Weekend in Heaven

1. In the period of 1972 to 1993, why do you think that Snapple flourished when so many small startup premium fruit drinks stayed small or disappeared? Explore each of the Four Ps.

*Major successful market was serving RTD teas (ready to drink teas)*

1972-1986: - 3 founders: Leonard Marsh and Hyman Golden and Arnold Greenberg - Snapple’s mantra: 100% Natural ( showed their passion for healthy no preservative juices - It outsourced production and product development and built a network of distributors across NYC. - Added carbonated drinks, fruit-flavored iced teas, diet juices, seltzers, an isotonic sports drink and a Vitamin Supreme. (the ones that succeeded would be charged for a higher price in order to cover losses from the products that weren’t selling( strategic way of selling) - Expanded into NJ and Philadelphia( 1984: made an annual turnover of $4 million. 1986: over two years increased annual turnover to $8 million. - **Bad strategy: used Ivan Lendl, a tennis star, to promote their product on ads but pronounced Snapple the wrong way and caused people to laugh at the commercials rather than use it as a token of advantage to Snapple.

1987-1993: - SoHo took their sales to $25 million and sold it for $15 million to liquor giant Seagram. o One company that left the market - Snapple decided to hire a professional manager—Carl Gilman. o Ran their sales and marketing o Strategy: ▪ used focus groups to tell him how to improve Snapple’s label design ▪ increased advertising budget to $1 million ▪ wanted to sell primarily in the east coast (theory: the west will come once we establish a stronger east coast) - Distribution Channels: o Had 300 small family owned convenience stores o Ted Landers—owner of Boston Beer Distribution Company— wanted to increase Snapple’s volume from 250,000 cases a year to a million. But didn’t want to sell to supermarkets (20% of Snapple’s sales was through supermarkets) - Promotion o Wendy Kaufman ▪ Advertised for Snapple on TV shows such as Opera and David Letterman o Radio Programs ▪ Howard Stern ▪ Rush Limbaugh o Held Snapple fashion shows and fun n games - SoHo- failed to benefit from the market expansion so they sold their company off for 1 million in 1992 - 1992(Snapple founders sold company to Thomas H Lee Company (Boston private investment bank) for $674 million which then sold company to Quaker Oats for $1.7 billion

*”Snapple was just one of many small beverage brands aspiring to appeal to young, health-conscious urban professionals in the 1980’s.” (pg. 2)
1972- Snapple sold to health food stores and was successful from launching innovative products - Sold fruit juices and teas to the beverage market - All natural apple juice to health food stores
Snapple was an impetuous newcomer which won over New Yorkers and soon the rest of the US. - Homemade freshness and attractive amateurism was a part of the Snapple brand. Some brands just want to have fun and from birth Snapple was one of them.

Product: Place: Promotion: Placement:

2. Now look at the period from 1994 to 1997. Did Quaker make an error in buying Snapple or did they manage it badly?

1994-1997: - Quaker buys Snapple for $1.7 billion - Quaker is a food company with 4 major areas of business o Grain-based foods, bean based foods, pet foods and beverages ▪ Beverage market—Gatorade—was growing rapidly ▪ Contributed $1.1 billion (took 12 years to get to this) of the company’s $5.95 billion turnover that year (18.5%) - Quakers Strategy (for Gatorade): o First, expand their line by creating a 16 and 64 oz bottles o Second, increase promotional support by being visible in the sports leagues ▪ Michael Jordan being their spokesman ▪ Promote in the NFL o Third, improve Gatorades distribution by increasing market into 26 international countries and lowering cost service - Quaker expected to benefit Snapple by their packaging experience, supply chain expertise and modern information systems capabilities o Plan was to eliminate the substantial cost of the middlemen in Snapple’s warm channel by shipping to factory directly. - Difference between Gatorade and Snapple o Gatorade ▪ Lifestyle brand ▪ Beverage for sports players o Snapple ▪ Fashion brand ▪ Annual sales of 674 million ▪ Chance to go mainstream, from fashion to lifestyle was doable - Questionable idea to get rid of Howard Stern o One hand, he helped the company out but on the other hand he made them seem bad after firing him - **Sales decreased in their 3 years from 1994-674 million to 1997-440 million (lost 36.5% of sales) o ** FIND OUT WHY THEY LOST MONEY**

** Many distributors in the summer and fall of 1994 had large product overflow because of decreased demand due to a cooler-than-usual summer and Snapple’s inability to quickly react to changing market conditions. By this time, Snapple lost over 50% of its value from a share price high of around $60 in 1993. In light of this, the company identified the need for change and looked for growth opportunities in vending, overseas markets, institutional/food service sales, and large retailer channels.**

▪ Possibly due to the fact that they got rid of selling to supermarkets or the fact that Gatorade required more attention so they concentrated more on Gatorade o Led to Triarc coming in and buying them

Quaker bought Snapple for $1.7 billion and had a vision to combine their hit, Gatorade, with Snapple. Quaker’s sales were dropping for 3 years and eventually Quaker sold Snapple to Triarc for $300 million.

Gatorade was a spectacular investment and trying to manage both Gatorade and Snapple was a bad idea. The reason why it was bad is because Snapple was a huge market hit as well as Gatorade and having both was hard to manage.

Quaker managed badly by: - ??? - *The bad publicity of losing the face of Snapple (Wendy Kaufman) led to public disapproval of consumers and it led to their downfall (similar to Black & Decker when they had a bad reputation)*

**There were problems with raw material inventories arose. Quaker had to dump more than 1 million cases of outdated Snapple cans as well as discontinued flavors, ingredients, and materials. Due to the distraction of the distribution problems during the crucial planning months, Quaker was also unable to put together a marketing plan incorporating procedures, promotions and advertising. Distributors complained about not having any guidance: “[as of January, 1995] we’re still working without a first quarter plan. While we’re sitting here, Lipton, Ocean Spray, Nestea are just licking their chops.”10 It took Quaker until May 1996, almost a year and a half, to finally work out many of the distribution problems and introduce a new marketing campaign. By this time, however, competition in RTD teas and fruit drinks had been intensifying so strongly since 1994 that it was virtually impossible for Quaker to win back lost market share with its belated attempts.**

*** However, in terms of brand identity the two drinks couldn’t have been further apart. Seems Quaker Oats simply didn’t understand what the Snapple identity was all about which caused brand confusion resulting the diminishing of the customer loyalty. Wendy Kaufman, an employee of Snapple Company, used to be 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. ***

3. Roll forward to 1998. What can Triarc’s managers learn from Quaker’s experience? Is the Snapple target market “anyone with lips?” Is it ok that Snapple “ends up meaning lots of different things to lots of different people?” What are the risks and rewards of leaving “what the brand stands for” open to consumers’ interpretations rather than a strong positioning on it? And what does it mean to say that Snapple is a fashion brand? a. Do not acquire a strong brand that is expanding rapidly if you have another big product that is doing sufficiently well.

4. Identify the three highest priority initiatives you would start tomorrow if you were in Mike Weinstein’s shoes. Justify them.

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Solution:

Our employees must have the vision articulated to them with as much candor and enthusiasm as the moment can bear on an individual level. • Accept that different brands have distinct images/culture and need different distribution. Do not try to reinvent the wheel. In Chapter 7 of book (page 353), it is well stated “Organizational cultures differ for several reasons. First has worked repeatedly for one organization may not for another, so basic assumptions may differ. Second, an organization’s culture is shaped by many factors, including, for example, the societal culture in which it resides; … and the personality of its founder(s) or dominant early leaders…” As CEO, I would rehire Wendy Kaufman and get Howard Stem back to reestablish Snapple’s quirky culture instead of modeling a new image for Snapple by a new set of costly advertising campaign which may cause further brand confusion