Dive Brief:

• PepsiCo is "reducing nonessential advertising and marketing spend to reflect the realities of the current environment," the company's CFO Hugh Johnston said during an earnings call on Tuesday.
• The company reported an 8% lift in sales for Q1, with executives attributing at least 5% of that increase to sales before panic buying began in March. The company is beefing up its advertising in the snacks and Quaker oats categories to target homebound consumers and retain new customers once the crisis starts to wind down.
• Additionally, the company said it's diverting some funds to reinvest in its e-commerce offerings, as more consumers turn to online ordering during the crisis.

Dive Insight:

Before the coronavirus health crisis, PepsiCo had been ramping up its marketing spend, a strategy that had helped it drive sales. The company's latest numbers are evidence of the complex position that snack foods and beverage companies are in during the pandemic lockdowns.

While some CPG marketers stand to benefit from sales as consumers stock up at grocery stores, they are also seeing dips in sales at gas stations and restaurants as people continue to stay home. The bad is outweighing the good at this point, leading PepsiCo to reduce nonessential marketing. However, the company will use marketing strategically to drive sales and loyalty where it sees opportunities, such as in categories that show strength during the lockdowns.

"There are a lot of occasions at home now that there were not there six or seven weeks ago," Ramon Laguarta, PepsiCo's chairman and CEO, said on the call. "So we're also emphasizing in our advertising the opportunities that the snacks category give consumers to have moments of enjoyment during this confinement."

PepsiCo said products such as Quaker Oats and Tostitos chips and dips are seeing a bump in sales. Additionally beverage sales did well during Q1, in particular the Pepsi and Mtn Dew brands. Pepsi brought back its first new tagline in two decades at the beginning of the year. The "That's What I Like" tagline has appeared across advertisements and promotions for its Pepsi, Pepsi Zero Sugar and Diet Pepsi brands.

During the earnings call, Pepsi also revealed it's moving money from other initiatives into e-commerce to support current growth.

"We're reallocating resources from other parts of the P&L into e-commerce and capturing consumers in that particular channel," Laguarta said. "And then obviously, we'll be — keep investing to retain those consumers as they probably stay in e-commerce."

PepsiCo's chief rival Coca-Cola also revealed plans to cut ad spending last week, as shutdowns are hurting beverage sales. That news comes after the beverage giant paused its marketing spend in the UK due to the economic uncertainty of the pandemic.