Case: Snapple: A sorry Acquisition

Essay by ying730316College, UndergraduateB, January 2009

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Problem AnalysisStep one: Comprehend the case situationQuaker CEO William D. Smithburg had bought Stokely-Van Camp in 1983, mainly for its Gatorade, then a $90 million sports drink. Even though he drew criticism, Smithburg turned Gatorade into a billion dollar brand. Quaker Oats bought Snapple in 1993 for an extravagant $1.7 billion dollars even though industry leaders thought it was only worth $700 million. In fiscal 1995 sales, one of $1.7 billion was from foreign operation. Its brand was generally strong in particular grocery products and beverage areas. Purchase of Snapple, sales of its beverage operation would approach $2 billion or about one-third of total corporate sales.

Step Two: Define the ProblemSnapple's growth rate had declines by 1994. Snapple's dollar volume sales of fruit juices dropped 15%, tea sales dropped 14%. These is about half of Snapple's sales volume, while the other half, considered too small to measure, comes from delis and sandwich shops.

As a result, sales for Snapple products declined, and the delays made it impossible for Quaker Oats to regain lost market share.

Step three: Identify the CausesSnapple faced formidable competitors, including Coke's Fruitopia and Pepsi's joint venture with Lipton, which used low prices to capture 31 percent of ice tea market.

Quaker Oats felt confident that the drink brand was worth the price tag, because they had already achieved success with Gatorade. However, in terms of brand identity the two drinks couldn't have been further apart. Gatorade was about sports and a high-energy, athletic image. Snapple, on the other hand, had always been promoted as New Age and healthy alternative to standard soft drink brands. Quaker Oats didn't understand what the Snapple identity was all about. Quaker Oats did not consider Snapple's own external and customer analysis.

The main two reasons why Snapple failed was because Quaker...