How a Juicy Brand Came Back to Life
"Some brands just want to have fun, and from birth Snapple was one of them," says HBS professor John Deighton. As he explains in this excerpt from Harvard Business Review, the odyssey of the fun-loving beverage contains smart lessons for managers on branding and company culture.
Even now, mere mention of Quaker Oats' acquisition of Snapple causes veteran dealmakers to shudder. For good reason. In 1993, Quaker paid $1.7 billion for the Snapple brand, outbidding Coca-Cola, among other interested parties. In 1997, Quaker sold Snapple to Triarc Beverages for $300 million, a price most observers found generous. The debacle cost both the chairman and president of Quaker their jobs and hastened the end of Quaker's independent existence (it's now a unit of PepsiCo).
But that's not the end of the story. In October 2000, Triarc, the privately held outfit that took Snapple off Quaker's hands, sold the brand to Cadbury Schweppes for about $1 billion. The turnaround would be astonishing in any industry, but especially in the beverage-marketing business, where short-lived brands are depressingly common. Snapple's durability raises a number of questions. Why did the brand lose $1.4 billion in value under Quaker's stewardship in just four years? How did Triarc restore most of that value in less than three years? What did Triarc do with such apparently effortless grace that Quaker, with all its resources, could not?
Brands thrive when there's a close fit between process and corporate temperament.
— John Deighton
In November 2000, shortly after Triarc sold Snapple to Cadbury Schweppes, I posed those questions to Triarc's top executives: chairman and majority owner Nelson Peltz, CEO Mike Weinstein, and marketing director Ken Gilbert. Their answers led me to a conclusion that many marketing professionals are likely to resist: There is a vital interplay between the challenge a brand faces and the culture of the corporation that owns it. When brand and culture fall out of alignment, both brand and corporate owner are likely to suffer.
I'm hardly courting controversy by asserting that a brand might fit better in one company's portfolio than in another's. But a marketing professional would probably explain the improved fit in terms of distribution economies or manufacturing synergies. I would explain it differently: First, as every brand manager would surely agree, good brand management is explained more by process than by strategy. The big idea is important, but the execution of the big idea determines its success or failure. Second, consistent process execution is a matter of temperament. Some processes are best entrusted to managers with cautious, prudent temperaments while others flourish in the hands of risk takers. Brands thrive when there's a close fit between process and corporate temperament. This explanation, I believe, will provide the framework for understanding Triarc's and Quaker's contrasting experiences with Snapple as our story unfolds.
An endearing artlessness
Some brands just want to have fun, and from birth Snapple was one of them. Operating from the back of his parents' pickle store in Queens, Arnie Greenberg and his friends Leonard Marsh and Hyman Golden started selling a fresh apple juice called Snapple across New York City in the late 1970s. At the time, there was no shortage of upstart brands competing for the dollars of young, health-conscious New Yorkers, but Snapple stood out from the rest by virtue of an endearing artlessness. The labels on its bottles were cluttered and amateurish, and its ads seemed, if possible, even more homemade. In one, tennis star Ivan Lendl garbled the brand name into "Shnahpple." Several others featured a Snapple order-processing clerk named Wendy Kaufman. Cheerful, zaftig, and blessed with a Noo Yawk accent strong enough to peel paint, Wendy blossomed into a minor celebrity known to her fans as the Snapple Lady. She chatted on-air with Oprah Winfrey and David Letterman, made appearances at retail stores, and accepted Snapple drinkers' invitations to sleep-overs, bar mitzvahs, and proms. On the radio, the brand grew by sponsoring shockmeisters Howard Stern and Rush Limbaugh. Stern was an especially effective spokesperson. He got to know the founders of the business personally and conveyed to his listeners a genuine and infectious regard for the products and the people behind them.
The brand's distribution channels were as unconventional as its promotions. Initially Snapple 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 as the individual distributors were, they aggregated into a mighty marketing force. By 1994, Snapple was available across the country, and as distributors added painstakingly cultivated supermarket accounts, sales ballooned to $674 million from just $4 million ten years earlier. 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. Enter Quaker Oats.
Quaker's executives approached the Snapple deal with a mixture of confidence and urgency. 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. After purchasing the sports drink from Stokely-Van Camp in 1983, Quaker introduced it into twenty-six foreign markets, added five new flavors (for a total of eight), and hired basketball great Michael Jordan as a spokesperson. It used its leverage with supermarkets to win premium display space and squeezed costs out of the supply chain. Textbook actions produced textbook results: Gatorade sales swelled from $100 million to $1 billion in ten years, giving Quaker's executives ample reason to believe they could produce similar growth for Snapple.
But replicating Gatorade's success was more than an objective—it was a matter of corporate survival. With only one brand in its beverage portfolio, Quaker was at a serious disadvantage to larger players that could use their broader lineups to capture economies of scale. To stave off acquisition by one of those larger competitors, Quaker needed to add a second brand that could capture similar economies. Acutely aware of the make-or-break nature of the acquisition, Quaker's executives formulated a marketing plan that sought to minimize or eliminate risk. As it happened, though, Quaker's very risk aversion turned out to be the greatest risk of all.
When brand and management clash
One of the most striking things about my conversations with Peltz, Weinstein, and Gilbert was the language that the Triarc team used. In most corporations, brand marketing sounds like a form of warfare. Consumers are targeted, campaigns are planned, products are positioned and launched, waves of advertising are flighted, and then market research does the reconnaissance to say whether the missions were successful or not. But at Triarc, the talk was of play and fun, parties and parades. It's not that they didn't know the other terminology. Peltz hired Weinstein and Gilbert for their impeccable professional credentials, and they could have used marketing-speak if they had wanted to. But the spirit of Snapple called for another way of speaking and thinking. As Gilbert once told me: "We can be disciplined, but should we be? We can write down positioning statements, but the Snapple trademark spills over the boundaries we put on it." The brand's vitality responded better to play than to planning.
My point here is not to disparage discipline or, indeed, the marketing professionals of Quaker Oats. Their failure with Snapple wasn't a matter of ineptitude or a bureaucratic tin ear. Nor do I think it was a case of a nimble upstart outflanking a lumbering corporate behemoth. In a battle between David and Goliath, the smart money is almost always on the giant. Rather, Quaker's failure can be put down to a fatal mismatch between brand challenge and managerial temperament.
There was no such mismatch between Gatorade and Quaker. If Snapple was about play, Gatorade was about sport—about playing to win. You could have fun with Gatorade, but only after you'd won the game. Quaker's corporate temperament was perfectly attuned to the achievement-oriented message of Gatorade. But Snapple isn't about accomplishing an objective; it's about adding a little whimsy to the humdrum and the everyday. The job's dull and the car is more safe than sporty, but at least you can get a little wild at lunch with a Mango Madness. Given the difference between the two brand identities, it's no surprise that they didn't both thrive under the same owner. The surprise would have been if they had.
That's a lesson executives considering a brand acquisition might want to keep in mind. There are factors beyond economic analysis to take into account if the process of brand management is to cohere. What we call a brand identity is actually a form of meaning, made at least as much by small, impromptu managerial acts as by grand designs precisely executed. The managerial temperament makes itself known and felt in those small, almost unconscious, actions and decisions. Variations in temperament go a long way toward explaining why brands that flourish in the care of one custodian wither in another. So before committing to a deal, don't just consider a brand's sales. Give some thought as well to its soul.
Excerpted with permission from "How Snapple Got its Juice Back," Harvard Business Review, January 2002, Vol. 80, No. 1.