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Deal marks major shift from local focus

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KitKat marketing budget up nearly 20% so far this year

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CEO Freixe "a big supporter" of the deal

By Richa Naidu

LONDON, Nov 11 (Reuters) - Nestle's KitKat brand has

signed a global sponsorship deal with Formula 1 as new Chief

Executive Laurent Freixe seeks to change the way the world's

biggest food company markets its core, multi-billion-dollar

brands.

A senior executive told Reuters exclusively that the Formula

1 deal had been struck to cover the period between late 2025 and

2028, and the aim was to improve KitKat's global reach and

appeal to shoppers under 30 years old.

Through the deal that will start in Mexico and Brazil,

Formula 1 racetracks and pit lanes will have KitKat advertising

and events, chocolate wrappers will have Formula 1 branding, and

Nestle will give away hundreds of race tickets.

The deal marks a major shift for Nestle. In its nearly

160-year history, the world's biggest food company has never

signed a global marketing deal, and has instead relied on

country-by-country agreements.

"(The deal is) a key part of our strategy to move from

what's a very local model today, very fragmented," said Chris

O'Donnell, KitKat's global category leader, declining to

disclose the monetary value of the deal.

KitKat's global marketing budget has risen nearly 20% so far

this year, and the brand is valued at over 2 billion Swiss

francs ($2.29 billion) worldwide, O'Donnell said.

"We're now back to pre-COVID levels of investment (in

marketing in KitKat). That's a significant change, and we

anticipate to keep investing behind the brands," he said.

Nestle, which also makes Nescafe and Haagen-Dazs, does not

typically reveal details about marketing spend, or break out the

sizes of specific brands. This valuation makes KitKat one of the

the company's biggest revenue streams, but smaller than some

coffee and petcare brands and Maggi.

The rate at which KitKat is raising its marketing spend

dwarfs Nestle's overall increase in recent years. The company

reported that advertising and marketing expenses were 7.7% of

sales in 2023, or an increase of 80 basis points compared to the

prior year.

FREIXE 'A BIG SUPPORTER'

Under former CEO Mark Schneider, Nestle's marketing budget

shrank during the pandemic and the repercussions of that

strategy are weighing on the company's revenue today.

Schneider was ousted in August following several quarters of

weak sales volumes after the company cut back on innovation and

marketing to save on costs during a period of high prices.

Shoppers switched to cheaper or more differentiated brands,

eating into market share.

Freixe, who took over in September, has said that he wants

to focus on the company's core brands, and was "a big supporter"

of the KitKat deal, O'Donnell said.

"He saw this as a big statement for the brand and a real

accelerator for growth," he said. "This (investment) will be

more consistent across many of (Nestle's) brands."

Last month, French luxury giant LVMH said it had

reached a 10-year sponsorship deal with Formula 1 which covers

its Louis Vuitton, Moet Hennessy and TAG Heuer brands, replacing

long-time sponsor Rolex.

($1 = 0.8718 Swiss francs)