Initially Snapple had very little supermarket coverage. In 1994, grocery store legend Quaker Oats . Take Quaker Oats Apple and Cranberries Instant Oatmeal. When contemplating a deal, managers at both companies should list all the barriers to realizing enhanced shareholder value after the transaction is completed. ''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. 4 billion write-off and sold the company it purchased 29 months before for $300 million. Several changes in management, including hiring the executive who turned Poland Spring water into a national brand, did nothing to reverse the trend. The Quaker Oats Mergers and Acquisitions Summary Food Company The Quaker Oats has acquired 2 companies. So we know Quaker Oats makes all kinds of oatmeal, but here's a fun fact you can pull out at parties the next time someone starts sharing some trivia: they also made video games. ''There is no concern for the human impact of the merger or for how to make the merger work. If managed properly, it can be a huge success.. 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. Investors who thought $14 too low could refuse to tender, vote against the merger, and demand appraisal under 262 of the Delaware Corporation Law. Soon after the merger, multitudes of Nextel executives and mid-level managers left the company, citing cultural differences and incompatibility. But replicating Gatorades success was more than an objectiveit was a matter of corporate survival. The Quaker Oats Company, founded in 1891<br><br>William D. Smithburg appointment as CEO in 1979<br> 4. We believed Snapple had tremendous possibilities, Quaker spokesman Mark Dollins said. Finally, executives of the acquiring company should avoid paying too much for the target company. Distributors and end-customers dis-agreed with . Gene Wilder's Willy Wonka & the Chocolate Factory is one of those iconic movies of any childhood even if it did give you nightmares. Quaker & Snapple. Technological dynamics of the wireless and Internet connections required smooth integration between the two businesses and excellent execution amid fast change. She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. Sort of. In addition to overpaying, management broke a fundamental law in mergers and acquisitions: Make sure you know how to run the company and bring specific value-added skill sets and expertise to the operation. But that was enough. 2 In addition to overpaying,. U.S., including Quaker Oats, Aunt Jemima, and Cap'n Crunch and Life cereals. I would explain it differently: First, as every brand manager would surely agree, good brand management is explained more by process than by strategy. 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. 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. ''But even Pepsi messed up its restaurant lines. 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. 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. Quaker Oats and Snapple no. But who is he? These days his happy visage seems oddly inappropriate. But the swiftness with which Quakers Snapple investment eroded will make this deal a special case study of mismanagement for a generation of business students. The company hired film director Spike Lee for advertising and gave away samples at Little League games and on city street corners. Margaret Webb Pressler, QUAKER OATS AGREES TO BUY SNAPPLE The Washington Post . Investopedia requires writers to use primary sources to support their work. That has led to widening speculation that Smithburgs days as Quakers chief executive are numbered. Quicker oats and Snapple; This merger failure is an example of overpaying. 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. Snapples durability raises a number of questions. In 2018, the Environmental Working Group the same group that releases the Dirty Dozen list tested multiple breakfast foods for the presence of glyphosate. Prior to 1997, foods weren't allowed to advertise claims about specific benefits. But at Triarc, the talk was of play and fun, parties and parades. ", U.S. Securities and Exchange Commission. There are two different kinds of oatmeal: instant, and the kind that takes next to forever to cook. The effective premium to market valuation was 3.00%. The problems dragged down the total performance of Chicago-based Quaker, which had sales of $5.2 billion last year, and Quakers stock price badly trailed the overall stock market. to sell it to Siemens A.G. and return to a focus on the computer business. The Quaker Oats Company's $1.4 billion debacle with Snapple only proves that the well-trod merger road has been paved with unrealized synergies and executive hubris, experts in mergers and acquisitions say. AOL was bought by Verizon in 2015 for $4.4 billion. 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. - Merger of AOL and Time Warner, 2001. AOL had arrogant and aggressive employees while Time Warner had corporate and staid employees. How did Triarc restore most of that value in less than three years? Acutely aware of the make-or-break nature of the acquisition, Quakers executives formulated a marketing plan that sought to minimize or eliminate risk. If a merger or acquisition fails, it can be catastrophic, resulting in mass layoffs, a negative impact on a brand's reputation, a decrease in brand loyalty, lost revenue, increased costs, and sometimes the permanent closure of a business. Thats a lesson executives considering a brand acquisition might want to keep in mind. 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. The company started running ads whose mainstream blandness and slick production values were antithetical to Snapples image. Take the case of the Quaker Oats-Snapple merger. What we call a brand identity is actually a form of meaning, made at least as much by small, impromptu managerial acts as by grand designs precisely executed. 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.". It identifies the three major reasons for the failure as distribution problems, stagnant industries, and rival wars. A vertical merger is the merger of two or more companies that provide different supply chain functions for a common good or service. The Sad State of Corporate Innovation See how corporates are failing when it comes to innovation. Then the U.S. government blindsided it, Column: Uber and Lyfts deactivation policy is dehumanizing and unfair. . The consolidation of AOL Time Warner is perhaps the most prominent merger failure ever. Oddly, there is a positive aspect to this flopped deal (as in most flopped deals): The acquirer was able to offset its capital gains elsewhere with losses generated from the bad transaction. Part of it was selfishnesswe liked the stuff so much we wanted to get it into our offices. It has happened to corporate giants and high-technology start-ups alike, including I.B.M., Xerox, General Motors, Sony, General Electric and Novell. Respected executives at both companies sought to capitalize on the convergence of mass media and the Internet. The question is whether they are going to pick it up a second time, and the distributors tell us pretty quickly whether thats happening. Why the Quakers? The merger of Quaker and Snapple was considered to be a disaster owing to an incorrect marketing strategy. In such a commoditized business, the company did not deliver on this critical success factor and lost market share. Some brands just want to have fun, and from birth Snapple was one of them. All this led to a loss in performance for Quacker oatas a company resulting in a takeover by Pepsico in December 2000 in a $13. Wall Street was awash in money. Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. In effect, Triarc let its distributors do its market research. At the same time, Quaker management failed to understand the differences between promoting and distributing Snapple versus Gatorade. 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). BRAND FAILURES<br> 2. - Acquisition of Snapple by Quaker Oats, 1994. Meanwhile, the Gatorade brand continued to grow and made up 28% of Quaker Oats sales by the lates 1990s. 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. ", United Press International. From their 1994 peak, sales declined every year, plunging to $ 440 million in 1997. And finally, the politicized and turf-protecting culture of Time Warner made realizing anticipated synergies that much more difficult. On the radio, the brand grew by sponsoring shockmeisters Howard Stern and Rush Limbaugh. 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. Another element of Quakers Snapple strategy came straight out of the Gatorade playbook. In one, tennis star Ivan Lendl garbled the brand name into Shnahpple Several others featured a Snapple order-processing clerk named Wendy Kaufman. Times staff writer Nancy Rivera Brooks contributed to this report. This article presents a few examples of busted deals in recent history. I had a picture of Wendy on my wall, Weinstein recalls. He noted that Quakers loss on the purchase means Quaker lost $1.6 million for each day it owned Snapple, which makes exotic juices and iced teas. For good reason. But thats not the end of the story. 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. But theyve hit a snag, A $150,000 executive protection dog? * October 1994: General Electric Co. sells Kidder, Peabody & Co. to rival brokerage house PaineWebber Group for stock valued at $670 million. The reasoning was twofold. A version of this article appeared in the. A principal reason for the failed merger effort between Quaker Oats and Snapple was: the accounts payable. We perceive them as the opportunity. Its also been selling its own brand of trendy drinks under the Mistic name. "Can AT&T Avoid the Merger Mistakes of AOL-Time Warner? One of the most striking things about my conversations with Peltz, Weinstein, and Gilbert was the language that the Triarc team used. Quaker's late 1994 acquisition of Snapple, the "new age" beverage marketer, proved to be disastrous, costing the company well over $1 billion. 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. Other acquisitions that went sour include: *. 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. When they released their results, they said (via Business Insider) that among the foods that tested positive for the chemical were Quaker Oats. The nations thirst for such drinks became more sated and the markets growth eased just as Quaker bought the company. Despite protracted negotiations with individual distributors and distributor councils, no channel rationalization was achieved. The group dissolved after Pearl Harbor, Stuart enlisted in the Army, and served in Europe. How many times have you started your day with a piping hot bowl of Quaker oatmeal? "Form 8-K - March 27, 1997. SBC was founded by Leonard March, Hyman Golden and Arnold Greenburg in . 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. However, as its dial-up subscribers dwindled, Time Warner stuck to its Road Runner Internet service provider rather than market AOL. Cultural clashes between the two entities often mean that employees do not execute post-integration plans. 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. Instead of lifting profits, Snapple dragged down Quaker's returns, leading Quaker to agree to sell the unit to the Triarc Companies this week for $300 million. 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. Back in his native country and most of Europe everyone was familiar with the idea of eating oats and porridge. Patrick specialty dyes and chemicals businesses. Stern took his revenge by subjecting Quaker to months of on-air diatribes that urged listeners to stay away from Crapple.. Of course, none of the new product launches would have stood a chance without Snapples distributors. 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. 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. "How Snapple Got Its Juice Back. If Snapple was about play, Gatorade was about sportabout playing to win. Smithburg, who received no bonus over his $872,506 salary last year, declined to comment. 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. Absolutely, and it's no wonder their foray into gaming only lasted for such a short time. 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. Two other kid-friendly oatmeals followed, Treasure Hunt and Sea Adventures. Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc. Form 10-K for the Fiscal Year Ended December 31, 2008, Diversification of product and service offerings. Chicago-based Quaker, which . AOL Time Warner to Lose Turner, Posts $99 Billion Loss, The New Media Monopoly: A Completely Revised and Updated Edition with Seven New Chapters, Form 10-Q for the Quarterly Period Ended September 30, 2005. Download the free 31-page State of Innovation report. As it happened, though, Quakers very risk aversion turned out to be the greatest risk of all. Other breakfast foods were also found to contain the weed-killer chemical, like Cheerios and Lucky Charms. Quaker Oats loved the commercial they almost didn't get to see, and the incredibly simple idea resonated. In 2002, the company reported an astonishing loss of $99 billion, the largest annual net loss ever reported, attributable to the goodwill write-off of AOL. Quaker Oats offered $14 in cash for each share of Snapple stock; the merger agreement contemplated the same payment per share. Disney had released all of Pixar's movies before, but with their contract about to run out after the release of "Cars," the merger made perfect sense. That covers development cost. From their 1994 peak, sales declined every year, plunging to $440 million in 1997. A key component of the strategy was to use the strength of Snapples distributors in the cold channel to help Gatorade and use Gatorades strength in the warm channelthat is, supermarketsto help Snapple. 2Interview with William Smithburg, former CEO of Quaker Oats, January 18, 2001. Cultural clashes and turf wars can prevent post-integration plans from being properly executed. Kids could watch the "dinosaur eggs" in their oatmeal hatch into little candy pieces, and according to Ideas To Go, the firm who acted as a consultant, they were a massive hit and ended up doubling their project sales goals. The combined company is intended to be better than both individual companies due to an expected reduction of financial risks, diversification of products and services, and a larger market share, for example. In 1968, the New York Central and Pennsylvania railroads merged to form Penn Central, which became the sixth-largest corporation in America. Because they embody the same values Quaker Oats wanted to be associated with: "honesty, integrity, purity and strength.". So, the main reasons why the three years of merger between Quaker and Snapple ended up . Takeover talk continued to buzz around the company with suitors ranging from Nestle, PepsiCo and Danone mentioned. According to their design firm's Michael Connors (via AdWeek), "We took about five pounds off him.". 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 . Small as the individual distributors were, they aggregated into a mighty marketing force. As Snapple struggled, Quaker poured millions of dollars into gimmicks aimed at pumping up its sales. 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. ``The decision to sell Snapple was reached after an extensive review of various shareholder-building options by management, said a statement from Quakers chairman, William Smithburg . 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. Microsoft and Nokia Date: April 25, 2014 Price: $7.9B It was done by Haddon Sundblom, who also did the Santa Claus illustrations for Coca-Cola. Healthline says they've been found to be high in vital nutrients, minerals, fiber, and antioxidants, help manage cholesterol, improve blood sugar, and help with weight loss because they're so filling. They werent about to give up the supermarket accounts theyd worked for years to win. Wall Street had warned saying that the amount is excessive, to acquire a company. The convenience factor got people interested, and Schumacher went on to figure out a way to make them cook faster. When they bought Snapple in 1994, the acquisition made them the third largest beverage company on the continent (behind Coca-Cola and PepsiCo). 1Prince, Greg, "Come Together," Beverage World, December 1995, p. 50-54. The dollar value of mergers and acquisitions soared to $659 billion in 1996, nearly double the number in 1994. 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. Their answers led me to a conclusion that many marketing professionals are likely to resist: There is a vital interplay between the challenge a brand faces and the culture of the corporation that owns it. Log in Join. ``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 . The plan flopped for several reasons. 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. They also need to be attuned to the target company's branding and customer base. The idea took shape in Weinsteins office. These offerings provided transportation at shorter distances and resulted in less-predictable, higher-risk cash flow for the Northeast-based railroads. Nextel was attuned to customer concerns; Sprint had a horrendous reputation in customer service, experiencing the highest churn rate in the industry. He decided on packaging his oats in the round, colorful containers we still see today. In 1993, Quaker bought Snapple for almost USD 1.7 billion. Just think of where some of these companies could have better invested that money. Now that's a mouthful you can simply enjoy. But there was a catch. 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. On March 28, 1997 Quacker decided to take a $1. When Quaker sold Snapple to Triarc Companies, they converted the struggling Snapple brand into a successful one by applying a good marketing strategy. You've seen the Life Cereal commercials where we learn "Mikey likes it." And with 70-90% of M&A transactions failing to increase value, the biggest challenge isn't getting approved; it's integrating cultures after the deal closes. 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. Nextel was too big and too different for a successful combination with Sprint. Definition and Examples, Vertical Merger: Definition, How It Works, Purpose, and Example, Pyrrhic Victory in Business: Meaning, Examples and FAQ, Pennsylvania Railroad and New York Central Railroad Records, 1853-1965. They say that he's not an actual person, but that he was chosen as a representative of the Quakers. They gave us a chance.. Even now, mere mention of Quaker Oats acquisition of Snapple causes veteran deal makers to shudder. A merger or acquisition is when two companies come together to take advantage of synergies. Quaker Oats Morrison reviving Quaker after the Snapple debacle- cost $1.4 B write-off Focus on Gatorade. "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. Samples at Little League games and on city street corners merger is the Mistakes... 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