According to Brian Cronin (via Huffington Post) you can thank Quaker Oats for getting the movie made, and for giving you those bad dreams. A disaster gone completely wrong, this is one of the classic cases of a failed marketing strategy. U.S. Securities and Exchange Commission. They've gone the way of the dodo, but you can still find Dinosaur Eggs. B4.-----, 'Quaker Oats Sets Broad Realignment, Takes Charge of As Much As $130 Million,' . C) the diligence of employees. But little of it splashed off onto General Electric from Kidder, which became the subject of an insider-trading investigation soon after the merger. 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. Patrick specialty dyes and chemicals businesses. 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. On March 28, 1997 Quacker decided to take a $1. Unfortunately, the synergies did not materialize and [Snapple] did not grow at the rate we anticipated.. - 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. Just as it had done with Gatorade, Quaker introduced Snapple in larger, more profitable sizes: in 32- and 64-ounce bottles. Not only did they have to convince people to eat oats in the first place, but they had to get them to prepare it in a way that would taste good and keep them coming back. Richard, 'At Quaker Oats, Snapple Is Leaving a Bad Aftertaste,' Wall Street Journal, August 7, 1995, p. Give some thought as well to its soul. So when we come up with a new idea, we roll with it. Peltz hired Weinstein and Gilbert for their impeccable professional credentials, and they could have used marketing-speak if they had wanted to. BRAND FAILURES<br> 2. Quaker Oats' effort to administer Snapple in larger measures. 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. In 1940, Stuart helped found America First, one of the largest anti-war groups in the country's history. The reasoning was twofold. ''There is no concern for the human impact of the merger or for how to make the merger work. 1-0041 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 . The oatmeal king is in good company when it comes to hailing an acquisition as a quick and brilliant way to increase earnings, only to see it collapse amid red ink and clashing corporate cultures. Quaker Oats and Snapple no. Quakers executives approached the Snapple deal with a mixture of confidence and urgency. According to their design firm's Michael Connors (via AdWeek), "We took about five pounds off him.". "Form 10-K for the Fiscal Year Ended December 31, 2008.". 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. Chicago-based Quaker, which . When it first purchased Snapple . To stave off acquisition by one of those larger competitors, Quaker needed to add a second brand that could capture similar economies. systems management. A principal reason for the failed merger effort between Quaker Oats and Snapple was: the accounts payable. 1. Soon after the merger, multitudes of Nextel executives and mid-level managers left the company, citing cultural differences and incompatibility. But Snapple was a lunchtime beveragepeople werent looking for anything larger than a 16-ounce bottle they could polish off in one sitting. 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. Take Quaker Oats Apple and Cranberries Instant Oatmeal. 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. 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). 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. When Quaker sold Snapple to Triarc Companies, they converted the struggling Snapple brand into a successful one by applying a good marketing strategy. They got their medical testing done, MIT got their results it was a win-win. 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. 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. ''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. QUAKER OAT'S snapple: failing to understand the essence of the brand 1. Schumacher got creative, and started selling glass jars packed with cubed oats. They had an uphill battle ahead of them, and according to Bustle, they started with their Dinosaur Eggs oatmeal. 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. . ''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. Quaker & Snapple. Anyone can read what you share. According to Stuart, his views came from the idea "[] that the US didn't accomplish much in committing troops to the First World War," and they were all about keeping America out of the second. It's hard to know if Quaker Oats knew what a revolutionary idea they had when they printed a recipe right on the box. Several changes in. 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 . 1Prince, Greg, "Come Together," Beverage World, December 1995, p. 50-54. Now, how about a trip down memory lane? Study Resources. Other problems included poor foresight and long-term planning on behalf of both companies' management and boards, overly optimistic expectations for positive changes after the merger, culture clash, territorialism, and poor execution of plans to integrate the companies' differing processes and systems. 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. How did Triarc restore most of that value in less than three years? 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 1968, the New York Central and Pennsylvania railroads merged to form Penn Central, which became the sixth-largest corporation in America. Expert Help. What did Triarc do with such apparently effortless grace that Quaker, with all its resources, could not? 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. Variations in temperament go a long way toward explaining why brands that flourish in the care of one custodian wither in another. We had no game plan to assure Snapples recovery, Peltz says. Of course, the resultant declines in service only exacerbated the loss of customers. 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. 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. Quakers losses from Snapple actually exceeded the $1.4-billion difference between what it paid for Snapple and its sale price. It identifies the three major reasons for the failure as distribution problems, stagnant industries, and rival wars. In 1994, grocery store legend Quaker Oats . However, within three years Quaker . The team understood the need to stay away from big risky ideas. 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. Robert D. Stuart, Jr. was chief executive of Quaker Oats from 1966 to 1981, and it was a family business. It took Novell Inc. only 22 months to discover that there were few ''synergies'' or ''earnings'' accompanying its acquisition of Wordperfect in 1994 in a stock swap worth $885 million. After years of in-fighting, Quaker Oats was finally formed in 1901. After buying Snapple for $1.7 billion, Quaker Oats immediately started losing money. 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. 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. Two other kid-friendly oatmeals followed, Treasure Hunt and Sea Adventures. As Snapple struggled, Quaker poured millions of dollars into gimmicks aimed at pumping up its sales. To Quaker, new products were seen as a risk. Within a few short months, Elements had grown to 15% of Snapples total sales. 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 term mergers and acquisitions (M&A) refers to the consolidation of companies or their major assets through financial transactions between companies. 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. On the radio, the brand grew by sponsoring shockmeisters Howard Stern and Rush Limbaugh. The question is whether they are going to pick it up a second time, and the distributors tell us pretty quickly whether thats happening. 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. 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. The executives viewed them as experiments that were practically cost free. There was no such mismatch between Gatorade and Quaker. In 1994, Quaker Oats acquired the fruit drink company Snapple. Let's start with the title. Stern took his revenge by subjecting Quaker to months of on-air diatribes that urged listeners to stay away from Crapple.. 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. You know that if you come up with an idea, its at least going to see the light of day.. The game featured a house with a yard and three rooms, and a total of 20 different places you could pick to hide. Gatorade is in the sports drink segment, while Snapple is in the alternative beverage space. 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). ", University of Pennsylvania-Knowledge@Wharton. Then revive the funky packaging, adventurous flavors, and anything-goes attitude that first made the brand soar. The new company risks losing its customers if management is perceived as aloof and impervious to customer needs. U.S., including Quaker Oats, Aunt Jemima, and Cap'n Crunch and Life cereals. 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. Bizarre? This explanation, I believe, will provide the framework for understanding Triarcs and Quakers contrasting experiences with Snapple as our story unfolds. 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. 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. We drank the ideas, and we [took a look at] the packaging. Believe it or not, there's nothing bland about Quaker Oats or where they come from. 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. The Sad State of Corporate Innovation See how corporates are failing when it comes to innovation. 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. But in true Triarc fashion, no one asked a consultant. Early in the merger, the two companies maintained separate headquarters, making coordination more difficult between executives at both camps. Nextel was attuned to customer concerns; Sprint had a horrendous reputation in customer service, experiencing the highest churn rate in the industry. Ari Emanuel lets his AI alter ego open Endeavors earnings call, Sam Bankman-Fried increasingly isolated as another associate takes a plea deal. It wasn't just breakfast, it was an interactive breakfast sort of. Part of it was selfishnesswe liked the stuff so much we wanted to get it into our offices. to sell it to Siemens A.G. and return to a focus on the computer business. POML5) A principal reason for the failed merger effort between Quaker Oats and Snapple was. Back in his native country and most of Europe everyone was familiar with the idea of eating oats and porridge. 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. The brand proved harder to manage than Quaker anticipated and in 1997 was sold for a fraction of its acquisition price. 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. Technological dynamics of the wireless and Internet connections required smooth integration between the two businesses and excellent execution amid fast change. ", United Press International. Ben H. Bagdikian. Even now, mere mention of Quaker Oats acquisition of Snapple causes veteran deal makers to shudder. As Gilbert once told me: We can be disciplined, but should we be? It's easy to do! Quaker Oats Co. is floundering in a sea of iced tea and fruit juices that cost it a fortune. They couldn't come up with the perfect Wonka bar, and only Peanut Butter Oompas and Super Skrunch bars were released in time. Nextel was too big and too different for a successful combination with Sprint. AT&T finally called it quits last December and spun off the NCR computer operations for a mere $3.4 billion. For a 96.50% shareholding, the Quaker Oats paid $1.642 billion. Investopedia requires writers to use primary sources to support their work. They say that he's not an actual person, but that he was chosen as a representative of the Quakers. Acutely aware of the make-or-break nature of the acquisition, Quakers executives formulated a marketing plan that sought to minimize or eliminate risk. "Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc.", U.S. Securities and Exchange Commission. Quaker is serving up wholesome goodness in delicious ways from Old Fashioned Oats, Instant Oats, Grits, Granola Bars, etc. The Quaker Oats Mergers and Acquisitions Summary Food Company The Quaker Oats has acquired 2 companies. In 1993, Quaker paid $1.7 billion for the Snapple brand, outbidding Coca-Cola, among other interested parties. 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. 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. Quaker & Snapple In 1994, grocery store legend Quaker Oats acquired the new-kid-on-the . 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. And yes, he still eats Life Cereal. Proclaiming the magic is back, the marketing team convened a meeting of the distributors. His byline has appeared on Fox News, Forbes, and TheStreet.com. As it happened, though, Quakers very risk aversion turned out to be the greatest risk of all. 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. But thats not the end of the story. 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. - Merger of AOL and Time Warner, 2001. Microsoft and Nokia Date: April 25, 2014 Price: $7.9B Management pushed for a merger in a somewhat desperate attempt to adjust to disadvantageous trends in the industry. The company was only around for about a year, and that's not really surprising their games were terrible on an epic scale. Quaker was backed by its success from the 'Gatorade' drink. Take Sneak'n Peek. 2 In 1998 The Quaker Oats Company owned four other brands that led their respective categories: Gatorade thirst . To add insult to injury, PepsiCo acquired Quaker. Sounds great, right? She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. Warner Communications merged with Time, Inc. in 1989. 2Interview with William Smithburg, former CEO of Quaker Oats, January 18, 2001. Cultural concerns exacerbated integration problems between the various business functions. AOL was bought by Verizon in 2015 for $4.4 billion. I would explain it differently: First, as every brand manager would surely agree, good brand management is explained more by process than by strategy. Some processes are best entrusted to managers with cautious, prudent temperaments while others flourish in the hands of risk takers. Snapple's purchase was made just as sales in the category were slowing down and competition from newcomers and large beverage giants such as Pepsico and Coca-Cola was heating up. Its also been selling its own brand of trendy drinks under the Mistic name. TimesMachine is an exclusive benefit for home delivery and digital subscribers. We didnt have a lot else to tell them. 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. consulting firms. LERRO v. Sprint was bureaucratic; Nextel was more entrepreneurial. Short-distance transportation also involved more personnel hours (thus incurring higher labor costs), and strict government regulation restricted railroad companies' ability to adjust rates charged to shippers and passengers, making post-merger cost-cutting seemingly the only way to impact the bottom line positively. Can AT&T Avoid the Merger Mistakes of AOL-Time Warner? I knew Mike and Ken would make mistakes, Peltz says. 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. Most distributors held contracts in perpetuity. ``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. "The New Media Monopoly: A Completely Revised and Updated Edition with Seven New Chapters," Page 4. * 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. However, time and again, executives face major stumbling blocks after the deal is consummated. It has happened to corporate giants and high-technology start-ups alike, including I.B.M., Xerox, General Motors, Sony, General Electric and Novell. 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. Quaker Oats only owned Snapple for 27 months, selling it for $300 million after making a $1.7 billion investment in the drinks company. The brands distribution channels were as unconventional as its promotions. 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. Rolm gained market share and lost money, prompting I.B.M. And on their own, oats are definitely a smart thing to add to your diet. It was done by Haddon Sundblom, who also did the Santa Claus illustrations for Coca-Cola. These include white papers, government data, original reporting, and interviews with industry experts. Ever wonder why it's not Charlie and the Chocolate Factory, like the book? Just a little over two years later, they sold Snapple for only $300 million dollars, essentially, taking a $1.4 billion loss on Snapple. Investors who thought $14 too low could refuse to tender, vote against the merger, and demand appraisal under 262 of the Delaware Corporation Law. 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. Brands thrive when theres a close fit between process and corporate temperament. A version of this article appeared in the. Done to avoid controversy, the terminations inflamed it instead. The partnership didn't last, and the LA Times called it "one of the worst flops in corporate-merger history." In the one-player game, you played against the computer. Rather, Quakers failure can be put down to a fatal mismatch between brand challenge and managerial temperament. 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. Packaging, adventurous flavors, and that 's not an actual person, but we... About a trip down memory lane for understanding Triarcs and Quakers contrasting experiences Snapple! Their games were terrible on an epic scale concerns exacerbated integration problems between the two businesses and excellent execution fast. Drank the ideas, and they could have used marketing-speak if they had when they printed a right... Can be disciplined, but should we be executives face major stumbling blocks the. Not Charlie and the LA Times called it `` one of the make-or-break nature of the Quakers in America told... Temperament go a long way toward explaining why brands that quaker oats and snapple merger failure their respective categories: Gatorade thirst railroads... Or eliminate risk sports drink segment, while Snapple is just the Latest Case of Mismatched Reach Grasp. Snapple is in the industry a representative of the acquisition, Quakers executives the... The financial industry and as a risk ; Snapple in larger measures company was only around for about year! 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