Let me give you a case assignment to dig into a little bit to some of the issues we've been talking about and add some more. And it's about Quaker oats and Snapple and of course Snapple's is kind of this iconic brand that skyrocketed from nothing to something big seemingly overnight. But it really took years and years of hard work to get there. It was founded as the unadulterated food products incorporated. When it began way back in 1972 and the company was created by two window washing brothers in law, Leonard Marsh and Hyman Golden and a health food store owner, Arnold Greenberg. These were New York city natives and they began distributing fruit juices, all natural sodas and seltzer's and fruit drinks to local health stores. And they emphasized this wholesome image through the slogan made from the best stuff on earth. Later it entered the developing iced tea market, which has become a really big deal. And they had this brood, high quality new age ready to drink tea, which would really prove to be a pivotal early move because that took off and that gave Snapple the money to roll out. It turned out to be pretty high profile advertising campaign centered on a customer relations, regular people theme. And I don't know whether any of you remember because it goes back quite a ways, but they had an employee, a real employee named Wendy Kaufman who became the face of Snapple on television and on radio. And her friendly greetings from Snapple salute and her pension for answering fan mail on the air helped to build the company's really kind of quirky brand and positioning. Snapple also enlisted the support of really famous personalities, top rated shock jock, howard, stern and talk show host Rush Limbaugh to create this kind of quirky, individualistic image that really would a cult like following Snapple took off. They had an extensive and dependable network of independent co packers and distributors and this is very, very important to the case. And their job was to prepare bottle warehouse and sell the Snapple products. Not only did these distributors generate really high margins from carrying Snapple, but they also have the option of delivering other drinks, other beverages to chain stores which further boosted their profitability. So you know, these distributorships, they loved working with Snapple and they were getting rich, working with Snapple. And the net result is Snapple became the fastest growing beverage company and the second largest seller of single serving juices, which is quite something. Enter Quaker oats, another iconic brand, right that had diversified to become a large consumer packaged goods company. At the top of Quaker was another brand, a blockbuster brand called Gatorade and they had acquired Gatorade when it was still a small brand and they had built it into a billion dollar brand. And so Quaker knew something about doing this. They saw Snapple as the next Gatorade, an established and profitable company and a brand, but with huge upside growth potential. And so they acquired Snapple for really an incredible $1.7 billion, which was almost three and a half times revenues, not profitability, but sales unfortunately, problems quickly piled up. The biggest of which was the distribution system. Quaker wanted to integrate Gatorade and Snapple distribution. I mean that would be very efficient. One could imagine why they'd want to do that. And they wanted to cut costs but also expand the reach of Snapple because Gatorade was, was being distributed was being sold everywhere. And if the same distributors that distribute Gatorade and this kind of massive trucks in this kind of traditional distribution system. If they also had Snapple beverages on the trucks, they'd be able to place Snapple and a whole bunch of outlets and expand their sales. So cut costs and expand sales. That was their idea. But they came up against, however, were long established Snapple distributors that I just mentioned before that we're making a ton of money doing it their way and they had lifetime distribution contracts. It gave them rights that never lapsed. And these distributors, typically family run businesses, they had no interest in carrying Gatorade because Gatorade margins for them were much lower. They would make less profits carrying Gatorade, why would they want to do that? Let alone giving up in return. Some of their Snapple business that was making them a ton of money and there was nothing Quaker could do. Why? Because the Snapple distributor ship contracts were iron clad. Three years later, Quaker sold Snapple for $300 million. A net loss of over a billion dollars after some tax savings from these various transactions. Business we called the acquisition one of the worst mergers ever, which seems to me to actually be a pretty valid assessment. So the case study describes what I just said and gives you much more detail as well. So you get a better feel for it and then your assignment will all be around what went wrong and why? Take a few minutes to dig into it to think about it for yourself. Free feel free to google around if you want to. But the case material gives you everything you need. And after you've had a chance to really think about it and spend the time on it and do some of that learning on your own. We'll come back in the next video and I'll give you my take as well.
