SNAPPLE

 Arnie Greenberg, Leonard Marsh, and Hyman Golden had been friends since high
school. In 1972, they went into business selling all-natural apple juice to health food
stores in Greenwich Village under the brand name Snapple. By the late 1980s, their
brand had achieved near-cult status on both coasts of the United States, with its iced
teas particularly in demand.
 In 1994 Quaker bought Snapple for $1.7 billion. The vision had been to combine
Snapple with Gatorade, an earlier and very successful acquisition, to form a powerful
beverage business unit. Snapple, however, did not thrive: sales fell in each of the
next four years, and in 1997 Quaker despaired and sold the brand to Triarc
Beverages for $300 million. In the fallout that followed, both Quaker’s chairman of 16
years and its president resigned.
 . Mike Weinstein, CEO of Triarc Beverage Group, reflected on the acquisition - It’s
in decline, and when that happens to a brand it’s seldom that it comes back.
But we’ve talked to a lot of consumers and we did a lot of qualitative research, and
we’ve decided that in this case the brand still has inherent strength. People feel good
about it. It will respond to the right marketing stuff.”
 1972-1986 the origin Arnie encouraged the family to stock health foods. The
three saw the popularity of natural no-preservative fruit juices in the store, and
teamed up with a California-based juice company to manufacture and distribute a
bottled apple drink. Eventually they broke away from the California partner and
founded their own company— Unadulterated Food Products—and the Snapple
brand.1 “100% Natural” became Snapple’s mantra.
 It added carbonated drinks, fruit-flavored iced teas, diet juices,
seltzers, an isotonic sports drink, and even a Vitamin Supreme. Some
succeeded and many failed, but premium pricing on the successful
products covered losses on the failures. Revenues and profits grew
with expansion of distribution into New Jersey and Pennsylvania. In
1984 annual turnover was $4 million and it doubled by 1986 to $8
million.
 When tennis star Ivan Lendl was featured in several ads, the idea didn’t quite come
off. (He) kept mispronouncing the name as “Shnapple.” Luckily the ads were so bad
that they didn’t do the brand any harm. Had those schlocky ads been just a little
better, they actually would have been worse for Snapple. The ineptness of the ads
actually came off as charming, just like the cluttered packaging
 Snapple was just one of many small beverage brands aspiring to appeal to
young, health- conscious urban professionals in the 1980s. Napa Naturals,
Natural Quencher, SoHo, After the Fall, Ginseng Rush, Elliot’s Amazing, Old
Tyme Soft Drink, Manly Sodas, Syfo, and Original New York Seltzer were some of
the many contenders in what eventually came to be called the New Age or
Alternative beverage category.
 1987-1993 the glory years The vision of many entrepreneurial founders was to
 exit via acquisition. The Snapple founders, however, decided to cope with the next
stage of growth by hiring professional management. They turned to Carl Gilman, a
beverage industry veteran from Seven-Up,
to run sales and marketing. Gilman used focus groups to tell him how to improve
Snapple’s label design. He increased the advertising budget to $1 million and
intensified the independent distributor system throughout the East Coast. He viewed
expansion to the West Coast as premature and a dilution of effort. “The stronger we
build the East Coast, the more the West Coast will want us
 The distribution system grew until Snapple had a network of 300 small,
predominantly family- owned distributors servicing convenience chains, pizza stores,
food service vendors, gasoline stations, and so-called mom-and-pop stores. A press
story described the work as “salesman, truck loader, driver, heavy lifter and bill
collector, all in one.
 Advertising and promotion Snapple’s promotion was an offbeat blend of public
relations and advertising. The story of the three founders’ success in an industry
dominated by multinational behemoths was told many times in many media.
Advertising agency Kirshenbaum, Bond & Partners created a spokesmodel for the
brand in the form of Wendy Kaufman, a former truck dispatcher with a brash New
York attitude. Wendy received paid exposure in the brand’s advertising, but her
eccentric personality also attracted unpaid media attention. She appeared on
television shows such as Oprah and David Letterman, where she read Letterman’s
“Top 10 Least Favorite Snapple Drinks,” and was interviewed by USA TODAY. At
times she attracted 2,000 letters a week. She made appearances at retail stores, and
accepted invitations to sleepovers, Bar Mitzvahs, and prom dates
 Advertising and promotion In a similar vein, the brand sponsored the radio
programs of two very popular 1980s exponents of shock radio. Howard Stern
specialized in tasteless and often outrageously sexist humor, and Rush Limbaugh
built a following as an advocate of right wing political and social ideas delivered in a
style that combined protracted ranting with acid sarcasm. In exchange for
sponsorships on both shows, the brand received on-air endorsement and sometimes
became the subject of Stern’s banter and Limbaugh’s rants.
Kirshenbaum, Bond adopted “100% Natural” not only as an advertising
line, but as the test which all marketing actions had to pass
 On a summer day in Hempstead, Long Island, Snapple invited consumers to a
Snapple Convention. Over 5,000 people sent the required $5 and 20 Snapple
labels, and participated in a day of Snapple-themed fun and games. A Snapple
fashion show was won by a woman in a dress made of Snapple caps.
 Growth in the Alternative beverage category was explosive, with Snapple leading the
way. Snapple sales grew from $80 million in 1989 to $231 million in 1992 and $516
million in 1993. Competition grew commensurately, though Snapple’s share remained
steady at about 30%–40% of the rather hard-to-define category.
 In 1992, the three Snapple founders sold control of the company to a Boston
private investment bank—the Thomas H. Lee Company—in a leveraged buyout
and subsequent public offering. In 1994 with sales running at $674 million, Lee
 sold it to Quaker Oats for $1.7 billion in cash.
1994–1997: Quaker Takes Command
 Quaker in 1994 was a food company with four main areas of business: grain-based
foods, bean- based foods, pet foods, and beverages. The first three were relatively
mature, while the beverage business, consisting entirely of the Gatorade brand, had
been growing vigorously. Gatorade contributed $1.1 billion of the company’s $5.95
billion turnover in that year
 Gatorade’s origins were in a research project at the University of Florida
in the early 1960s to find a way to replenish fluids lost during exercise. The
product, an uncarbonated orange-flavored mix of water, salts and sugars,
was tested on the school’s football team, the Gators. It came to the notice
of the sports world when the Gators beat Georgia Tech in the 1969 Orange
Bowl and Bobby Dodd, the losing coach, explained to Sports Illustrated:
“We didn’t have Gatorade. That made the difference.” A small packaged
goods marketing firm, Stokely-Van Camp, acquired the brand, took sales to
nearly $100 million, and sold it to Quaker in 1983. Quaker took its sales to
$1 billion in a decade.
 Within the company, management attributed this growth to three main factors.7
First, Quaker expanded the line. When Quaker bought the business, Gatorade was
sold in 32-ounce bottles. Quaker added a 16-ounce glass bottle for the convenience
store trade and 64-ounce and gallon plastic bottles for sale in supermarkets, and
expanded from three to eight flavors. Second, Quaker increased promotional
support. The brand became more visible in the major sports leagues, with Michael
Jordan of the Chicago Bulls basketball team as a spokesman, and touchline visibility
in the National Football League’s televised games. Third, Quaker improved
Gatorade’s distribution significantly. Internationally, it entered 26 foreign markets.
Domestically, it improved coverage of the market and lowered its cost-to-serve by
using the same logistics system that distributed Quaker’s breakfast cereals and
snacks. It shipped Gatorade in full truckloads from Quaker-owned manufacturing
plants to the warehouses of the larger supermarket chains and the wholesalers who
serviced smaller retail chains and independent supermarkets. From these
warehouses Gatorade was combined with other grocery products to make up full
truckload deliveries direct to retail stores.
 . In 1993 Quaker had explored a joint venture with Coca-Cola to develop overseas
sales, but talks had broken down. Domestically, Quaker felt that Gatorade was weak
in what it called the cold channel, comprising street vendors, delicatessens,
restaurants, recreation areas and so on, and distinguished from the so-called warm
channel comprising mainly supermarkets. About 60% of Gatorade’s sales moved
through the warm channel. Quaker believed that there were two million points of
availability for soft drinks in the United States, and Gatorade was represented in
200,000
 For example, Quaker sought to eliminate the substantial cost of middlemen in
Snapple’s warm channel by shipping direct from factory to supermarket warehouses,
while at the same time using Snapple’s middlemen to take Gatorade to the cold
channel.
 Gatorade as a “lifestyle” brand and Snapple as a “fashion” brand. They knew that
consumers pictured Gatorade as a beverage for those who worked out or played
vigorous sports, and such lifestyles were a relatively stable factor in the culture. The
 imagery of the Snapple brand was more fashion-sensitive, quirky and on the edge.
But Snapple was now a brand with annual sales of $674 million, and the task of
transitioning it from the edge to the mainstream, from fashion to lifestyle, seemed
within reach.
 In addition, it appeared that Snapple played a less utilitarian role in consumers’
lives than Gatorade, which lent itself to large- pack sizes because when people
drank it they were thirsty and were looking to be rehydrated, often in team
settings. Snapple, on the other hand, sold best in 16-ounce single-serve
containers.
 Snapple sales peaked in 1994 at $674 million, and declined each year until by
1997 sales were $440 million. Several changes in management did not help to
reverse the trend. In the latter years Quaker hired Mike Schott, Harvard MBA of
1972
1997: Triarc Acquires Snapple
 Triarc Companies was an investment company with a long history of buying and
selling troubled assets.
A Strategy for Snapple

 . The study had uncovered enough evidence to show that the brand had connected
strongly with consumers in its early years because it had done things differently by
being real, human, and avoiding the expected marketing slickness consumers had
grown suspicious of. As they saw it, the research showed that the many changes
Quaker had instituted went directly against these principles. Consumers had felt
betrayed, because Snapple had “sold-out.”
 “We know that we can sell around 200,000 cases of just about anything. We talk
to key distributors and see whether they think we have a good idea. If they take it,
we know within the first month based on reorders whether we have a product
that’s selling or not. If we don’t do consumer research, if we do product
development in-house, if we do our own label design, we can be in the market with
a new concept for $50,000 to $75,000 investment plus working capital for
ingredients.”
