SNAPPLE CASE STUDY: Central Problem:
How did Quaker which was operating as an individual company before its acquisition by PepsiCo squander its opportunity for a perfect synergy of its beverage products with that of the Snapple brand which it had acquired for $1.7 billion and sold it for a mere sum of $300 million to Triarc beverages, the decision which resulted to Chairman and the President of Quaker Oats stepping down? What convinced Triarc board to agree to the purchase of Snapple and how did the management revive the ever declining sales of Snapple?
Snapple Brand:
What started as an idea to make consumption of fruit juices more fun and exciting without adding preservatives from the back of store in Queens New York in now a multi-billion dollar brand i.e. ‘Snapple’, currently owned by the Dr Pepper Snapple Group. While it currently enjoys the status of non-carbonated beverage that is relatively healthier than its alternatives and more associated with the young demographics, Snapple brand went through a roller coaster ride from its inception in 1972 in terms of its brand value and perception and was under 3 ownerships before it was spun off as Dr Pepper Snapple Group from the Cadbury Schweppes division. Snapple was a brainchild of Arnie Goldberg and his friends Leonard Marsh who recognized the demand for no-preservative fruit juices during 1960s. In 1972 they founded their own company ‘Unadulterated Food Products’ and the ‘Snapple’ brand. They started selling Snapple in
Industry Analysis:
At the time of its inception the alternative beverage industry was saturated with soft drinks, carbonated drinks, and fruit juices with longer shelf life or with added preservatives. Fruit juices weren’t available as a single serve bottle which was the point of entry into the market for
Snapple. Also the trend with other entrepreneurial companies in the beverage industry was to grew big and be sold off to a much larger entity, and it almost certainly followed with the purchasing company failing in the operations after acquisition (ex. Purchase of SoHo by Seagrams). Though being unique Snapple faces numerous competitors in the Alternative beverage industry a rather hard-to-be defined category who were ready to follow suit. Product:
Snapple began by manufacturing ‘100%’ natural apple juice in 16 oz. glass bottles. When the business grew slowly they expanded their product line by introducing carbonated drinks, fruit-flavoured iced teas, diet juices, seltzers, an isotonic sports drink and also Vitamin Supreme. Over the years, Snapple added 50 flavours to its range. Some of these products succeeded whilst many failed, and the premium pricing of their products helped covered loses.
Price:
From exhibit 5, it is evident that Snapple was sold at a high end price of $1 per bottle ($24 per 24-bottle case) to the consumer. Snapple products are still priced in the premium pricing ranges of the beverage industry, which elicits how the brand has etched the claim as a leader in great tasting healthy beverage segment.
Promotion:
Snapple was founded with the idea of making its consumption more fun. Thus, despite the competition from upstart brands trying to encroach the health-conscious young consumers, Snapple stood out for their marketing philosophy was very simple and close to the heart of its consumers. Their vibrant and clumsy packaging and their PR adverts with iconic people like Ivan Lendl, Howard Stern and Rush Limbaugh catapulted the popularity of the brand. Snapple
invested around $1 million for its advertising. Place:
The brand’s distribution channels were as unconventional as its promotions. Unlike the major players in the cold beverage market, Snapple had very little coverage with the stores or the supermarkets (warm channel) however their sales flowed immensely through the cold channel or small distributors serving restaurants, delis, and other eat our places and single serve drink consumed within their place of business. Many distributors invested in cold store refrigerators to promote the sales of Snapple products. The distribution system grew until Snapple had a network of 300 family owned distributors. Sales grew from $80 million in 1989 to $560 million in 1993 and Snapple maintained a 30%-40% market share in this alternative beverage industry.
Proposed alternatives for Snapple (Acquisition by Quakers):
In 1994 when Arnie and his friends realized that Snapple had grown beyond their expertise as a company and as brand they agreed it was time to sell to a new owner that could take it to the next level. By then Snapple was available all across the country and sales had rocketed to $4 million to $694 million in a span of 10 years. When word got out that Snapple was up for sale many of
its competitors in the beverage industry made a bid for it and the bidding war was won by Quaker.
Quaker foods which already owned and marketed Gatorade the replenishing drink for athletes believed it could create a perfect synergy with the Snapple brand by expanding the distribution of Gatorade through its cold channels and increase the sale of Snapple through the supermarket coverage of Quaker. However Quaker foods being a much larger brand than Unadulterated Foods, it was very aggressive with its makeover efforts. Quaker went against the marketing strategies of Snapple by firing its iconic figure Wendy the distributor and also the radio stars Stern and Limbaugh. The team at Quaker also went ahead and introduced, 32 oz. and 64 oz. bottles of Snapple like they were marketing Gatorade failing to realize consumers of Snapple preferred only 16 oz. bottles. Also, the aggressive measures to control the cold channel distributors for Snapple to renounce their distribution contracts to Quaker failed thus losing distribution and market share. Sales declined from $674 million at its prime in 1994 to $440 million by the end of 1997 at the time of which Quaker foods realized the sales of Snapple was beyond salvation at its hand and agreed to sell it to Triarc companies for a mere $300 million. Sale of Snapple to Triarc and brand turnover:
The sale happened under Mike Weinstein who was managing the Triarc beverage brands. Triarc beverages had a portfolio of juice and soda brands at the time of acquisition. Despite being sold at $300 million Weinstein believed it was no cheaper price for a fashion brand in beverage industry as it was seldom easy to revive a failing value let alone substantiate loses. Thus Weinstein understood everything about Snapple had to be changed from how Quaker was handling it.
The sale of Snapple to Triarc was an initial sign of revival for the brand itself in the sense, people at Triarc beverages assumed a more unconventional approach to work with an activity and employee appreciation based work culture which screamed the principles of Snapple brand as such in contrast to the professional and upbeat culture at Quakers.
Consulting with Deutsch Inc., an advertising company, Triarc initiated a study to develop the communication strategy to revitalize the brand by investigating the customers and segmenting them and wanted to bring back the quirky offbeat attitude of the Snapple brand back.
Takeaway from the study (decision factors):
Management at Triarc learnt that the Snapple brand pivots on trust and the fact that it was healthy and fun. The diversity of the Snapple brand makes it a model for the multicultural society. Snapple was perceived as smooth yet complex, with a blend of different flavours which are stimulating as well as soothing. Snapple was a brand purchased individually and not in bulk, currently there is nothing attractive to hold its customers from reverting to conventional
beverages. Implementation:
Following the study the only fixed plan Triarc had was to limit the losses and to begin by launching the product exhibiting the new regime change and by bringing back what made Snapple a hit in the first place. Firstly, Weinstein has to ditch the rebranding efforts by Quaker starting with the 32 and 64 oz. bottles. They should rehire Wendy Kaufman for commercials and put her on the labels of Snapple bottles which they thought was much feasible than reformulating the Snapple drink as such. Then he should asses the response with sales of Snapple and if it at least flat-lines. In order to follow the approach of product line expansion, Triarc may proceed by
allowing its distributors to conduct a market study for its new range of teas (as it would also focus on health conscious consumers) with flavours instead of conducting a feasibility study of sorts. The field reports if well received can suggest Triarc to go ahead with its launch. Lastly what was left was to win back the faith in the distributors of Snapple. The marketing team at Triarc should have the same quirky attitude of Snapple were so fast in convincing its distributors that they decided to give them a shot and took more orders of Snapple.
Soon the management and marketing team realized that Snapple as a brand couldn’t be contained within boundaries and it responded better to play than planning. Among everything that
attributed to the Triarc success in reviving Snapple, it was their attitude in their workplace which blended in unison with the identity of Snapple which is where Quaker a company that made a $1 billion success out of Gatorade failed with Snapple.
