As Snapple struggled, Quaker poured millions of dollars into gimmicks aimed at pumping up its sales. Its also been selling its own brand of trendy drinks under the Mistic name. The Quaker Oats Company (QOC), founded in 1877, produces a variety of products ranging from oat bars, to rice cakes (History, 2011). new product development. Given the difference between the two brand identities, its no surprise that they didnt both thrive under the same owner. With a $35 billion price tag, the merger did not pay off. That got people noticing his oats but making them? The market response to the successive changes in tone at Snapple highlights a process that my Harvard Business School colleague Susan Fournier calls the co-construction of meaning. Consumers did just as much as Arnie Greenberg or the Triarc team to form Snapples brand identity. Can AT&T Avoid the Merger Mistakes of AOL-Time Warner? Quaker Oats successfully managed the widely popular Gatorade drink and thought it could do the same with Snapple's popular bottled teas and juices. These offerings provided transportation at shorter distances and resulted in less-predictable, higher-risk cash flow for the Northeast-based railroads. In effect, Triarc let its distributors do its market research. A Pyrrhic victory is a success that comes at the expense of great losses or costs, such as winning a hostile takeover bid or an expensive lawsuit. customer feedback. Definition and Examples, Vertical Merger: Definition, How It Works, Purpose, and Example, Pyrrhic Victory in Business: Meaning, Examples and FAQ, Pennsylvania Railroad and New York Central Railroad Records, 1853-1965. Download the free 31-page State of Innovation report. As each of Quakers initiatives failed or backfired, Snapple sales lost steam. Problems had been growing throughout the decade, as an increasing number of consumers and businesses began to favor, respectively, driving and trucking, using the newly constructed wide-lane highways. The Quaker Oats trademark was registered in 1877 by Henry Parsons Crowell (1855-1944), an Ohio milling company owner who in 1891 joined with two other millers . Other titles included (via AtariAge) names like Eggomania, Picnic, Piece o' Cake, and Name This Game, and it just goes to show that not every business venture is a good one. The familiar logo just the Quaker Man's head didn't show up until 1956, and for a short time, he was black-and-white. This case looks at the purchase of Snapple in 1994 by Quaker Oats. We also reference original research from other reputable publishers where appropriate. There's a long-standing belief that he's the founder of Pennsylvania, William Penn. At the time, there was no shortage of upstart brands competing for the dollars of young, health-conscious New Yorkers, but Snapple stood out from the rest by virtue of an endearing artlessness. Quaker Oats wanted in on the study because they saw it as a way to prove their oatmeal was just as healthy as their Cream of Wheat competitors. Stern was an especially effective spokesperson. - Merger of AOL and Time Warner, 2001. Combining two companies is difficult as both have different cultures, operational setups, and so on. Most distributors held contracts in perpetuity. In fact, chances are pretty good that you probably have one of those distinctive, round cartons in your cupboards right now maybe even a few empty ones tucked into a closet for a future craft project. In 2002, the company reported an astonishing loss of $99 billion, the largest annual net loss ever reported, attributable to the goodwill write-off of AOL. Ken said, Wouldnt it be great if we took Wendys picture and wrapped it on the bottle? Weinstein thought it was a terrible idea, but he told Gilbert to try it anywayand to rehire Wendy Kaufman while he was at it. 2 In 1998 The Quaker Oats Company owned four other brands that led their respective categories: Gatorade thirst . This has been a disaster, said analyst John McMillin of Prudential Securities Inc. in New York. It's the breakfast food of the health-conscious today, and that's in large part due to some official FDA claims Quaker Oats made possible for everyone. "AOL Time Warner to Lose Turner, Posts $99 Billion Loss.". Why is the Quaker Man smiling? The Stuarts were one of the founders of the company, but when he died in 2014, The New York Times' obituary highlighted some controversial things. Marvin Dumont has 15+ years of experience as a journalist and managing editor. It's hard to know if Quaker Oats knew what a revolutionary idea they had when they printed a recipe right on the box. If it doesnt work, then the very worst that can happen is that you end up with a little excess inventory that you have to discount. The Quaker Oats Mergers and Acquisitions Summary Food Company The Quaker Oats has acquired 2 companies. Why did the brand lose $1.4 billion in value under Quakers stewardship in just four years? The larger bottles were suitable for Gatorade because people tended to drink it during or after team practice or other exercise, when they were especially thirsty and needed to be rehydrated. Take Sneak'n Peek. Quaker Oats had teamed up with researchers from MIT for three experiments involving 74 boys between the ages of 10 and 17. smaller yet more publicized deal - the acquisition of Snapple - that will go down as Smithburg's, and Quaker's, costliest mistake. The Quaker Oats Company's $1.4 billion debacle with Snapple only proves that the well-trod merger road has. Nextel had a strong following from businesses, infrastructure employees, and the transportation and logistics markets, primarily due to the press-and-talk features of its phones. They werent about to give up the supermarket accounts theyd worked for years to win. In 1993, despite warnings from Wall Street that the company was paying $1 billion too much, the company acquired Snapple for a purchase price of $1.7 billion. Different systems and processes, dilution of a company's brand, overestimation of synergies, and a lack of understanding of the target firm's business can all occur, destroying shareholder value and decreasing the company's stock price after the transaction. Snapple, at that point was trading at $14 per share. POML5) A principal reason for the failed merger effort between Quaker Oats and Snapple was. When the headquarters was expanded through a wall into the offices next door, Weinstein threw a sledgehammer party. Column: 15 minutes of fame flies by. Even with the growth of competition in the "Alternative beverage" category, Snapple remained steady at 30-40% of market share. While some company mascots are very real like Duncan Hines Larry can continue to exist just as the perfect ideal of the Quaker faith. Sony has pumped as much as $8 billion into its Hollywood adventure since 1989, only to suffer such blockbuster disasters as ''Last Action Hero,'' the gold-plated ouster of a string of highly paid executives and a $3.2 billion write-off in 1994. Some brands just want to have fun, and from birth Snapple was one of them. If Snapple was about play, Gatorade was about sportabout playing to win. Ferdinand Schumacher was one of those founders, the trial-size sample, and the prize in the box, Quaker Oats Apple and Cranberries Instant Oatmeal. At the same time, Quaker management failed to understand the differences between promoting and distributing Snapple versus Gatorade. * February 1996: Novell Inc. agrees to sell WordPerfect and several other applications to Canadas Corel Corp. for $197 million, about a quarter of the $1 billion it paid to buy the closely held firm and the QuattroPro spreadsheet program in 1994. When he came to the US, he found oats were feed for horses and people certainly didn't want to eat that. The price tag to acquire Snapple was $1.7 billion, considered by many to be an astronomical sum. Instead, it flowed through the so-called cold channel: small distributors serving hundreds of thousands of lunch counters and delis, which sold single-serving refrigerated beverages consumed on the premises. Their failure with Snapple wasnt a matter of ineptitude or a bureaucratic tin ear. Question: POML5) A principal reason . Triarc officials estimate that the Snapple brand was worth $900 million to $1 billion of that total, but no separate accounting was officially made. As a subscriber, you have 10 gift articles to give each month. The mess involving Snapple--which virtually invented the market for alternative soft drinks and had sales of about $550 million last year--is also an illustration of corporate hubris that ultimately harmed Quaker and its stockholders. Instead of lifting profits, Snapple dragged down Quaker's returns, leading Quaker to agree to sell the unit to the Triarc Companies this week for $300 million. The merger of Quaker and Snapple was considered to be a disaster owing to an incorrect marketing strategy. According to CNN, the move changed the way we advertise the health claims on food, and the change came in spite of protests from some groups claiming consumers would be mislead into thinking certain foods were "magic" foods. u d ) if the alliance or acquisition pursued. This article presents a few examples of busted deals in recent history. He noted that Quakers loss on the purchase means Quaker lost $1.6 million for each day it owned Snapple, which makes exotic juices and iced teas. Because they embody the same values Quaker Oats wanted to be associated with: "honesty, integrity, purity and strength.". That changed after Quaker Oats reached out to the FDA and requested permission to advertise the fact that including oats in a balanced, low-fat diet would help reduce the risk of heart disease. They could say they were low-fat, for example, but they couldn't say they helped manage cholesterol. Less than one year after Quaker Oats acquired Snapple for $2 billion, Snapple's sales were declining, calling into question the value of the $1.3 billion in goodwill Quaker Oats had recognized at the acquisition. While these challenges befuddled Quaker Oats, gargantuan rivals Coca-Cola (KO) and PepsiCo (PEP) launched a barrage of new competing products that ate away at Snapple's positioning in the beverage market. These include: Managers at both entities need to communicate properly and champion the post-integration milestones step by step. There's an almost infinite number of factors that come into play in an acquisition like this, but the LATimes blamed the disastrous merger on the company's failure to understand Snapple's strengths along with stiff competition from the other beverage distributors. Quakers stock edged up 25 cents to close at $37.75, while Triarcs stock jumped $1.625 a share to $17.375, both in New York Stock Exchange composite trading. It then compounded the misstep by dropping Wendy the Snapple Lady from the ads and even eliminating her job. Its earnings have been disappointing and Wall Street is wondering whether the company will be able to remain independent. ", The Channel Company-CRN. Just a little over two years later, they sold Snapple for only $300 million dollars, essentially, taking a $1.4 billion loss on Snapple. There's nothing like the comforting taste of nostalgia first thing in the morning, right? C) the diligence of employees. ", Harvard Business Review. quaker oats and snapple - Tuck School of Business - Dartmouth . Brands thrive when theres a close fit between process and corporate temperament. The once-profitable Kidder lost more than $300 million in 1994, and the following year General Electric took a charge of $917 million after it sold most of Kidder to the Paine Webber Group. So that cannister of Quaker Oats is going to be a great choice, but less great are those instant packets that come in all kinds of flavors. Huge rivals, such as Coca-Cola Co. and PepsiCo Inc., charged into the market with new products. Sprint Nextel's managers and employees diverted attention and resources toward attempts at making the combination work at a time of operational and competitive challenges. Now that we've learned about multiple ways of diversification, let's return to our example and explore why the Snapple acquisition may have failed. The brands distribution channels were as unconventional as its promotions. The company was only around for about a year, and that's not really surprising their games were terrible on an epic scale. Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc. Form 10-K for the Fiscal Year Ended December 31, 2008, Diversification of product and service offerings. By 1994, Snapple was available across the country, and as distributors added painstakingly cultivated supermarket accounts, sales ballooned to $674 million from just $4 million ten years earlier. Quaker Oats Morrison reviving Quaker after the Snapple debacle- cost $1.4 B write-off Focus on Gatorade. In their Complaint, Plaintiffs contended that when negotiations between Quaker and Snapple escalated in and around August 1994, Quaker and Smithburg must have known that its previously stated debt-to-capitalization ratio (also known as "leverage ratio") guideline, the upper-60 percent range, was no longer a realistic possibility. The. Microsoft and Nokia Date: April 25, 2014 Price: $7.9B Snapple's previously popular advertisements became diluted with inappropriate marketing signals to customers. Did you notice? On the day the merger was announced formally, both the companies registered a fall in share prices. After 27 months, Quaker Oats sold Snapple to Triarc for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple. CHICAGO (AP) _ Quaker Oats Co., which paid $1.7 billion to buy the Snapple beverage business in 1994 and has been disappointed with its performance since, today reached agreement to sell the New Age drink line for $300 million to Triarc Cos. Inc. Quaker said the sale would reduce pre-tax profits by $1.4 billion, resulting in a loss. We can write down positioning statements, but the Snapple trademark spills over the boundaries we put on it. The brands vitality responded better to play than to planning. Quakers corporate temperament was perfectly attuned to the achievement-oriented message of Gatorade. Quaker Oats was trademarked in 1877, and the next two decades saw three competing oat-milling companies come together to form a single conglomerate. In 1993 Quaker paid $1.7 billion for Snapple, in just five years Quaker sold Snapple to Triarc Beverages for just $300 million, a loss of 1.4 billion dollars. Distributors and end-customers dis-agreed with . He got a complete overhaul in the 1970s, to a blue-and-white logo that, frankly, is very 70s. The companies never meshed, and the acquired products were overwhelmed by those of Microsoft, so Novell sold the software company last year for $115 million. That's stuff found in weed-killer, and specifically, in Roundup. Definition, Meaning, Types, and Examples, What Is Horizontal Integration? Cheerful, zaftig, and blessed with a Noo Yawk accent strong enough to peel paint, Wendy blossomed into a minor celebrity known to her fans as the Snapple Lady. The term mergers and acquisitions (M&A) refers to the consolidation of companies or their major assets through financial transactions between companies. Presented by : 1 Prateek Rajpal PEPSICO PepsiCo Inc. is an American multinational corporation headquartered in New York, United States, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its . Unfortunately, the synergies did not materialize and [Snapple] did not grow at the rate we anticipated.. When brand and culture fall out of alignment, both brand and corporate owner are likely to suffer. Within a few short months, Elements had grown to 15% of Snapples total sales. From their 1994 peak, sales declined every year, plunging to $440 million in 1997. Snapple was sold at a huge loss in March 1997, a fact that led to the resignation of longtime chairman, president, and CEO William Smithburg in April 1997. Fresh from their success with Gatorade, Quaker Oats wanted to make Snapple drinks just as . She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. QUAKER OAT'S SNAPPLE:<br><br> FAILING TO UNDERSTAND THE ESSENCE OF THE BRAND<br> 3. Quaker Oats Co. agreed to sell its Snapple juice and iced-tea business for a fraction of what it paid less than three years ago, swallowing a $1.4 billion pretax charge. Brand meanings and associations arise as a kind of found consensus between what the marketer wants and what the consumer has use for. It's possible U.S. history says Penn became a Quaker when he was 22 but according to Quaker Oats lore, it's not him. Less than three years later, Quaker sold Snapple to Triarc for $300 million, representing a more than 82% loss on its original investment. Ultimately, PepsiCo succeeded in a bid to to acquire Quaker Oats and its crown jewel brand of Gatorade in 2001. The give-it-a-go approach paid off again later when Triarc launched a Snapple extension called Elements, a range of teas with flavor names like Sun, Rain, and Fire. Quaker bought Snapple from a group led by Thomas H. Lee Co., a Boston investment firm that reaped a remarkable profit of more than $800 million by selling out. Although the merging sounded strategically compelling, the two companies could not manage to merger due to cultural variation. systems management. Believe it or not, there's nothing bland about Quaker Oats or where they come from. Aware that Snapple had grown beyond their limited expertise, Greenberg and his partners cast about for a new owner that could take the brand to the next level. Quaker Oats paid $1.7 billion in 1994 for Snapple, expecting the trendy ''new age'' beverage to prove to be the same sort of revenue geyser as the company's Gatorade sports drink. Snapples durability raises a number of questions. Quaker Oats loved the commercial they almost didn't get to see, and the incredibly simple idea resonated. Below, we look at some the worst mergers and acquisitions undertaken by large corporations, and how the good times went bad. Its the most fun part of the business. It was an incredible thing, because the entire industry was truly built on their founders' ability to convince the public they should be eating livestock feed. An acquisition is a corporate action in which one company purchases most or all of another company's shares to gain control of that company. The company wasted no time trying to implement this strategy: Distribution would be rationalized, Snapple flavors would be made widely available in supermarkets, and a coordinated national promotion effort would expand mainstream awareness of the brand beyond the two coasts. The Quaker-Snapple fiasco joins such ill-fated business marriages as AT&T; Corp. and computer maker NCR and General Electric Co. and defunct brokerage house Kidder, Peabody & Co. Sources: Bloomberg News; Times and wire reports. In 2008, it wrote off an astonishing $30 billion in one-time charges due to impairment to goodwill, and its stock was given a junk status rating. By the time the sale took place, Snapple had revenues of approximately $500 million, down from $700 million at the time that the acquisition took place. If managed properly, it can be a huge success.. Early in the merger, the two companies maintained separate headquarters, making coordination more difficult between executives at both camps. The partnership didn't last, and the LA Times called it "one of the worst flops in corporate-merger history." ''A lot of the disasters occur because the due diligence is focused on legal and financial considerations, as opposed to cultural ones,'' said Jacalyn Sherriton, president of Corporate Management Developers Inc., a post-merger consulting firm. There's something undeniably wholesome about Quaker Oats. Operations Management questions and answers. Like A.T.&T., International Business Machines tried to blend telecommunications and computers in 1984 when it acquired the Rolm Company, an innovative Silicon Valley concern, for $1.5 billion. Disney had released all of Pixar's movies before, but with their contract about to run out after the release of "Cars," the merger made perfect sense. My trick was to make money appear in a box, Weinstein recalls. The benefits of mergers and acquisitions (M&A) include, among others: If a merger goes well, the value of the new company should appreciate as investors anticipate synergies to be actualized, creating cost savings, and/or increased revenuesfor the new entity. Several changes in. Limited economies of scope are one reason. Marketers offer brand ideas to the market, but those ideas dont truly become brands until they are accepted, adopted, and made over afresh as part of the lives of those who use them. She chatted on-air with Oprah Winfrey and David Letterman, made appearances at retail stores, and accepted Snapple drinkers invitations to sleep-overs, bar mitzvahs, and proms. We didnt have a lot else to tell them. Quakers efforts to take the risk out of Snapples publicity were equally ill-fated. Additionally, differences in systems and processes can make the business combination difficult and often painful right after the merger. Snapple also posted a $160-million operating loss for 1995 and 1996 combined, which means Quakers total losses from Snapple probably approach $2 billion. In 1993, Quaker bought Snapple for almost USD 1.7 billion. A version of this article appeared in the. After over-paying $100 billion (according to Wall Street warnings) Quaker Oats sold Snapple to a holding company just 27 months after purchase for a mere $300 million - a loss of $1.6 million for . Local railroads catered to daily commuters, long-distance passengers, express freight service, and bulk freight service. to sell it to Siemens A.G. and return to a focus on the computer business. ''But even Pepsi messed up its restaurant lines. His byline has appeared on Fox News, Forbes, and TheStreet.com. Once a year, they play miniature golf up and down the corridors of Triarcs headquarters in White Plains, New York, each office vying to create a more bizarre hole than the next. Wall Street was awash in money. Done to avoid controversy, the terminations inflamed it instead. A variety of marketing measures by Quaker, including a giveaway program last summer, failed to reinvigorate sales and the fruit-juice and iced-tea line lost more than $100 million. Evaluation and control are pervasive in organizations today, and their importance will increase in the future because of the growing significance of all except: technology for information processing. He retired in April 2020. In the 1990s, Quaker Oats decided to make a serious push at getting kids interested in eating oatmeal. Finally, executives of the acquiring company should avoid paying too much for the target company. So we know Quaker Oats makes all kinds of oatmeal, but here's a fun fact you can pull out at parties the next time someone starts sharing some trivia: they also made video games. Later, Stuart would be described more as an "internationalist" than an isolationist, and after he retired from Quaker Oats he was appointed as an ambassador to Norway. In a battle between David and Goliath, the smart money is almost always on the giant. Anyone can read what you share. Small as the individual distributors were, they aggregated into a mighty marketing force. Expert Help. After 27 months, Quaker Oats sold Snapple to Triarc for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple. In 1891, consumers could find a piece of china dishware in their oat boxes, and while that's quite a bit different from the toys we usually expect in today's cereal, they can take credit for this idea, too. U.S. Securities and Exchange Commission. From the very start, Quaker Oats has been built by its marketing perhaps more so than most companies. Triarc is run by Nelson Peltz and Peter May, two financiers who rose to prominence in the 1980s by buying companies with the help of former junk bond king Michael Milken. This paper discusses why the hyped-up merger of food giants, Quaker Oats and Snapple Beverages, was doomed to fail from the start. In October 2000, Triarc, the privately held outfit that took Snapple off Quakers hands, sold the brand to Cadbury Schweppes for about $1 billion.1 The turnaround would be astonishing in any industry, but especially in the beverage-marketing business, where short-lived brands are depressingly common. Investopedia requires writers to use primary sources to support their work. Ben H. Bagdikian. The surprise would have been if they had. AOL had arrogant and aggressive employees while Time Warner had corporate and staid employees. The Quaker Oats Company, founded in 1891<br><br>William D. Smithburg appointment as CEO in 1979<br> 4. Quaker Oats only owned Snapple for 27 months, selling it for $300 million after making a $1.7 billion investment in the drinks company. Other acquisitions that went sour include: *. They had been told to come up with something completely different for the cereal, and they were given a stack of pitched ads representing everything Quaker Oats didn't want. Quaker Oats' effort to administer Snapple in larger measures. ''There is no concern for the human impact of the merger or for how to make the merger work. AOL missed out on these and other opportunities, such as the emergence of higher-bandwidth connections, due to financial constraints within the company. Quaker Oats and Snapple no. In a definitive agreement . New York-based Triarc, with nearly $1 billion in annual revenue, has widely diverse interests including its Royal Crown Co. and Mistic Brands beverages, Arbys Inc. restaurants, National Propane liquefied petroleum gas and C.H. ``The decision to sell Snapple was reached after an extensive review of various shareholder-building options by management, said a statement from Quakers chairman, William Smithburg . The merger of the legendary Walt Disney and "everything-we-create-kids-adore" Pixar was a match made in cartoon heaven. See all flavors GLUTEN-FREE Start your day with a delicious bowl of Quaker Gluten Free Instant Oatmeal. Quaker Foods North America Quaker Tower555 West Monroe, Suite 16-01Chicago, Illinois 60604-9001U.S.A.Telephone: (312) 821-1000Web site: https://www.quakeroats.com Source for information on Quaker Foods North America: International Directory of Company Histories dictionary. 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