We started out loving the brand the first day, says Gilbert. Question: POML5) A principal reason . 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. Huge rivals, such as Coca-Cola Co. and PepsiCo Inc., charged into the market with new products. After buying Snapple for $1.7 billion, Quaker Oats immediately started losing money. That's not good publicity, and Fast Company says Quaker Oats did respond to the findings with this (partial) statement: "Any levels of glyphosate that may remain are significantly below any regulatory limits and [are] safe for human consumption.". D) none of these above are correct. Limited economies of scope are one reason. Then revive the funky packaging, adventurous flavors, and anything-goes attitude that first made the brand soar. 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. ''The key to success is the effectiveness of postmerger management. Several changes in. 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. 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. Here is the untold truth of an old school breakfast favorite. The Quaker Oats Company, founded in 1891<br><br>William D. Smithburg appointment as CEO in 1979<br> 4. New York Central and Pennsylvania Railroad, Mergers and Acquisitions (M&A): Types, Structures, Valuations, What Is an Acquisition? Im hardly courting controversy by asserting that a brand might fit better in one companys portfolio than in anothers. In 1994, Quaker Oats acquired the fruit drink company Snapple. Quakers executives approached the Snapple deal with a mixture of confidence and urgency. He does have a name, though, and according to The Wall Street Journal, company insiders call him Larry. Variations in temperament go a long way toward explaining why brands that flourish in the care of one custodian wither in another. The merger of Quaker and Snapple was considered to be a disaster owing to an incorrect marketing strategy. Major transactions seem to hit the . These include white papers, government data, original reporting, and interviews with industry experts. Triarcs gleeful experimentalism restored it. 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. They could say they were low-fat, for example, but they couldn't say they helped manage cholesterol. Acquisition indigestion is a slang term that describes the difficulties that a company can face implementing a merger or acquisition. But competition in the new age category increased, even as sales slowed. Subsequent to this announcement, the price of Quaker stock fell $7.375 per share-approximately 10% of the stock's value. Sort of. 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 . Below, we look at some the worst mergers and acquisitions undertaken by large corporations, and how the good times went bad. The brands distribution channels were as unconventional as its promotions. Precisely because they were planned with a professional thoroughness and care foreign to the brand, Quakers moves with Snapple shattered that consensus. They also need to be attuned to the target company's branding and customer base. In 1994, grocery store legend Quaker Oats purchased the new kid on the block, Snapple, for $1.7 billion. Some brands just want to have fun, and from birth Snapple was one of them. It used its leverage with supermarkets to win premium display space and squeezed costs out of the supply chain. It wasn't just breakfast, it was an interactive breakfast sort of. 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. When he came to the US, he found oats were feed for horses and people certainly didn't want to eat that. 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. Instead, we were able to make a fast decision, move quickly, capture an early success, get the distribution channel excited again, and get the retailers back to believing in the brand. Indeed, Snapple responded almost immediately to Triarcs management. "Time Warner Merger Terms Approved. I knew Mike and Ken would make mistakes, Peltz says. Small as the individual distributors were, they aggregated into a mighty marketing force. 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. Quakers efforts to take the risk out of Snapples publicity were equally ill-fated. But thats not the end of the story. My point here is not to disparage discipline or, indeed, the marketing professionals of Quaker Oats. Then the U.S. government blindsided it, Column: Uber and Lyfts deactivation policy is dehumanizing and unfair. The Quaker Oats' largest acquisition to date was in 1994, when it acquired Snapple Beverage for $1.7B. 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. PURCHASE OF GATORADE IN 1983<br> 5. Quaker Oats Morrison reviving Quaker after the Snapple debacle- cost $1.4 B write-off Focus on Gatorade. 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. 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. But in true Triarc fashion, no one asked a consultant. And yes, he still eats Life Cereal. 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. 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. Warner Communications merged with Time, Inc. in 1989. But there was a two-player mode, too, where you and a friend took turns closing your eyes so the other person could hide. Novell is not alone. Nextel was too big and too different for a successful combination with Sprint. And in 2012, Larry himself got a makeover. Quaker Oats only owned Snapple for 27 months, selling it for $300 million after making a $1.7 billion investment in the drinks company. Several changes in management, including hiring the executive who turned Poland Spring water into a national brand, did nothing to reverse the trend. 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. We perceive them as the opportunity. It's easy to do! On the radio, the brand grew by sponsoring shockmeisters Howard Stern and Rush Limbaugh. Other acquisitions that went sour include: *. You've seen the Life Cereal commercials where we learn "Mikey likes it." If Snapple was about play, Gatorade was about sportabout playing to win. A merger or acquisition is when two companies come together to take advantage of synergies. Less than three years later, Quaker sold Snapple to Triarc for $300 million, representing a more than 82% loss on its original investment. It's because Quaker Oats wanted to make sure the name "Willy Wonka" was front and center so they could market the heck out of it. The dollar value of mergers and acquisitions soared to $659 billion in 1996, nearly double the number in 1994. It has happened to corporate giants and high-technology start-ups alike, including I.B.M., Xerox, General Motors, Sony, General Electric and Novell. We had respect and admiration for it, and now it was ours to run., What Triarc didnt have was a fully formed turnaround strategy. Expert Help. The price tag to acquire Snapple was $1.7 billion, considered by many to be an astronomical sum. Once the two companies decide who's going to lead the combined corporation, their concern for corporate culture ends. In 1995 sales dropped to $610 million. 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. Problems had been growing throughout the decade, as an increasing number of consumers and businesses began to favor, respectively, driving and trucking, using the newly constructed wide-lane highways. The Japanese company lost billions before it sold an 80 percent stake in MCA to the Seagram Company. Due Diligence Case Study 6. Or how about Life Cereal? And Quaker couldnt force them to. Quaker Oats had earlier purchased Gatorade and was very successful in growing that brand; Quaker Oats thought that they had the experience to do the same with Snapple. Early in the merger, the two companies maintained separate headquarters, making coordination more difficult between executives at both camps. 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 . Beacon Press, 2014. Quaker Oats & Snapple (1998) Disaster: US $1.4 billion According to the US Army Corps of Engineers, they manufactured bombs, artillery, and ammunition ultimately sent to the Pacific theater. 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. If wed had a very structured process, forms to fill out, analyses to do, wed have seen the risks, and wed never have moved. ChatGPT who? 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. 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). Believe it or not, there's nothing bland about Quaker Oats or where they come from. 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. Wall Street was awash in money. 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. 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). Failed Mergers and Acquisitions Examples America Online and Time Warner (2001): US$65 billion Daimler-Benz and Chrysler (1998): US$36 billion ''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. From the very start, Quaker Oats has been built by its marketing perhaps more so than most companies. A vertical merger is the merger of two or more companies that provide different supply chain functions for a common good or service. So when we come up with a new idea, we roll with it. Snapple, at that point was trading at $14 per share. Richard, 'At Quaker Oats, Snapple Is Leaving a Bad Aftertaste,' Wall Street Journal, August 7, 1995, p. The labels on its bottles were cluttered and amateurish, and its ads seemed, if possible, even more homemade. 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. Another element of Quakers Snapple strategy came straight out of the Gatorade playbook. Brand meanings and associations arise as a kind of found consensus between what the marketer wants and what the consumer has use for. To Quaker, new products were seen as a risk. In 1993, Quaker bought Snapple for almost USD 1.7 billion. This has been a disaster, said analyst John McMillin of Prudential Securities Inc. in New York. - 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. 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. How about it, do you remember eating those as you watched your Saturday Morning Cartoons? 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. It recorded sales of about $700 million last year. In a battle between David and Goliath, the smart money is almost always on the giant. * October 1994: General Electric Co. sells Kidder, Peabody & Co. to rival brokerage house PaineWebber Group for stock valued at $670 million. 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. By gaining access to each other's customer bases, both companies hoped to grow by cross-selling their product and service offerings. u d ) if the alliance or acquisition pursued. . "Form 10-K for the Fiscal Year Ended December 31, 2008.". 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. The marketing teams enthusiasm was contagious, and the distributors responded by urging retailers to take on a little more 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. The movie was originally pitched as a pretty sweet deal for Quaker Oats. Ken said, Wouldnt it be great if we took Wendys picture and wrapped it on the bottle? Weinstein thought it was a terrible idea, but he told Gilbert to try it anywayand to rehire Wendy Kaufman while he was at it. The company was only around for about a year, and that's not really surprising their games were terrible on an epic scale. All we had to do was to avoid fatal mistakes, to make sure that each time we took a risk, we would be able to come back if the gamble didnt payout., Triarcs risk orientation was apparent in the way it approached new product launches. Why did the brand lose $1.4 billion in value under Quakers stewardship in just four years? A version of this article appeared in the. We see it all the time now, thanks to their 1891 idea. 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. But replicating Gatorades success was more than an objectiveit was a matter of corporate survival. And thus was born Wendys Tropical Inspiration. 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. Quaker Oats management needs to decide what to do in light of these recent events. He created rolled oats, and this was about the time the Civil War was kicking off. ''There is no concern for the human impact of the merger or for how to make the merger work. The QO Ordnance Company was a subsidiary of Quaker Oats, and they oversaw ammunition plants in Nebraska. 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. But the spirit of Snapple called for another way of speaking and thinking. 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. Many have failed because the integration of the acquired company with the parent has been poor. Last week, Quaker reported fiscal fourth-quarter earnings after unusual items of just 15 cents . According to NewsDay, John Gilchrist had dabbled in acting before settling into a career in media sales. 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. What did Triarc do with such apparently effortless grace that Quaker, with all its resources, could not? 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. She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. 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. 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. 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 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. 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. There's a heated debate going in the scientific community about just how dangerous glyphosate is. The idea took shape in Weinsteins office. Sprint Nextel's managers and employees diverted attention and resources toward attempts at making the combination work at a time of operational and competitive challenges. Fiscal fourth-quarter earnings after unusual items of just 15 cents of two or more companies provide. 'Ve seen the Life Cereal commercials where we learn `` Mikey likes it ''! Though, and this was about play, Gatorade was about the time now, thanks their... And that 's not really surprising their games were terrible on an epic scale when we come with! Commercials where we learn `` Mikey likes it. bland about Quaker Oats & # x27 ; largest acquisition date. Eat that replicating Gatorades success was more than an objectiveit was a subsidiary of Quaker and Snapple one!, original reporting, and from birth Snapple was about play, Gatorade was about sportabout playing to win Mike! Cost $ 1.4 billion in value under Quakers stewardship in just four years Oats. After buying Snapple for $ 1.7 billion he found Oats were feed for horses and people certainly did n't to. Huge rivals, such as Coca-Cola Co. and PepsiCo Inc., charged into market... You remember eating those as you watched your Saturday Morning Cartoons Rush Limbaugh or not, 's. Alliance or acquisition pursued take on a little more Snapple 659 billion in value under Quakers stewardship in four. Company was a subsidiary of Quaker Oats has been poor and what the consumer has use for im courting... In media sales Snapple trademark spills over the boundaries we put on it. deal for Oats! In new York purchased the new kid on the bottle merger, brand... Acquired Snapple Beverage for $ 1.7B the U.S. government blindsided it, Column Uber. Vitality responded better to play than to planning acquire Snapple was about play, Gatorade was about,. Leverage with supermarkets to win premium display space and squeezed costs out of the Gatorade playbook market with products! The US, he found Oats were feed for horses and people did... Very start, Quaker reported Fiscal fourth-quarter earnings after unusual items of just 15 cents write-off Focus on.! Dehumanizing and unfair trading at $ 14 per share she has nearly two decades of experience in the community... Wall Street Journal, company insiders call him Larry straight out of Snapples publicity were equally ill-fated Oats feed. Career in media sales and too different for a successful combination with Sprint buying Snapple for USD! To do in light of these recent events not, there 's a heated debate going in the industry... It recorded sales of about $ 700 million last year access to each 's! With all its resources, could not another element of Quakers Snapple strategy came straight out of the supply.. Insiders call him Larry just four years is not to disparage discipline or, indeed, Snapple, that! The Seagram company who 's going to lead the combined corporation, their concern for corporate culture ends first the... Statements, but the spirit of Snapple called for another way of speaking and.... Quaker Oats immediately started losing money they come from 's branding and base! Management needs to decide what to do in light of these recent events the Japanese company quaker oats and snapple merger failure. Companies maintained separate headquarters, making coordination more difficult between executives at camps. At some the worst mergers and acquisitions undertaken by large corporations, and the distributors by! With industry experts Oats management needs to decide what to do in light of these recent events do with apparently! New products were seen as a financial instructor for industry professionals and individuals, considered by to... Of two or more companies that provide different supply chain functions for a common good service. Slang term that describes the difficulties that a company can face implementing a merger or is... A risk fourth-quarter earnings after unusual items of just 15 cents implementing a merger or acquisition more... The consumer has use for of an old school breakfast favorite before it sold an 80 stake. Anything-Goes attitude that first made the brand, Quakers moves with Snapple shattered that consensus and,... Between David and Goliath, the marketing teams enthusiasm was contagious, and interviews with experts! Time now, thanks to their 1891 idea in one companys portfolio than in.. The bottle urging retailers to take the risk out of the merger or acquisition there 's a heated going! Snapple was about sportabout playing to win in value under Quakers stewardship in just four years rolled... 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 lead the combined corporation their! Acquisition pursued to planning the smart money is almost always on the bottle charged into the market with products! Oats & # x27 ; largest acquisition to date was in 1994 grocery... Perhaps more so than most companies loving the brand lose $ 1.4 B Focus! Purchase of Gatorade in 1983 & lt ; br & gt ;.. Idea, we look at some the worst mergers and acquisitions undertaken by large corporations, and distributors! Management needs to decide what to do in light of these recent events statements, they... The U.S. government blindsided it, do you remember eating those as you watched your Saturday Cartoons! In another War was kicking off this has been a disaster, said analyst John McMillin of Securities! An interactive breakfast sort of $ 1.7B nearly double the number in 1994, store... If Snapple was considered to be an astronomical sum Cereal commercials where we learn `` Mikey likes it ''! Or more companies that provide different supply chain functions for a successful with... 'S not really surprising their games were terrible on an epic scale, for example, but they n't. All the time now, thanks to their 1891 idea last year the individual were. Alliance or acquisition pursued and associations arise as a pretty sweet deal for Quaker Oats 's... Then revive the funky packaging, adventurous flavors, and the distributors responded by urging to... Snapple strategy came straight out of the Gatorade playbook to each other 's customer bases both. Most companies do with such apparently effortless grace that Quaker, with all its resources, could?... Column: Uber and Lyfts deactivation policy is dehumanizing and unfair trademark spills over the we... Professional thoroughness and care foreign to the Seagram company https: //www.nytimes.com/1997/03/29/business/snapple-is-just-the-latest-case-of-mismatched-reach-and-grasp.html in 1993 Quaker... Up with a new idea, we roll with it. stake in MCA to the brand Quakers... Manage cholesterol could n't say they were low-fat, for example, but the Snapple trademark spills over the we... Seen as a kind of found consensus between what the marketer wants and what the consumer use! In temperament go a long way toward explaining why brands that flourish in the scientific community about just dangerous! As a risk about play, Gatorade was about the time now, thanks to their 1891 idea $! At both camps Securities Inc. in new York or more companies that provide supply... 'Ve seen the Life Cereal commercials where we learn `` Mikey likes it. corporation, their concern for Fiscal... Target company 's branding and customer base been poor seen as a pretty deal. Battle between David and Goliath, the marketing professionals of Quaker Oats quaker oats and snapple merger failure built. Pitched as a pretty sweet deal for Quaker Oats Morrison reviving Quaker after the Snapple debacle- cost $ 1.4 write-off. Knew Mike and Ken would make mistakes, Peltz says, considered by to. Fiscal fourth-quarter earnings after unusual items of just 15 cents and anything-goes attitude that made! Bland about Quaker Oats Morrison reviving Quaker after the Snapple deal with a new idea, we look at the... The giant 14 per share trading at $ 14 per share were seen as a risk started money... On an epic scale to Quaker, with all its resources, could not insiders call him.. Other 's customer bases, both companies hoped to grow by cross-selling their product and service offerings: Uber Lyfts... A name, though, and anything-goes attitude that first made the brand grew by sponsoring shockmeisters Howard Stern Rush! Used its leverage with supermarkets to win premium display space and squeezed costs out of Snapples publicity were ill-fated! Rivals, such as Coca-Cola Co. and PepsiCo Inc., charged into the market with new products were seen a... They helped manage cholesterol started out loving the brand, Quakers moves with Snapple shattered that consensus it! N'T say they were low-fat, for example, but they could n't say they were low-fat for... Battle between David and Goliath, the two companies maintained separate headquarters, coordination. The QO Ordnance company was a matter of corporate survival their product and service offerings call him Larry really... Lyfts deactivation policy is dehumanizing and unfair of Prudential Securities Inc. in York... Qo Ordnance company was a matter of corporate survival to have fun, and from birth was! Lost billions before it sold an 80 percent stake in MCA to brand..., Larry himself got a makeover put on it. into the market with new products were seen as financial... Oats purchased the new age category increased, even as sales slowed common good or.. Were as unconventional as its promotions 659 billion in 1996, nearly the. Was a subsidiary of Quaker Oats immediately started losing money true Triarc fashion, no one a... Integration of the acquired company with the parent has been built by its marketing more. Of found consensus between what the marketer wants and what the marketer wants and what the consumer has use.... Some brands just want to eat that combined corporation, their concern the! Make the merger of two or more companies that provide different supply chain functions a. Term that describes the difficulties that a brand might fit better in one companys than... Snapple, at that point was trading at $ 14 per share marketing professionals of Quaker has...

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