Click here to subscribe today or Login.
By CLIFF EDWARDS; AP Business Writer
Tuesday, April 29, 1997 Page:
CHICAGO — William Smithburg dreams of flying an airplane after he gives up
the reins at Quaker Oats Co.
But during a full day of interviews on his announcement last week that he’s
retiring as chairman and chief executive, Smithburg was forced to instead
concentrate on the same question that has dogged him for two years:
What went wrong in Quaker’s infamous $1.7 billion purchase of Snapple
Beverages?
“You can find a lot of things in hindsight and there’s been a lot of
criticism levied,” he said.
Analysts have called the Snapple acquisition one of the worst corporate
debacles ever. From the time of the acquisition in late 1994 until earlier
this month, when Quaker sold the iced tea and juice drink maker to Triarc Cos.
of New York for a mere $300 million, Quaker lost the equivalent of $11.6
million a week, $1.7 million a day, or $1,200 a minute.
Until the sale, Snapple was produced and bottled at the Quaker Oats plant
in the Crestwood Industrial Park in Wright Township. The plant primarily
bottles Gatorade.
“One reason they failed with Snapple — the key reason — is they tried to
sell Snapple the way they sell Gatorade, and it just didn’t work,” said Hellen
Berry, vice president of marketing and research for New York-based Beverage
Marketing Corp.
Gatorade bottles had flown off supermarket shelves on the strength of the
brand’s distribution network and million-dollar advertising campaigns
featuring basketball star Michael Jordan.
Smithburg and his management team tried to duplicate that formula with
Snapple. They virtually abandoned Snapple’s independent distribution network,
which concentrated on single-serve sales at “street locations” — delis,
convenience stores and other small venues.
Upon buying Snapple, Quaker also abandoned a popular marketing campaign
featuring Wendy Kaufman, the “Snapple Lady” and dumped radio shock jock Howard
Stern as a pitchman. Ads that followed were confusing and short-lived.
And the company failed to expand Snapple’s reach from the coasts to middle
America. An unusually mild summer last year cut into demand for Snapple in the
key Northeast region.
As the man who transformed Gatorade from a tiny brand, Smithburg had been
well-regarded in the beverage industry.
Triarc chief executive Nelson Peltz — who will be adding Snapple to a
lineup including Mistic teas and drinks, RC Cola and Diet Rite — kept phoning
Smithburg for more than a year before finally getting Smithburg to give in —
at a fire-sale price.
By then, Snapple’s business was evaporating. Snapple’s fruit drinks still
remained an industry leader throughout Quaker’s tenure, but iced tea sales
fell sharply.
As a result, Quaker’s sales in the New Age drinks segment rose only 2.6
percent in 1996, according to Beverage Digest. Competitors’ sales, meanwhile,
showed double-digit gains.
Smithburg, 58, seems relieved now to be rid of Snapple. He hopes to buy an
airplane soon and learn to soar above the clouds.