Quaker’s Snapple Acquisition: $1.4 bn Down The Drain

In 1993, Quaker paid $1.7 billion for the Snapple brand, outbidding Coca-Cola, among other interested parties. In 1997, Quaker had to sell Snapple to Triarc Beverages for $300 million, a price most observers found generous. The debacle cost both the chairman and president of Quaker their jobs and hastened the end of Quaker’s independent existence (it’s now a unit of PepsiCo).

Why did the acquisition fail so badly?

This decision was influenced by CEO William Smithburg’s successful acquisition of Gatorade in 1983. Smithburg had turned Gatorade into a smashing success. Sales had swelled from $100 million to $1 billion in ten years, and so Smithburg was convinced he could do the same with Snapple:

“We have an excellent sales and marketing team here at Gatorade. We believe we do know how to build brands, we do know how to advance businesses. And our expectation is that we will do the same as we take Snapple as well as Gatorade to the next level.” 

But this logic failed because it ignored critical business nuances:

  1. Unlike Gatorade, Snapple was a category leader in trouble. Competitors had entered its market and taken share
  2. Unlike Gatorade, all but one of the top management team at Snapple moved on after the acquisition
  3. Unlike Gatorade, Snapple’s inventory and production were out of control
  4. Unlike Gatorade, Snapple was an “image” drink. So, it required non-traditional marketing, unlike Gatorade which was promoted in a traditional fashion
  5. Unlike Gatorade’s sales coming from supermarkets, Snapple sales mostly came from smaller channels, such as convenience stores, gas stations and related independent distributors

Sources:

  1. Why Good Leaders Make Bad Decisions
  2. How Snapple Got Its Juice Back
  3. Business lessons – Quaker Oats & Snapple
  4. Quaker-Snapple: $1.4 Billion Is Down the Drain
  5. Biggest Merger and Acquisition Disasters

Supported Insight: Business decisions often go wrong due to a lack of appreciation of business-specific nuances

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