''The key to success is the effectiveness of postmerger management. It's hard to know if Quaker Oats knew what a revolutionary idea they had when they printed a recipe right on the box. Give some thought as well to its soul. Due Diligence Case Study 6. In a definitive agreement . ''Somewhow they made the arrogant assumption that if they were an expert in one kind of food and beverage biz, they were an expert in all food and beverage businesses,'' said Jordan D. Lewis, a management consultant and author based in Washington. In just 27 months, Quaker Oats sold Snapple to a holding company for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple. As each of Quaker's initiatives failed or backfired, Snapple sales lost steam. With a $35 billion price tag, the merger did not pay off. These include white papers, government data, original reporting, and interviews with industry experts. At the time, Snapple was still run by the three founders of the company. When Quaker bought Snapple in late 1994, many on Wall Street howled that the price was too high, perhaps $1 billion above what Snapple was worth. Once the two companies decide who's going to lead the combined corporation, their concern for corporate culture ends. 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. Quaker & Snapple In 1994, grocery store legend Quaker Oats acquired the new-kid-on-the . 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 confidence was easily understood: Quaker had an impressive record in beverage marketing, having developed Gatorade into a powerhouse national brand by skillfully executing a plan drawn straight from the marketing textbooks. 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. 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. Absolutely, and it's no wonder their foray into gaming only lasted for such a short time. This paper discusses why the hyped-up merger of food giants, Quaker Oats and Snapple Beverages, was doomed to fail from the start. Its market capitalization was $1.7024 billion. Released in 1982, it was (via Old School Gamer), a super bizarre answer to a question literally no one had ever asked: "How can I play hide-and-seek without getting up off the couch?" But little of it splashed off onto General Electric from Kidder, which became the subject of an insider-trading investigation soon after the merger. Triarcs gleeful experimentalism restored it. But theyve hit a snag, A $150,000 executive protection dog? 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. 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. 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). Snapples durability raises a number of questions. 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. Kids could watch the "dinosaur eggs" in their oatmeal hatch into little candy pieces, and according to Ideas To Go, the firm who acted as a consultant, they were a massive hit and ended up doubling their project sales goals. Part of the fun for the Triarc team was using themselves as a test market. Horizontal integration is the acquisition, merger, or expansion of a business that increases the market share in its existing industry. In 1995 sales dropped to $610 million. When you think of Quaker Oats, you think of their oats and their cereal products, right? Schumacher got creative, and started selling glass jars packed with cubed oats. The Willy Wonka line of candy was launched alongside the movie, but there were difficulties. But a merger of two companies with related businesses, which has become so fashionable in the 1990's, is no guarantee of success, said Ken Smith, a post-merger consultant with Mercer Management Consulting. While some company mascots are very real like Duncan Hines Larry can continue to exist just as the perfect ideal of the Quaker faith. 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. 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. GE bought Kidder for $600 million in 1986, but had invested an additional $800 million in the firm between the purchase and the sale. And on their own, oats are definitely a smart thing to add to your diet. Cadbury paid $1.45 billion for Snapple and a number of other Triarc brands, including Royal Crown, Mistic, and Stewarts. Even though Snapple sales brought in about $550 million for Quaker Oats last year, that was a drop of 8 percent from the previous year and a drag on earnings. From their 1994 peak, sales declined every year, plunging to $440 million in 1997. Consumers are targeted, campaigns are planned, products are positioned and launched, waves of advertising are flighted, and then market research does the reconnaissance to say whether the missions were successful or not. "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. Quicker oats and Snapple; This merger failure is an example of overpaying. ''There is no concern for the human impact of the merger or for how to make the merger work. "Can AT&T Avoid the Merger Mistakes of AOL-Time Warner? Quaker had Snapples 300 distributors fly into several centralized meetings and proposed to them that they cede Snapples supermarket accounts to Quaker in exchange for the right to distribute Gatorade to the cold channel. 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. What did Disney actually lose from its Florida battle with DeSantis? Soon after the merger, multitudes of Nextel executives and mid-level managers left the company, citing cultural differences and incompatibility. You know that if you come up with an idea, its at least going to see the light of day.. We also reference original research from other reputable publishers where appropriate. The partnership didn't last, and the LA Times called it "one of the worst flops in corporate-merger history." Quaker Oats Co. announced yesterday that it will buy Snapple Beverage Corp. for $1.7 billion in cash, ending weeks of speculation that the iced tea producer was going to be acquired. They would finance the movie, a major film studio would release it, then they would create their own candies based on the ones in the film and that's exactly what happened. Their answers led me to a conclusion that many marketing professionals are likely to resist: There is a vital interplay between the challenge a brand faces and the culture of the corporation that owns it. When the headquarters was expanded through a wall into the offices next door, Weinstein threw a sledgehammer party. Study Resources. 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. A vertical merger is the merger of two or more companies that provide different supply chain functions for a common good or service. That covers development cost. The merger of Quaker and Snapple was considered to be a disaster owing to an incorrect marketing strategy. The Quaker Oats Company's $1.4 billion debacle with Snapple only proves that the well-trod merger road has. Triarc said it expects to complete the purchase in the second quarter of this year, pending a federal antitrust review. The debacle cost both the chairman and president of Quaker their jobs and hastened the end of Quakers independent existence (its now a unit of PepsiCo). 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. 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. It has also divested 2 assets. 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. Nextel was too big and too different for a successful combination with Sprint. Did you notice? 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. We might say something didnt taste so great and needed reformulating, but there was never a time when we said stop. 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. Articles Find articles in journals, magazines, newspapers, and more; Catalog Explore books, music, movies, and more; Databases Locate databases by title and description; Journals Find journal titles; UWDC Discover digital collections, images, sound recordings, and more; Website Find information on spaces, staff, services, and more . Acquisition indigestion is a slang term that describes the difficulties that a company can face implementing a merger or acquisition. If wed had a very structured process, forms to fill out, analyses to do, wed have seen the risks, and wed never have moved. 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. They gave us a chance.. He got a complete overhaul in the 1970s, to a blue-and-white logo that, frankly, is very 70s. In 1997, Quaker sold Snapple to Triarc Beverages for $300 million, a price most observers found generous. The game featured a house with a yard and three rooms, and a total of 20 different places you could pick to hide. Small as the individual distributors were, they aggregated into a mighty marketing force. But Snapple isnt about accomplishing an objective; its about adding a little whimsy to the humdrum and the everyday. Then revive the funky packaging, adventurous flavors, and anything-goes attitude that first made the brand soar. When it first purchased Snapple . There are factors beyond economic analysis to take into account if the process of brand management is to cohere. Microsoft and Nokia Date: April 25, 2014 Price: $7.9B Several changes in. 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. Nextel employees often had to seek approval from Sprint's higher-ups in implementing corrective actions, and the lack of trust and rapport meant many such measures were not approved or executed properly. "AOL Time Warner to Lose Turner, Posts $99 Billion Loss.". Quakers executives approached the Snapple deal with a mixture of confidence and urgency. 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. He got to know the founders of the business personally and conveyed to his listeners a genuine and infectious regard for the products and the people behind them. Quaker Organic Instant Oatmeal is USDA-certified organic and made with 100% whole grain oats. The marketing teams enthusiasm was contagious, and the distributors responded by urging retailers to take on a little more Snapple. The. 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. It went from local to national success and was poised to go international when the founders sold out to Quaker. Its not that they didnt know the other terminology. In meeting after meeting, distributors resisted Quakers proposals. 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. And finally, the politicized and turf-protecting culture of Time Warner made realizing anticipated synergies that much more difficult. 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. "Pennsylvania Railroad and New York Central Railroad Records, 1853-1965. Definition, Meaning, Types, and Examples, What Is Horizontal Integration? In 2001, America Online acquired Time Warner in a megamerger for $165 billion; the largest business combination up until that time. SBC was founded by Leonard March, Hyman Golden and Arnold Greenburg in . 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. When finalizing an M&A deal, it is often beneficial to include language that ensures that current management stays on board for a certain period of time to ensure a smooth transition and integration since they are familiar with the business. 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. Rich L.A. homeowners are snapping them up, Elizabeth Holmes cites her new baby as a reason she should avoid prison for Theranos scam. The question is whether they are going to pick it up a second time, and the distributors tell us pretty quickly whether thats happening. 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. These days his happy visage seems oddly inappropriate. Meanwhile, the Gatorade brand continued to grow and made up 28% of Quaker Oats sales by the lates 1990s. So, the main reasons why the three years of merger between Quaker and Snapple ended up . Introduction Abstract Issues Issue #1: Distribution Issue #1: Alternatives and Recommendations 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. customer feedback. A consultant would probably have cautioned against the launch, arguing that Elements slick New Age preciousness would sit uncomfortably under the Snapple logo. 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. 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. 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. QUAKER OATS. 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. Part of it was selfishnesswe liked the stuff so much we wanted to get it into our offices. I was always as keen to get the new products to market as Mike and Ken were, says Peltz. Just as it had done with Gatorade, Quaker introduced Snapple in larger, more profitable sizes: in 32- and 64-ounce bottles. 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. Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. In effect, Triarc let its distributors do its market research. We see it all the time now, thanks to their 1891 idea. 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. 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. But thats not the end of the story. 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. 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 . Within a span of 20 months, Quaker Oats had to sell off Snapple at a loss of about 20%. 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. 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. Amy is an ACA and the CEO and founder of OnPoint Learning, a financial training company delivering training to financial professionals. Wall Street had warned saying that the amount is excessive, to acquire a company. To add insult to injury, PepsiCo acquired Quaker. Acutely aware of the make-or-break nature of the acquisition, Quakers executives formulated a marketing plan that sought to minimize or eliminate risk. On November 2, 1994, Quaker and Snapple announced that Quaker would acquire Snapple in a tender offer and merger transaction for $1.7 billion in cash. 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 Even now, mere mention of Quaker Oats acquisition of Snapple causes veteran deal makers to shudder. 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. Stern took his revenge by subjecting Quaker to months of on-air diatribes that urged listeners to stay away from Crapple.. But Dollins said Smithburg is focused on driving forward the rest of Quakers lines, including Gatorade and the companys various brands of ready-to-eat cereals. Snapple also posted a $160-million operating loss for 1995 and 1996 combined, which means Quakers total losses from Snapple probably approach $2 billion. After the landmark property failed to generate enough cash to cover mortgage payments, Mitsubishi walked away from its nearly $2 billion investment. Most distributors held contracts in perpetuity. The acquiring management also fumbled on Snapple's advertising, and the differing cultures translated into a disastrous marketing campaign for Snapple that was championed by managers not attuned to its branding sensitivities. If managed properly, it can be a huge success.. 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. "The New Media Monopoly: A Completely Revised and Updated Edition with Seven New Chapters," Page 4. The plan flopped for several reasons. Margaret Webb Pressler, QUAKER OATS AGREES TO BUY SNAPPLE The Washington Post . In this case, Quaker Oats was able to recoup $250 million in capital gains taxes it paid on prior deals, thanks to losses from the Snapple acquisition. In 1994, grocery store legend Quaker Oats purchased the new kid on the block, Snapple, for $1.7 billion. QUAKER OAT'S snapple: failing to understand the essence of the brand 1. Technological dynamics of the wireless and Internet connections required smooth integration between the two businesses and excellent execution amid fast change. Let's start with the title. It used its leverage with supermarkets to win premium display space and squeezed costs out of the supply chain. ", The Channel Company-CRN. consulting firms. When contemplating a deal, managers at both companies should list all the barriers to realizing enhanced shareholder value after the transaction is completed. 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. ''There's no strong correlation between price premiums or strategic relatedness and the success of a deal,'' Mr. Smith said. Why the Quakers? Quaker Oats had teamed up with researchers from MIT for three experiments involving 74 boys between the ages of 10 and 17. Further, a macroeconomic downturn led customers to expect more from their dollars. ", United States Department of Justice. 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. So what? The Japanese company lost billions before it sold an 80 percent stake in MCA to the Seagram Company. 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. 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. She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. When brand and culture fall out of alignment, both brand and corporate owner are likely to suffer. 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