Snapple Case Analysis

Snapple Case Analysis

In 1972, Snapple had a modest beginning in Brooklyn, New York. Initially, Snapple beverages were sold to health-food stores and Snapple became successful by launching innovative products, based on fruit juices and teas, into the beverage market. Snapple was a brash newcomer which won over New Yorkers and soon the rest of the US. Homemade freshness and endearing amateurism was a part of the Snapple brand. Some brands just want to have fun and from birth Snapple was one of them. In 1992, Boston-based Thomas H. Lee Co. purchased Snapple from the original owners for $27.9 million. Snapple's distribution channels and promotion were unconventional and it had very little supermarket coverage. Instead, it flowed through the so-called cold channel: small distributors serving hundreds of thousands of lunch counters and delis, which sold single-serving refrigerated beverages consumed on the premises. Small distributors were, they aggregated into a mighty marketing force.

Quaker 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. Smithburg's strategy was to use the strength of Snapple's distributors in the cold channel to help Gatorade and use Gatorade's strength in the supermarkets to help Snapple. Quaker executives hoped that Snapple would provide the same type of benefits as their highly successful Gatorade brand had done in previous years. They expected to achieve these benefits by applying the marketing expertise used for Gatorade, but they failed to understand some important differences in the markets, distribution channels, and customer attitudes for the two types of beverages. The Quaker executives planned to market Snapple in the same way as they had done previously for Gatorade. The expertise of former Snapple executives was disregarded. Two of the top Snapple executives left after the acquisition, along with many key employees, and the only remaining executive had little power over strategic decisions. Competition was increasing in the tea and fruit drink markers, and there were many problems and delays in implementing the new strategy. Snapple's dollar volume sales of fruit juices dropped 15% for the 12 weeks ending September 14, 1996. Tea sales dropped 14% losing 2.5 share points to 21.4%. Juices lost 5% industry wide and teas went down 4%. The data from A.C. Nielsen Co. 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. In 1997 Quaker sold Snapple