Quaker’s purchase of Snapple

1994-1997

In 1994, grocery store legend Quaker Oats purchased the new-kid-on-the-block, Snapple, for $1.7 billion. The seller was Thomas H. Lee, a pioneer in private equity is said to have pocketed $900 million. Flush from their success with Gatorade, Quaker Oats wanted to make Snapple drinks just as popular. Snapple had none of Gatorade’s success factors, and Wall Street opined that $1 billion too much for the fruity drinks. Quaker Oats dove head-first into a new marketing campaign and set out to bring Snapple to every grocery store and chain restaurant they could.

However, their efforts failed miserably. Snapple had become so successful because they marketed to small, independent stores. The founders were three small-time entrepreneurs that sold to health food stores and used TV ads in the early 90s to raise the margins. They knew what Quaker Oats didn’t: that the brand just couldn’t hold its own in a mass-marketing campaign targeting large grocery stores and other retailers nationally. Pepsi and Coca-Cola themselves began releasing Snapple-like drinks and the general public’s new-found taste for Snapple beverages was beginning to wane. After just 27 months, Quaker Oats sold Snapple for $300 million (or, for those of you doing the math, a loss of $1.6 million for each day that the company owned Snapple). CEO William Smithsburg’s reputation was forever tarnished, and numerous executives were fired.

The lessons don’t end there. Triarc Beverages that bought it from Quaker Oats, resold Snapple to Cadbury Schweppes for about $1 BN, which spun it off as Dr. Pepper Snapple in 2008. PepsiCo bought Quaker Oats in 2001 for $13.4 BN to acquire the Gatorade brand.

References:
Harvard Business Review - How Snapple Got Its Juice Back