to amplify organic social to hide that it’s still bad creative,” said Gary Vaynerchuk, co-founder and CEO of VaynerMedia, duirng the panel.
In the time since PepsiCo began its joint venture with VaynerMedia, the food and beverage giant has started pumping out three times as much content, according to Kirkham. Engagement has jumped between 50% and 70%, depending on the brand, and the CMO sees PepsiCo as just getting started.
“What used to take a month takes two or three days,” said Kirkham, explaining that the marketer no longer has the time for weeks-long briefs and a dozen-plus rounds of review.
PepsiCo and VaynerMedia were confident in making their move thanks to a relationship stretching back around 15 years, to the early days of social as a serious marketing channel (PepsiCo was among Vaynerchuk’s first clients). But one of the more convincing proofs of concept for PepsiCo came, not from its namesake beverage, but Mug Root Beer.
The soft drink has experienced 50% year-over-year growth, supported by social activations that lean into its bulldog mascot (a VaynerMedia employee wears the costume in posts online, Kirkham admitted) and meme culture. Mug is on track to become the fourth-largest brand in PepsiCo’s beverages portfolio, according to Kirkham, and is the fastest-growing root beer brand overall.
“We’re actually sitting here because when this model was implemented on Mug Root Beer, it worked,” said Vaynerchuk. “It worked not on shares or … more content created. It worked on sales.”
The ability for social to deliver sales has also been apparent among a rising crop of upstart competitors in the better-for-you soda category. PepsiCo acquired the prebiotic soda brand Poppi for nearly $2 billion earlier this year, a deal Vaynerchuk called out as an example of the broader shift in thinking around how to market brands today, with social and influencer savvy seen as valuable tools for growth.
“The most black-and-white attributable thing happening in business and marketing today is the brands that are most winning on achieving scaled organic reach on social have a direct correlation to sales,” said Vaynerchuk.
Ensuring cultural fit
PepsiCo and VaynerMedia’s attempt to shake up in-housing may not be feasible for every agency-client relationship. For one thing, Vaynerchuk’s firm is independent, meaning experiments with different ways of working are not beholden to a board or the steady churn of quarterly earnings. The agency executive said he can afford to lose money on a bet like his one with PepsiCo in the first year if it means making money in years two and three.
The PepsiCo, VaynerMedia model arrives at a time when brands are exploring a variety of new ways to work with marketing services providers, including bespoke shops that sit with larger agency holding groups, like Coca-Cola's Open X within WPP. Others are working with outside help to bolster their own internal shops.
Beyond any financial considerations, cultures within external agencies and client teams can be night and day. VaynerMedia is an entrepreneur-owned indie that prides itself on a disruptive mindset while PepsiCo is an international food and beverage corporation in charge of billion-dollar brands (the company reports its Q3 results on Oct. 9).
While such tie-ups come with the potential for a cultural clash, for PepsiCo and VaynerMedia, the integration process has been smooth so far — Kirkham even has a direct line to Vayner through a WhatsApp group chat.
“You literally can’t tell who’s PepsiCo, who’s Vayner when you’re in the room. That is the measure of success,” said Kirkham. “But there’s one thing about winning a pitch versus being inherently integrated into a business model. We don’t pitch this team. We just ask them to go do great work together.”
