However, time and again, executives face major stumbling blocks after the deal is consummated. Schumacher got creative, and started selling glass jars packed with cubed oats. Quaker Foods North America Quaker Tower555 West Monroe, Suite 16-01Chicago, Illinois 60604-9001U.S.A.Telephone: (312) 821-1000Web site: https://www.quakeroats.com Source for information on Quaker Foods North America: International Directory of Company Histories dictionary. While their efforts should be recognized, it does not do justice to the acquiring group's investors if the deal ultimately does not make sense and/or management pays an excessive acquisition price beyond the expected benefits of the transaction. AOL had arrogant and aggressive employees while Time Warner had corporate and staid employees. Within a span of 20 months, Quaker Oats had to sell off Snapple at a loss of about 20%. "Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc.", U.S. Securities and Exchange Commission. They could say they were low-fat, for example, but they couldn't say they helped manage cholesterol. Aware that Snapple had grown beyond their limited expertise, Greenberg and his partners cast about for a new owner that could take the brand to the next level. Just a little over two years later, they sold Snapple for only $300 million dollars, essentially, taking a $1.4 billion loss on Snapple. TimesMachine is an exclusive benefit for home delivery and digital subscribers. At the time, AOL was the leader in dial-up Internet access; thus, the company pursued Time Warner for its cable division as high-speed broadband connection became the wave of the future. And finally, the politicized and turf-protecting culture of Time Warner made realizing anticipated synergies that much more difficult. The familiar logo just the Quaker Man's head didn't show up until 1956, and for a short time, he was black-and-white. I knew Mike and Ken would make mistakes, Peltz says. Its number one priority: repair relations with disgruntled distributors. This case looks at the purchase of Snapple in 1994 by Quaker Oats. By the time Triarc came on the scene, they had virtually given up on the brand and were putting their energies into other companies products. According to their design firm's Michael Connors (via AdWeek), "We took about five pounds off him.". Many soft-drink brands flourished in the 1980s serving New York's Yuppies, but only Snapple made the big time. However, as its dial-up subscribers dwindled, Time Warner stuck to its Road Runner Internet service provider rather than market AOL. Finally, executives of the acquiring company should avoid paying too much for the target company. Cultural clashes between the two entities often mean that employees do not execute post-integration plans. Snapples durability raises a number of questions. Twenty-nine months later, Quaker announced an agreement to sell Snapple for $300 million and take a $1.4 billion write-off on the sale. If a merger or acquisition fails, it can be catastrophic, resulting in mass layoffs, a negative impact on a brand's reputation, a decrease in brand loyalty, lost revenue, increased costs, and sometimes the permanent closure of a business. It then compounded the misstep by dropping Wendy the Snapple Lady from the ads and even eliminating her job. The Willy Wonka line of candy was launched alongside the movie, but there were difficulties. According to Tim Clark who inspired his father to write the "Three Brothers" commercial the idea of a "slice-of-life commercial was nothing short of career suicide at the time (via Forbes). Quaker Oats decision to sell its Snapple Beverages unit for an enormous $1.4-billion loss is one of many acquisitions that went bad for buyers. - Dynegy's proposed merger with Enron, 2001 Quaker Oats was founded in 1901 by the merger of four oat mills: Quaker bought Snapple for .7 billion in 1994 and sold it to Triarc in 1997 for 0 million. In a battle between David and Goliath, the smart money is almost always on the giant. U.S., including Quaker Oats, Aunt Jemima, and Cap'n Crunch and Life cereals. 1-0041 ", The Channel Company-CRN. Libraries-Penn State University. Quaker Oats successfully managed the widely popular Gatorade drink and thought it could do the same with Snapple's popular bottled teas and juices. Major transactions seem to hit the . But Snapple isnt about accomplishing an objective; its about adding a little whimsy to the humdrum and the everyday. There are two different kinds of oatmeal: instant, and the kind that takes next to forever to cook. But a marketing professional would probably explain the improved fit in terms of distribution economies or manufacturing synergies. It's comfort food to the max, and that might have to do with the smiling, friendly-looking man on the logo. Disney had released all of Pixar's movies before, but with their contract about to run out after the release of "Cars," the merger made perfect sense. Now, how about a trip down memory lane? And in 2012, Larry himself got a makeover. With their consolidated channels and business units, the combined company also did not execute on converged content of mass media and the Internet. '', See the article in its original context from. A week prior to the results going public, a California judge ruled in favor of a man who claimed repeated exposure to Roundup caused his terminal cancer. These days his happy visage seems oddly inappropriate. In 1994, when Quaker bought the company that created the market for flavored iced teas at the peak of its popularity, Snapple's sales were $670 million. The confidence was easily understood: Quaker had an impressive record in beverage marketing, having developed Gatorade into a powerhouse national brand by skillfully executing a plan drawn straight from the marketing textbooks. Other acquisitions that went sour include: * December 1996: AT&T; Corp. spins off its NCR unit, valued at $3.4 billion, considerably less than the $7.48 billion AT&T; paid for the computer company in 1991. What did Triarc do with such apparently effortless grace that Quaker, with all its resources, could not? The partnership didn't last, and the LA Times called it "one of the worst flops in corporate-merger history." consulting firms. Some processes are best entrusted to managers with cautious, prudent temperaments while others flourish in the hands of risk takers. And Quaker couldnt force them to. When contemplating a deal, managers at both companies should list all the barriers to realizing enhanced shareholder value after the transaction is completed. If Snapple was about play, Gatorade was about sportabout playing to win. Sprint Nextel's managers and employees diverted attention and resources toward attempts at making the combination work at a time of operational and competitive challenges. CHICAGO (AP) _ Quaker Oats Co., which paid $1.7 billion to buy the Snapple beverage business in 1994 and has been disappointed with its performance since, today reached agreement to sell the New Age drink line for $300 million to Triarc Cos. Inc. Quaker said the sale would reduce pre-tax profits by $1.4 billion, resulting in a loss. According to the US Army Corps of Engineers, they manufactured bombs, artillery, and ammunition ultimately sent to the Pacific theater. By the time the divestiture took place, Snapple had revenues of approximately $500 million, down from $700 million at the time that the acquisition took place. Takeover talk continued to buzz around the company with suitors ranging from Nestle, PepsiCo and Danone mentioned. Statement of the Department of Justice Antitrust Division on the Closing of the Investigation of Sprint Corporation's Acquisition of Nextel Communications Inc. Form 10-K for the Fiscal Year Ended December 31, 2008, Diversification of product and service offerings. The companies never meshed, and the acquired products were overwhelmed by those of Microsoft, so Novell sold the software company last year for $115 million. Investors who thought $14 too low could refuse to tender, vote against the merger, and demand appraisal under 262 of the Delaware Corporation Law. Its market capitalization was $1.7024 billion. Why did the brand lose $1.4 billion in value under Quakers stewardship in just four years? Had the Snapple acquisition been a mistake? A 1995 lawsuit found that while the radioactivity hadn't been enough to cause lasting damage, the boys involved were entitled to a settlement and apology. Ken said, Wouldnt it be great if we took Wendys picture and wrapped it on the bottle? Weinstein thought it was a terrible idea, but he told Gilbert to try it anywayand to rehire Wendy Kaufman while he was at it. Most distributors held contracts in perpetuity. We believed Snapple had tremendous possibilities, Quaker spokesman Mark Dollins said. In just 27 months, Quaker Oats sold Snapple to a holding company for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple. The combined company is intended to be better than both individual companies due to an expected reduction of financial risks, diversification of products and services, and a larger market share, for example. At the time of the initial acquisi- Additionally, AOL executives realized that their know-how in the Internet sector did not translate to capabilities in running a media conglomerate with 90,000 employees. Chicago-based Quaker has said that Snapple failed to catch on in middle America and last year pulled the drink line out of several markets. e) the liabilities of a company. In their Complaint, Plaintiffs contended that when negotiations between Quaker and Snapple escalated in and around August 1994, Quaker and Smithburg must have known that its previously stated debt-to-capitalization ratio (also known as "leverage ratio") guideline, the upper-60 percent range, was no longer a realistic possibility. In 1994, Quaker Oats acquired the fruit drink company Snapple. Cultural clashes and turf wars can prevent post-integration plans from being properly executed. Rather, Quakers failure can be put down to a fatal mismatch between brand challenge and managerial temperament. My point here is not to disparage discipline or, indeed, the marketing professionals of Quaker Oats. Anyone can read what you share. Quaker Oats and Snapple no. In 1993, Quaker paid $1.7 billion for the Snapple brand, outbidding Coca-Cola, among other interested parties. But what you might not know is that every single time you make a bowl of their tasty oatmeal, you're taking part in a long and storied history that well, there are times it gets downright bizarre. The company was only around for about a year, and that's not really surprising their games were terrible on an epic scale. Evaluation and control are pervasive in organizations today, and their importance will increase in the future because of the growing significance of all except: technology for information processing. The question is whether they are going to pick it up a second time, and the distributors tell us pretty quickly whether thats happening. Below, we look at some the worst mergers and acquisitions undertaken by large corporations, and how the good times went bad. Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience. As each of Quaker's initiatives failed or backfired, Snapple sales lost steam. Its the most fun part of the business. The team understood the need to stay away from big risky ideas. Let's start with the title. He retired in April 2020. The Quaker Oats Company, founded in 1891<br><br>William D. Smithburg appointment as CEO in 1979<br> 4. Definition, Meaning, Types, and Examples, What Is Horizontal Integration? But consumers simply didnt want them. As a subscriber, you have 10 gift articles to give each month. Stern took his revenge by subjecting Quaker to months of on-air diatribes that urged listeners to stay away from Crapple.. The QO Ordnance Company was a subsidiary of Quaker Oats, and they oversaw ammunition plants in Nebraska. Quaker Oats Morrison reviving Quaker after the Snapple debacle- cost $1.4 B write-off Focus on Gatorade. That's stuff found in weed-killer, and specifically, in Roundup. . Rich L.A. homeowners are snapping them up, Elizabeth Holmes cites her new baby as a reason she should avoid prison for Theranos scam. Sources: Bloomberg News; Times and wire reports. Second, consistent process execution is a matter of temperament. ", Harvard Business Review. But a merger of two companies with related businesses, which has become so fashionable in the 1990's, is no guarantee of success, said Ken Smith, a post-merger consultant with Mercer Management Consulting. They had been told to come up with something completely different for the cereal, and they were given a stack of pitched ads representing everything Quaker Oats didn't want. Management pushed for a merger in a somewhat desperate attempt to adjust to disadvantageous trends in the industry. Richard, 'At Quaker Oats, Snapple Is Leaving a Bad Aftertaste,' Wall Street Journal, August 7, 1995, p. He got a complete overhaul in the 1970s, to a blue-and-white logo that, frankly, is very 70s. In August 2005, Sprint acquired a majority stake in Nextel Communications in a $37.8 billion stock purchase. The convenience factor got people interested, and Schumacher went on to figure out a way to make them cook faster. Sprint saw stiff competitive pressures from AT&T (which acquired Cingular), Verizon (VZ), and Apple's (AAPL) wildly popular iPhone. And yes, he still eats Life Cereal. 2 In 1998 The Quaker Oats Company owned four other brands that led their respective categories: Gatorade thirst . 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