Two other kid-friendly oatmeals followed, Treasure Hunt and Sea Adventures. My point here is not to disparage discipline or, indeed, the marketing professionals of Quaker Oats. Triarcs corporate style could not have been more unlike Quaker Oats Part of financier Nelson Peltzs complex web of holdings, Triarc has built a portfolio of juice and soda brands that at one time or another has included Stewarts, Royal Crown, and Mistic, as well as Snapple, all under the management of CEO Mike Weinstein and marketing director Ken Gilbert. customer feedback. Quaker discussed selling the brand with a number of potential acquirers, including, rumor has it, Procter & Gamble, PepsiCo, and Cadbury Schweppes, but only Triarc was willing to do a deal. As a subscriber, you have 10 gift articles to give each month. Part of the fun for the Triarc team was using themselves as a test market. Despite Snapples flat sales and its inability to spread much beyond its core base of fans along the West and East coasts, Triarc says it is confident that Snapple can regain its past form. Its the most fun part of the business. But a marketing professional would probably explain the improved fit in terms of distribution economies or manufacturing synergies. Larry the Quaker Oats Man was first developed in 1877, and according to Business Insider 's walk down memory lane, he's had a surprising number of looks over the years. With the decline of cash from operations and with high capital-expenditure requirements, the company undertook cost-cutting measures and laid off employees. At the time, AOL was the leader in dial-up Internet access; thus, the company pursued Time Warner for its cable division as high-speed broadband connection became the wave of the future. Introduction Abstract Issues Issue #1: Distribution Issue #1: Alternatives and Recommendations Even with the growth of competition in the "Alternative beverage" category, Snapple remained steady at 30-40% of market share. Lee had bought Snapple from its original owners--Leonard Marsh, Hyman Golden and Arnold Greenberg--who had started the firm to sell fruit juices to health stores. One of the most striking things about my conversations with Peltz, Weinstein, and Gilbert was the language that the Triarc team used. This look didn't last long, but it was only in 2007 we got the logo you're familiar with today for the most part. AOL missed out on these and other opportunities, such as the emergence of higher-bandwidth connections, due to financial constraints within the company. ", U.S. Securities and Exchange Commission. The labels on its bottles were cluttered and amateurish, and its ads seemed, if possible, even more homemade. Quaker Oats management needs to decide what to do in light of these recent events. The surprise would have been if they had. But Snapple was a lunchtime beveragepeople werent looking for anything larger than a 16-ounce bottle they could polish off in one sitting. Just think of where some of these companies could have better invested that money. Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. The Quaker Oats Company had been founded at the start of the 20th century, and its most famous product, Quaker Oats Cereal, originated in 1877. Im hardly courting controversy by asserting that a brand might fit better in one companys portfolio than in anothers. Other breakfast foods were also found to contain the weed-killer chemical, like Cheerios and Lucky Charms. This explanation, I believe, will provide the framework for understanding Triarcs and Quakers contrasting experiences with Snapple as our story unfolds. From their 1994 peak, sales declined every year, plunging to $ 440 million in 1997. Once the two companies decide who's going to lead the combined corporation, their concern for corporate culture ends. Distributors and end-customers dis-agreed with . Thats a lesson executives considering a brand acquisition might want to keep in mind. After purchasing the sports drink from StokelyVan Camp in 1983, Quaker introduced it into 26 foreign markets, added five new flavors (for a total of eight), and hired basketball great Michael Jordan as a spokesperson. Before the merger, Sprint catered to the traditional consumer market, providing long-distance and local phone connections, and wireless offerings. Ever wonder why it's not Charlie and the Chocolate Factory, like the book? 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. How did Triarc restore most of that value in less than three years? To stave off acquisition by one of those larger competitors, Quaker needed to add a second brand that could capture similar economies. 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 such a commoditized business, the company did not deliver on this critical success factor and lost market share. "How Snapple Got Its Juice Back. Weinstein picks up the tale: We tied a TV commercial to it that took two weeks to shoot and ran a parade down Fifth Avenue. systems management. It has also divested 2 assets. Sounds great, right? The effective premium to market valuation was 3.00%. 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. In 1940, Stuart helped found America First, one of the largest anti-war groups in the country's history. 1. Just the opposite. A company like Quaker would never take such a casual approach to product development, but it was standard practice at Triarcand true to Snapples back-of-the-store, back-of-the-envelope roots. 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. The Sad State of Corporate Innovation See how corporates are failing when it comes to innovation. The Japanese company lost billions before it sold an 80 percent stake in MCA to the Seagram Company. Quaker Oats Company, former (1901-2001) Chicago-based American manufacturer of oatmeal and other food and beverage products. 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. I dont think that there was anyone at Quaker who had loved that brand, and it takes passion to get behind a brand and turn it around. 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. At the time, Snapple was still run by the three founders of the company. After the landmark property failed to generate enough cash to cover mortgage payments, Mitsubishi walked away from its nearly $2 billion investment. They could say they were low-fat, for example, but they couldn't say they helped manage cholesterol. Rolm gained market share and lost money, prompting I.B.M. While their efforts should be recognized, it does not do justice to the acquiring group's investors if the deal ultimately does not make sense and/or management pays an excessive acquisition price beyond the expected benefits of the transaction. Quaker Oats offered $14 in cash for each share of Snapple stock; the merger agreement contemplated the same payment per share. 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 . Snapple, at that point was trading at $14 per share. 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. Quaker Oats Morrison reviving Quaker after the Snapple debacle- cost $1.4 B write-off Focus on Gatorade. It went from local to national success and was poised to go international when the founders sold out to Quaker. That covers development cost. Closing the books on what some analysts have called the worst acquisition in memory, the Quaker Oats Company said today that it would sell the Snapple drink business to the Triarc Companies. 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. There's something undeniably wholesome about Quaker Oats. Stern was an especially effective spokesperson. 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. 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. Sales started downward just as Quaker acquired Snapple. Triarc is a New York-based company that owns the Arbys fast-food restaurant chain and several soft drink brands, including Royal Crown and Diet Rite. Complaint at 34. The price tag to acquire Snapple was $1.7 billion, considered by many to be an astronomical sum. A key component of the strategy was to use the strength of Snapples distributors in the cold channel to help Gatorade and use Gatorades strength in the warm channelthat is, supermarketsto help Snapple. I would explain it differently: First, as every brand manager would surely agree, good brand management is explained more by process than by strategy. Less than three years later, Quaker sold Snapple to Triarc for $300 million, representing a more than 82% loss on its original investment. In 1989, the Mitsubishi Estate Company bought a controlling stake in that American icon, Rockefeller Center. Limited economies of scope are one reason. Done to avoid controversy, the terminations inflamed it instead. 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. Its tempting to say that Triarcs executives understood and embodied the quirky spirit of the Snapple brand in a way that Quakers marketing team never did, and Triarcs executives arent inclined to disagree. Quaker said Snapple just didnt work out as planned. On this list alone, the best part of US$200 billion was blown on acquisitions which failed. The company started running ads whose mainstream blandness and slick production values were antithetical to Snapples image. Quaker Oats was trademarked in 1877, and the next two decades saw three competing oat-milling companies come together to form a single conglomerate. to sell it to Siemens A.G. and return to a focus on the computer business. The idea took shape in Weinsteins office. . When he came to the US, he found oats were feed for horses and people certainly didn't want to eat that. Just a little over two years later, they sold Snapple for only $300 million dollars, essentially, taking a $1.4 billion loss on Snapple. After the warning given by the Wall Street, Quicker oats had purchased Snapple by paying $1.7 billion. PURCHASE OF GATORADE IN 1983<br> 5. It recorded sales of about $700 million last year. In November 2000, shortly after Triarc sold Snapple to Cadbury Schweppes, I posed those questions to Triarcs top executives: chairman and majority owner Nelson Peltz, CEO Mike Weinstein, and marketing director Ken Gilbert. As each of Quakers initiatives failed or backfired, Snapple sales lost steam. '', See the article in its original context from. Robert D. Stuart, Jr. was chief executive of Quaker Oats from 1966 to 1981, and it was a family business. Let's start with the title. 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. For one, the boys were given breakfasts of Quaker Oats that contained radioactive calcium and iron. 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. - Mattel's acquisition of The Learning Company, 1999. 1-0041 There was no such mismatch between Gatorade and Quaker. On the other hand, the WHO's International Agency for Research on Cancer says it's possibly carcinogenic, so clearly, more research needs to be done. But little of it splashed off onto General Electric from Kidder, which became the subject of an insider-trading investigation soon after the merger. And thus was born Wendys Tropical Inspiration. Novell is not alone. Wonka Bars came a few years later, and Quaker Oats sold that division to Nestle in 1988. ", United Press International. 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. A 1995 lawsuit found that while the radioactivity hadn't been enough to cause lasting damage, the boys involved were entitled to a settlement and apology. 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. Until Quaker Oats possessed Snapple, it caused them a loss of $1.6 million on a daily basis. "Mikey" was almost "Tim", and while we'll never know if that would have seen the same success, we do know the urban legends about little Mikey's fate just aren't true. Snapple, based in East Meadow, N.Y., is a leader in the U.S. ready-to-drink iced tea and fruit-juice drink markets. Penn Central presents a classic case of cost-cutting as "the only way out" in a constrained industry, but this was not the only factor contributing to its demise. Why is the Quaker Man smiling? 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. I knew Mike and Ken would make mistakes, Peltz says. But at Triarc, the talk was of play and fun, parties and parades. Sprint was bureaucratic; Nextel was more entrepreneurial. Shortly after the mega-merger, however, the dot-com bubble burst, which caused a significant reduction in the value of the company's AOL division. 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. Quaker Oats' effort to administer Snapple in larger measures. Anyone can read what you share. It has 12 grams of sugar and according to the American Heart Association, daily sugar consumption shouldn't be more than 36 grams for men and 25 grams for women. Beacon Press, 2014. Respected executives at both companies sought to capitalize on the convergence of mass media and the Internet. It's comfort food to the max, and that might have to do with the smiling, friendly-looking man on the logo. However, within three years Quaker . Search the for Website expand_more. But competition in the new age category increased, even as sales slowed. And finally, the politicized and turf-protecting culture of Time Warner made realizing anticipated synergies that much more difficult. Study Resources. And with 70-90% of M&A transactions failing to increase value, the biggest challenge isn't getting approved; it's integrating cultures after the deal closes. In 1995 sales dropped to $610 million. Quaker Oats' decision to sell its Snapple Beverages unit for an enormous $1.4-billion loss is one of many acquisitions that went bad for buyers. Chicago-based Quaker has said that Snapple failed to catch on in middle America and last year pulled the drink line out of several markets. We didnt think much about itit didnt seem like taking chances. Snapple's sales grew from $80 million in 1989 to $231 million in 1992 and $516 million in 1993. There are two different kinds of oatmeal: instant, and the kind that takes next to forever to cook. The new company risks losing its customers if management is perceived as aloof and impervious to customer needs. Or how about Life Cereal? The company hired film director Spike Lee for advertising and gave away samples at Little League games and on city street corners. ''The key to success is the effectiveness of postmerger management. 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. So, there you have it. Finally, Dave Clark pitched an idea his superiors said was too boring, basing it on his family's breakfast struggles. But, are they? He created rolled oats, and this was about the time the Civil War was kicking off. Snapple also posted a $160-million operating loss for 1995 and 1996 combined, which means Quakers total losses from Snapple probably approach $2 billion. Connect with the definitive source for global and local news. Twenty-nine months later, Quaker announced an agreement to sell Snapple for $300 million and take a $1.4 billion write-off on the sale. Then revive the funky packaging, adventurous flavors, and anything-goes attitude that first made the brand soar. In addition to accumulated operating losses and certain tax benefits, analysts estimated that the total undiscounted loss ranged between -$1.2 and -$1.5 billion. There are factors beyond economic analysis to take into account if the process of brand management is to cohere. King University. You can learn more about the standards we follow in producing accurate, unbiased content in our, 4 Cases When M&A Strategy Failed for the Acquirer (EBAY, BAC). The Quaker Oats Company's $1.4 billion debacle with Snapple only proves that the well-trod merger road has. Sales, which had been declining 20% a year, turned flat within three months of Triarcs purchase. 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. Snapple Is Just the Latest Case Of Mismatched Reach and Grasp, https://www.nytimes.com/1997/03/29/business/snapple-is-just-the-latest-case-of-mismatched-reach-and-grasp.html. But the swiftness with which Quakers Snapple investment eroded will make this deal a special case study of mismanagement for a generation of business students. Part of it was selfishnesswe liked the stuff so much we wanted to get it into our offices. Quaker & Snapple In 1994, grocery store legend Quaker Oats acquired the new-kid-on-the . The marketing teams enthusiasm was contagious, and the distributors responded by urging retailers to take on a little more Snapple. The two combined to become the third-largest telecommunications provider, behind AT&T (T) and Verizon (VZ). QOC produced Gatorade and sought to expand their beverage line with the merger/acquisition of Snapple Beverage Company (SBC) (History, 2011). 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 . Proclaiming the magic is back, the marketing team convened a meeting of the distributors. We knew Snapple because we had been going up against it every day in the marketplace with Mistic, he adds, referring to Triarcs first entry into the premium fruit-drink category. Second, consistent process execution is a matter of temperament. Other acquisitions that went sour include: * December 1996: AT&T; Corp. spins off its NCR unit, valued at $3.4 billion, considerably less than the $7.48 billion AT&T; paid for the computer company in 1991. In the 1990s, Quaker Oats decided to make a serious push at getting kids interested in eating oatmeal. Textbook actions produced textbook results: Gatorade sales swelled from $100 million to $1 billion in ten years, giving Quakers executives ample reason to believe they could produce similar growth for Snapple. 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. Chicago-based Quaker has said that Snapple failed to catch on in middle America and last year pulled the drink line out of several markets. The brands distribution channels were as unconventional as its promotions. Quaker Oats loved the commercial they almost didn't get to see, and the incredibly simple idea resonated. From the very start, Quaker Oats has been built by its marketing perhaps more so than most companies. With only one brand in its beverage portfolio, Quaker was at a serious disadvantage to larger players that could use their broader lineups to capture economies of scale. When you think of Quaker Oats, you think of their oats and their cereal products, right? It must end, Drugmaker Eli Lilly to slash insulin prices, Stocks slip as stubborn inflation raises rate expectations, TikTok to set default daily time limit of 60 minutes for minors, Column: While workers struggled during the pandemic, CEO pay went up, up, up, The chance of a lifetime: Five friends ski the tallest mountain in Los Angeles, Shocking, impossible gas bills push restaurants to the brink of closures, Review: A reimagined Secret Garden fails to flower anew at the Ahmanson Theatre, High school basketball: Southern California and Northern California Regional results and updated pairings, Column: Supreme Court conservatives may want to block student loan forgiveness. Wall Street was awash in money. AT&T finally called it quits last December and spun off the NCR computer operations for a mere $3.4 billion. AOL Time Warner to Lose Turner, Posts $99 Billion Loss, The New Media Monopoly: A Completely Revised and Updated Edition with Seven New Chapters, Form 10-Q for the Quarterly Period Ended September 30, 2005. Quaker Oats decision to sell its Snapple Beverages unit for an enormous $1.4-billion loss is one of many acquisitions that went bad for buyers. What we call a brand identity is actually a form of meaning, made at least as much by small, impromptu managerial acts as by grand designs precisely executed. The Quaker Oats Company took a different and surprising role in the war effort. In fact, 31 of the 45 samples of oats tested were deemed to be below their safety criteria, and when they went back and tested more samples of both Quaker Oats and Cheerios, they found that all but two (of 28) samples were deemed "harmful.". 7 billion all stock bid. It used its leverage with supermarkets to win premium display space and squeezed costs out of the supply chain. Most of those have a ton of added sugar, and even ones that sound like they should be healthy can come with some not-so-great ingredients. But the spirit of Snapple called for another way of speaking and thinking. Most distributors held contracts in perpetuity. In 1968, the New York Central and Pennsylvania railroads merged to form Penn Central, which became the sixth-largest corporation in America. "The New Media Monopoly: A Completely Revised and Updated Edition with Seven New Chapters," Page 4. 2 In addition to overpaying,. 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. consulting firms. Variations in temperament go a long way toward explaining why brands that flourish in the care of one custodian wither in another. In a definitive agreement . Unfortunately, the synergies did not materialize and [Snapple] did not grow at the rate we anticipated.. smaller yet more publicized deal - the acquisition of Snapple - that will go down as Smithburg's, and Quaker's, costliest mistake. Our favorite answer is 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. B4.-----, 'Quaker Oats Sets Broad Realignment, Takes Charge of As Much As $130 Million,' . But that was enough. Amy is an ACA and the CEO and founder of OnPoint Learning, a financial training company delivering training to financial professionals. Quaker Oats On November 1, 1994, Quaker Oats acquired Snapple for approximately $1.9 billion, becoming the third largest pro-ducer of soft drinks in the United States. Soon after the merger, multitudes of Nextel executives and mid-level managers left the company, citing cultural differences and incompatibility. The gods sent Quaker Oats Co. executives a sign about the troubles ahead if they bought Snapple Beverage Corp. On Oct. 26, 1994, two days after financial advisers had drawn up preliminary papers .

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