Quaker Oats and Snapple

Topics: Gatorade, Iced tea, PepsiCo Pages: 7 (2316 words) Published: August 26, 2006
"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."

-Don Uzzi, President of the Quaker Oats Beverage Company, North America.1
The Quaker Oats Company, founded in 1891, is one of America's oldest food enterprises. From its start in the domestic ready-to-eat cereal market, Quaker grew an appetite for diversification, snapping up pet food, grocery and toy businesses, and by the 1960s had expanded into Europe. While William D. Smithburg continued to diversify into the clothing and optical wear industries after his appointment as CEO in 1979, he also launched an aggressive program to streamline production through supply chain management and renewed the company's focus on customer satisfaction. It was the purchase of Gatorade in 1983 (as part of the Stokely-Van Camp purchase), however, that catapulted Quaker to the top of an untapped beverage segment that, to this day, dominates 80% of the market. This deal was vital to Quaker's long-term success – "Had we not bought Gatorade in the 1980s," which has consistently brought double-digit growth, "Quaker would not have existed beyond that time."2 While Gatorade is rightfully considered Smithburg's greatest feat, it was a relatively smaller yet more publicized deal – the acquisition of Snapple – that will go down as Smithburg's, and Quaker's, costliest mistake.

1Prince, Greg, "Come Together," Beverage World, December 1995, p. 50-54. 2Interview with William Smithburg, former CEO of Quaker Oats, January 18, 2001. Quaker Oats and Snapple
The Rise of the Snapple Beverage Corporation
"We made the first ready-to-drink tea that didn't taste like battery acid." – Arnold Greenberg, co-founder of the Snapple Beverage Corporation.3
Snapple, formerly known as Unadulterated Food Products, Inc. when it began in 1972, was created by two window washing brothers-in-law, Leonard Marsh and Hyman Golden, and a health food store owner, Arnold Greenberg. The New York City natives began distributing fruit juices, all natural sodas and seltzers, and fruit drinks to local health stores by 1986, emphasizing a wholesome image through its slogan, "Made from the best stuff on earth." It then entered the developing iced tea market the next year with a brewed, high quality, "new age" Ready-to-Drink (RTD) tea, which would prove to be a pivotal early move.

The Thomas H. Lee Company of Boston took interest in the growing company and successfully proposed a leveraged buy-out in 1992, renaming it "Snapple" and taking it public a year later. Wanting to propel the brand to national distribution, Snapple rolled out an advertising campaign centered on a "customer relations, regular people" theme. An employee, Wendy Kaufman, became the "face" of Snapple on TV, and her friendly "Greetings from Snapple!" salute and penchant for answering fan mail on the air helped build the company's "quirky" positioning. Snapple also enlisted the support of offbeat personalities, including top-rated shock-jock Howard Stern and talk show host Rush Limbaugh, to create a quirky, individualist image that wooed a cult-like following. Another mainstay to Snapple's success was in an aggressive distribution and employee loyalty strategy, bolstered by a health and fitness craze prevalent at the time. Snapple had an extensive and dependable network of independent co-packers and distributors to prepare, bottle, warehouse, and sell its products. Not only did these distributors generate high margins carrying Snapple, they also had the option of delivering other beverages to chain stores, further boosting profitability. Snapple also prided itself on its people-focused management style – no layoffs and employee recognition have always been the rule. Approaching its distribution and employee relationships with a relaxed, respectful attitude,...
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