The movie was originally pitched as a pretty sweet deal for Quaker Oats. A version of this article appeared in the. Acutely aware of the make-or-break nature of the acquisition, Quakers executives formulated a marketing plan that sought to minimize or eliminate risk. And yes, he still eats Life Cereal. After buying Snapple for $1.7 billion, Quaker Oats immediately started losing money. 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. 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. Cultural concerns exacerbated integration problems between the various business functions. 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. After the landmark property failed to generate enough cash to cover mortgage payments, Mitsubishi walked away from its nearly $2 billion investment. King University. Snapple's previously popular advertisements became diluted with inappropriate marketing signals to customers. to sell it to Siemens A.G. and return to a focus on the computer business. According to 8-bit Central, Quaker Oats once had a video game division called US Games, and in the 1980s they made a grand total of 14 games for the Atari 2600. The FDA acknowledged that in their official rules and regulations, stating that just wasn't the case and by 1999, the Chicago Tribune was reporting Quaker Oats was seeing record sales. In a much ballyhooed bid to create an integrated computer and telecommunications behemoth, the AT&T Corporation bought the NCR Corporation for $7.48 billion in 1991 and spent a couple of billion more dollars trying to make it work. That covers development cost. Quaker Oats' effort to administer Snapple in larger measures. Take Quaker Oats Apple and Cranberries Instant Oatmeal. Nor do I think it was a case of a nimble upstart outflanking a lumbering corporate behemoth. Other acquisitions that went sour include: *. Those challenges got Henry Crowell one of the original founders of Quaker Oats thinking (via The Gazette). The military needed a cheap way to feed a lot of people, and soldiers across the country were introduced to the idea they could eat their horses' oats. But just two years later, the company shocked Wall Street by filing for bankruptcy protection, making it the largest corporate bankruptcy in American history at the time. As each of Quaker's initiatives failed or backfired, Snapple sales lost steam. On the radio, the brand grew by sponsoring shockmeisters Howard Stern and Rush Limbaugh. Quaker Oats and Snapple no. But the spirit of Snapple called for another way of speaking and thinking. 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. 7 billion all stock bid. 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. 1Prince, Greg, "Come Together," Beverage World, December 1995, p. 50-54. Expert Help. 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. The consolidation of AOL Time Warner is perhaps the most prominent merger failure ever. This case looks at the purchase of Snapple in 1994 by Quaker Oats. Finally, executives of the acquiring company should avoid paying too much for the target company. quaker oats and snapple - Tuck School of Business - Dartmouth . 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. u d ) if the alliance or acquisition pursued. The Sad State of Corporate Innovation See how corporates are failing when it comes to innovation. Just think of where some of these companies could have better invested that money. In 9 out of 10 mergers, there is the potential for increasing value, but it's not exploited.''. The Quaker Oats' largest acquisition to date was in 1994, when it acquired Snapple Beverage for $1.7B. Ever wonder why it's not Charlie and the Chocolate Factory, like the book? Their failure with Snapple wasnt a matter of ineptitude or a bureaucratic tin ear. Before the merger, Sprint catered to the traditional consumer market, providing long-distance and local phone connections, and wireless offerings. When they bought Snapple in 1994, the acquisition made them the third largest beverage company on the continent (behind Coca-Cola and PepsiCo). 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. "Form 10-K for the Fiscal Year Ended December 31, 2008.". 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. But Quaker Chairman William D. Smithburg--who had turned sports-drink maker Gatorade into a smashing success after buying that business in 1983--was convinced he could do the same with Snapple, in part by meshing the ways in which Snapple and Gatorade were marketed. 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. I was always as keen to get the new products to market as Mike and Ken were, says Peltz. 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. When the headquarters was expanded through a wall into the offices next door, Weinstein threw a sledgehammer party. Wonka Bars came a few years later, and Quaker Oats sold that division to Nestle in 1988. Beacon Press, 2014. When Quaker sold Snapple to Triarc Companies, they converted the struggling Snapple brand into a successful one by applying a good marketing strategy. 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. Take the case of the Quaker Oats-Snapple merger. But thats not the end of the story. Brands thrive when theres a close fit between process and corporate temperament. In 1993, Quaker paid $1.7 billion for the Snapple brand, outbidding Coca-Cola, among other interested parties. Warner Communications merged with Time, Inc. in 1989. Quakers executives approached the Snapple deal with a mixture of confidence and urgency. By the time Triarc came on the scene, they had virtually given up on the brand and were putting their energies into other companies products. Then the U.S. government blindsided it, Column: Uber and Lyfts deactivation policy is dehumanizing and unfair. Less than three years later, Quaker sold Snapple to Triarc for $300 million, representing a more than 82% loss on its original investment. Combining two companies is difficult as both have different cultures, operational setups, and so on. The managerial temperament makes itself known and felt in those small, almost unconscious, actions and decisions. 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. Within weeks, it was clear from their field reports that young consumers, drawn by the Snapple seal of approval, had tried Elements, liked it, and wanted more. '', See the article in its original context from. 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. consulting firms. Quaker was backed by its success from the 'Gatorade' drink. ", U.S. Securities and Exchange Commission. They also need to be attuned to the target company's branding and customer base. But a marketing professional would probably explain the improved fit in terms of distribution economies or manufacturing synergies. 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 . - Dynegy's proposed merger with Enron, 2001 Quaker Oats was founded in 1901 by the merger of four oat mills: Quaker bought Snapple for .7 billion in 1994 and sold it to Triarc in 1997 for 0 million. My point here is not to disparage discipline or, indeed, the marketing professionals of Quaker Oats. And nearly every merger announcement today is accompanied by a breathless accounting of the ''synergies'' between the companies that will enable the combined entity to reap both savings and additional earnings. 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. By gaining access to each other's customer bases, both companies hoped to grow by cross-selling their product and service offerings. 2 In 1998 The Quaker Oats Company owned four other brands that led their respective categories: Gatorade thirst . 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. He created rolled oats, and this was about the time the Civil War was kicking off. Quaker Oats & Snapple (1998) Disaster: US $1.4 billion Quaker Organic Instant Oatmeal is USDA-certified organic and made with 100% whole grain oats. 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. When you think of Quaker Oats, you think of their oats and their cereal products, right? For good reason. Then revive the funky packaging, adventurous flavors, and anything-goes attitude that first made the brand soar. From their 1994 peak, sales declined every year, plunging to $ 440 million in 1997. The labels on its bottles were cluttered and amateurish, and its ads seemed, if possible, even more homemade. 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. 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. Microsoft and Nokia Date: April 25, 2014 Price: $7.9B AOL had arrogant and aggressive employees while Time Warner had corporate and staid employees. In 1940, Stuart helped found America First, one of the largest anti-war groups in the country's history. Its still a growing and thriving product, said Christopher Varelas, a merger specialist at Salomon Bros. Inc. who represented Triarc in the deal. Researchers wanted to know what kind of effects radioactivity had on the human body, as more people were being exposed to it than ever before. Investment bankers (who work on commission) and internal deal champions, both having worked on a contemplated transaction for months, will often push for a deal "just to get things done." - Acquisition of Snapple by Quaker Oats, 1994. So, there you have it. The company changed its name to Quaker Foods and Beverages after being acquired by PepsiCo, Inc., in 2001. The Quaker Oats Company's $1.4 billion debacle with Snapple only proves that the well-trod merger road has. My trick was to make money appear in a box, Weinstein recalls. They gave Triarc a chance, I would submit, because Triarcs presentation convinced the distributors that Snapple once again had an owner that understood the spirit of the brand. Libraries-Penn State University. Sales started downward just as Quaker acquired Snapple. 1. SBC was founded by Leonard March, Hyman Golden and Arnold Greenburg in . Gatorade -cash cow - potentially could dry up Pre-Morrison, Quaker mainly riding Gatorade under-investing in food brands Morrison comes in and changes PA: Younger manager presidents - oversee individual product lines such as hot cereal, cold cereal, snacks, and domestically sold Gatorade However, within three years Quaker . Investopedia requires writers to use primary sources to support their work. You've seen the Life Cereal commercials where we learn "Mikey likes it." Within a span of 20 months, Quaker Oats had to sell off Snapple at a loss of about 20%. And Quaker couldnt force them to. 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. Largest anti-war groups in the country 's history local phone connections, and wireless offerings for increasing,. 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