quaker oats and snapple merger failurequaker oats and snapple merger failure

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. Sources: Bloomberg News; Times and wire reports. In 1995 sales dropped to $610 million. In effect, Triarc let its distributors do its market research. The reasoning was twofold. When conglomerates of disparate businesses were the rage in the 1970's and 1980's, the General Electric Company's $600 million acquisition of the Kidder, Peabody Group in 1986 seemed a smart idea. 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. Triarc officials estimate that the Snapple brand was worth $900 million to $1 billion of that total, but no separate accounting was officially made. And finally, the politicized and turf-protecting culture of Time Warner made realizing anticipated synergies that much more difficult. 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. Expert Help. Gene Wilder's Willy Wonka & the Chocolate Factory is one of those iconic movies of any childhood even if it did give you nightmares. 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. ChatGPT who? A version of this article appeared in the. 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. In 1994, grocery store legend Quaker 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. DEAL VALUATION Quaker paid $1.7 billion to acquire Snapple in December 2004. Its number one priority: repair relations with disgruntled distributors. For good reason. Quaker Oats-Snapple example. Triarc plans to operate Snapple with its Mistic Brands Inc. line and said that would transform the company into a leader in the premium beverage business. 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. 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. Bizarre? To stave off acquisition by one of those larger competitors, Quaker needed to add a second brand that could capture similar economies. ``The decision to sell Snapple was reached after an extensive review of various shareholder-building options by management, said a statement from Quaker's chairman, William Smithburg . King University. 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. Additionally, AOL executives realized that their know-how in the Internet sector did not translate to capabilities in running a media conglomerate with 90,000 employees. 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. 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). They're actually the same oats, says Huffington Post, and the only difference is that instant oats are cut thinner so they'll cook faster. Despite a hue and cry that America's patrimony was being sold off to foreigners, New York's real estate barons, sensing a glut of office space, were only too willing to unload properties on the Japanese, who were only too willing to pay astronomical prices. But there was a catch. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. In 2003, amidst internal animosity and external embarrassment, the company dropped "AOL" from its name and became known as Time Warner. 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. Huge rivals, such as Coca-Cola Co. and PepsiCo Inc., charged into the market with new products. Gatorade is in the sports drink segment, while Snapple is in the alternative beverage space. 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. 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. "Time Warner Merger Terms Approved. Margaret Webb Pressler, QUAKER OATS AGREES TO BUY SNAPPLE The Washington Post . - Acquisition of Snapple by Quaker Oats, 1994. That's stuff found in weed-killer, and specifically, in Roundup. 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. Search the for Website expand_more. The managerial temperament makes itself known and felt in those small, almost unconscious, actions and decisions. How about it, do you remember eating those as you watched your Saturday Morning Cartoons? Quaker Oats' management thought it could leverage its relationships with supermarkets and large retailers; however, about half of Snapple's sales came from smaller channels, such as convenience stores, gas stations, and related independent distributors. Sprint saw stiff competitive pressures from AT&T (which acquired Cingular), Verizon (VZ), and Apple's (AAPL) wildly popular iPhone. In contrast to Quakers buttoned-down, coolly professional culture, Triarc is the sort of place where employees wear costumes to work on Halloween. I had a picture of Wendy on my wall, Weinstein recalls. Ultimately, PepsiCo succeeded in a bid to to acquire Quaker Oats and its crown jewel brand of Gatorade in 2001. This still left a considerable chunk of destroyed equity value, however. ``We are proud to be future owners of a brand as great as Snapple and believe that our strong management team will be able to move our beverage business forward, said Triarc Chairman Nelson Peltz. However, within three years Quaker . 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. Along with ditching the much-despised 32- and 64-ounce bottles, the marketing team sent the distributors a clear message that they were part of the family and not an inefficiency that ought to be eliminated. But Snapple was a lunchtime beveragepeople werent looking for anything larger than a 16-ounce bottle they could polish off in one sitting. 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 . Give some thought as well to its soul. 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. Most distributors held contracts in perpetuity. In 1994, when Quaker bought the company that created the market for flavored iced teas at the peak of its popularity, Snapple's sales were $670 million. 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. 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. Operating from the back of his parents pickle store in Queens, Arnie Greenberg and his friends Leonard Marsh and Hyman Golden started selling a fresh apple juice called Snapple across New York City in the late 1970s. 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. It's comfort food to the max, and that might have to do with the smiling, friendly-looking man on the logo. Quakers corporate temperament was perfectly attuned to the achievement-oriented message of Gatorade. Additionally, differences in systems and processes can make the business combination difficult and often painful right after the merger. to sell it to Siemens A.G. and return to a focus on the computer business. 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. 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. One of the most striking things about my conversations with Peltz, Weinstein, and Gilbert was the language that the Triarc team used. The brands distribution channels were as unconventional as its promotions. 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. They don't think about how to go about merging these distinct corporate cultures. The. 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. Part of it was selfishnesswe liked the stuff so much we wanted to get it into our offices. But probably Quakers worst move was to dump Limbaugh and Stern. Now that's a mouthful you can simply enjoy. Early in the merger, the two companies maintained separate headquarters, making coordination more difficult between executives at both camps. See all flavors GLUTEN-FREE Start your day with a delicious bowl of Quaker Gluten Free Instant Oatmeal. 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. A merger or acquisition is when two companies come together to take advantage of synergies. 1Prince, Greg, "Come Together," Beverage World, December 1995, p. 50-54. Stern took his revenge by subjecting Quaker to months of on-air diatribes that urged listeners to stay away from Crapple.. 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 . That has led to widening speculation that Smithburgs days as Quakers chief executive are numbered. In 2010, Quaker Oats started redesigning both their packaging and the heavy box Larry was trapped in, wanting to make the most of their status as a healthy food. ''There's no strong correlation between price premiums or strategic relatedness and the success of a deal,'' Mr. Smith said. The dollar value of mergers and acquisitions soared to $659 billion in 1996, nearly double the number in 1994. The merger of Quaker and Snapple was considered to be a disaster owing to an incorrect marketing strategy. The plan flopped for several reasons. But what you might not know is that every single time you make a bowl of their tasty oatmeal, you're taking part in a long and storied history that well, there are times it gets downright bizarre. But consumers simply didnt want them. Within a few short months, Elements had grown to 15% of Snapples total sales. Every move appeared logical, yet each phase of Quakers strategy ran into problems. It has happened to corporate giants and high-technology start-ups alike, including I.B.M., Xerox, General Motors, Sony, General Electric and Novell. Sales, which had been declining 20% a year, turned flat within three months of Triarcs purchase. If Snapple was about play, Gatorade was about sportabout playing to win. Many have failed because the integration of the acquired company with the parent has been poor. Reading more about the merger between Quaker Oats and Snapple and how it failed to succeed, it became clear that Quaker Oats conducted an inadequate due diligence process and that the main reason for this was due to managerial hubris within the company. Start your day with a delicious bowl of Quaker and Snapple was about sportabout to. Wall, Weinstein recalls managerial temperament makes itself known and felt in those small, unconscious! A mouthful you can simply enjoy 's no strong correlation between price premiums or strategic relatedness the... 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