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PART AQUAKER OATS’ ACQUISITION OF SNAPPLE
BACKGROUND OF THE COMPANIES
Quaker Oats is an American food conglomerate. The story of Quaker Oats’ success is one of a company led by a strong management effectively growing inthe face of increasing competition and economic cycles through internal and inorganic growth.See
for details about Quaker Oats.
Snapple is an American beverage company, known for itsnatural juices and fruit drinks. From a business run part-time by its founding members, Snapplegrew to become one of the leading producers of non-alcoholic drinks in North America within afew decades.
provides the background of the company.
ACQUISITION OF SNAPPLE BY QUAKER OATSA.R
With an increase in competition, the Snapple stock price had halved, from $60 in 1993 to $30 in1994. This fall in the share price of Snapple was seen by Quaker Oats as an opportunity toincrease its market share in the non-alcoholic beverage market. The acquisition would cement its position as a prominent player in the North American non-alcoholic beverage market. Themarket was growing at a rapid rate. The acquisition of Snapple was considered necessary byQuaker Oats to remain a competitive player in the market. Yet another reason in favor of anacquisition was that Quaker Oats expected to gain operating synergies from buying Snapple.
Gatorade, positioned as a mass product, and was sold throughsupermarkets and convenience stores. Snapple products were sold largely through independentretailers, vending locations, and restaurants. Quaker Oats expected to utilize each of thesedistribution channels to bolster the sale of the other product.
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With the sales of Gatorade rising from $122 million in 1984 toabout $1.20 billion in 1994 (22% compound annual growth rate), Quaker Oats felt that it coulduse economies of scope from its Gatorade experience to boost sales for Snapple.
The Quaker Oat management believed that there were significantsynergies to be achieved in common areas such as R&D, manufacturing and marketing.