Why Pepsi's surprise $1.7 billion Publicis deal has Madison Avenue reeling

Forget the Jets and the Sharks, the Yankees and the Red Sox, aliases Arsenal v. Spurs (on my broadside of the pond). Few rivalries tally arsenic heavy arsenic Coca-Cola and Pepsi.

That explains why Madison Avenue was truthful stunned by past week's news: Publicis Groupe had won PepsiCo's $1.7 cardinal world media, data, and tech relationship without a accepted pitch. (Omnicom was Pepsi's world media partner for much than 25 years, though Publicis media agencies did already activity pinch the beverage and snacks elephantine successful immoderate markets successful Asia.)

The context: Publicis handles Coca-Cola's media successful North America — and was competing against incumbent WPP for Coke's world business.

"I was gobsmacked and shellshocked each week," 1 trading advisor told me. Another sent maine an unprintable expletive.

Two group acquainted pinch the matter told maine Publicis has withdrawn from Coke's world transportation and is group to resign the North America relationship — a business it had won from WPP past year. The Coke North America business is estimated to beryllium worthy $805 million, while the world business amounts to $1.8 cardinal successful spending, per the investigation institution COMvergence.

AdAge reported connected Tuesday that Coke is now readying to put its North American media business backmost nether review.

Publicis' coup is wide viewed arsenic a masterstroke by Arthur Sadoun's company, which likewise clinched Microsoft's media business successful April without a general pitch. It besides shows really consolidation of the agency scenery is reshaping CMOs' options — peculiarly for marketers who request class exclusivity.

Madison Avenue's reappraisal culture

When Coca-Cola confirmed its world media reappraisal successful June, Pepsi's trading squad quickly seized the opportunity to onslaught earlier it was excessively late.

If Publicis had won Coke, Pepsi would person had fewer evident alternatives to retaining Omnicom arsenic its world media partner. WPP and Publicis' narration pinch Coke would person made those agencies off-limits, and Omnicom's acquisition of IPG, arsenic good arsenic Dentsu's world struggles, near fewer different scaled world media operations successful the marketplace for a institution of PepsiCo's size.

"Top-to-top dealmaking is getting much prevalent vis-a-vis moving a process pinch guarantees connected people, remuneration, and media cost," said Ruben Schreurs, CEO of the trading consultancy Ebiquity. "Is this a motion of the times to come?"

It's an embarrassing rustle for Coke, which had been expecting to convene leaders from Publicis and WPP successful Mexico City this week successful the latest shape of the world media pitch. Only WPP made it.

Reviews are costly and time-consuming for some agencies and clients: WPP and Publicis execs had already flown to Shanghai and London arsenic portion of the process.

Some awesome world advertisers deem these lengthy processes basal arsenic they make awesome decisions complete which agencies are champion equipped to grip their billions of dollars successful advertisement spending. It's not conscionable astir which agency has the astir persuasive "pitch" and charismatic leaders successful the position room. Advertisers and their procurement teams tin walk months, and moreover years, haggling connected pricing, the apical group who will beryllium assigned to their accounts, and stress-testing agencies' capabilities successful areas specified arsenic data, tech, commerce media, and progressively AI. Volkswagen's world media review memorably stretched complete 3 years earlier it reappointed Omnicom's PHD successful 2024.

Given each the complexity progressive successful specified reviews, manufacture insiders said they were amazed that Publicis' move came arsenic the Coke reappraisal was good underway.

"It couldn't person been much shocking successful a much shocking class pinch 2 much shocking brands astatine a much shocking constituent successful the process," an agency caput told me.