Snapple

Snapple A Study of Entrepreneurship, Corporate Growth, Brand Management, and Ethnography

Presented October 15, 2012 Course 15.810

KC Kern • Greg Page • Jeff Prosek • Rahul Shewakramani

1. Snapple’s Benefits to its Customers (1972-1993) During Snapple’s early years all through its acquisition by Quaker in 1993, Snapple’s marketing managers were very successful at identifying the voice of Snapple’s customer, their needs and the benefits Snapple was able to provide them. Snapple’s customers were primarily young urban professionals located on the east coast. Starting in New York City, home of the founders, Snapple slowly built a network of distributors across the city to attract its target customers. It later expanded distribution to New Jersey, Pennsylvania and Boston. During the mid-70s and the early 80s, young urban professionals across the United States wanted something different; Snapple was identifiable as a reaction against ordinary colas that were clearly unhealthy and in urban areas represented “inner-city” and ghetto culture.1 Urban professionals found themselves between those who didn’t care about the health benefits of what they drank (colas which represented unnatural, artificial, mass produced substances) and those who were serious about health (drinkers of water, vegetable juices etc.) The alternative beverage category developed as a result of this gap, and Snapple managed to seize a large and growing segment of this market through the 80s. Snapple soon became defined by what it was not, and this resonated with its customer base that was fashion-sensitive. Snapple was healthy but not too healthy and attracted customers who wanted “something different.” These customers were tired of unnatural colas that were unhealthy and mass-produced; they wanted a beverage that could represent them, or what they aspired to be. Snapple not only was able to meet that basic need of a tasty refreshing beverage (what customers assumed it would do) but also fit into customer exciting needs very quickly (the needs which would delight and surprise the customer)2 by becoming a fashion brand. To its customers, Snapple’s imaginative range of flavors (Mango Madness, Kiwi Strawberry etc.) and alternative packaging represented an individualism and consciousness that was typical of 1980s urban America. These customers saw Snapple as a symbol of unassuming luxury, playfulness and consciousness – health was important to them but didn’t define them, Snapple became the symbol of their attitude towards consumption – “not trying too hard but remaining natural”. Snapple’s brand reinforced its customers’ needs to make a fashion statement by remaining offbeat and quirky, with advertisements that were “real” and this helped to sustain the image of Snapple being natural and cool despite its growth in sales. Weinstein refers to this ability of Snapple to enhance its customers ‘own perceived image, “customers are average, normal people, but the brand helps them think of themselves as offbeat”, he claimed in 1997. In this ability of Snapple to help enhance its customers individuality we seen an example of the Forer Effect, which suggests that consumers will ascribe high accuracy to descriptions of their personality that supposedly are crafted specifically for them, but are actually broad and vague enough to apply to a wide range of people. Snapple was able to successfully identify its customers’ needs by prioritizing the need of urban professionals to make a fashion statement.

1

Exhibit 6: Analysis of the Snapple Brand. The Cultural Logic of the Snapple Brand : Report prepared by Cultural Analysis Group for Deutsch, Inc. November 1997 2 John R. Hauser “Note on the Voice of the Customer.” MIT Sloan Courseware

2. The Right Product for Snapple’s customers Snapple’s success from 1972-1993 was largely related to their unique product distribution strategy leverging the “cold channel.” As case writer Professor John Deighton notes, “Snapple had a network of 300 small, predominantly familyowned distributors servicing convenience chains, pizza stores, food service vendors, gasoline stations, and so-called momand-pop stores.”3 This method was in contrast to other beverage distributors whose large distribution networks focused more on supermarkets. As was stated in the case, Seagrams used its existing large liquor distributor network after it acquired SoHo (a Snapple competitor) with minimal success. Snapple used its smaller network to continually strengthen key areas (such as New York City) before carefully expanding. Product value and promotion were two other areas that were instrumental in Snapple’s success. Snapple customers received more value than just that of the beverage with each purchase. As Mike Weinstein commented in the post-Quaker era, “Snapple users are really very average, normal people but the brand helps them to think of themselves as offbeat.”4 In other words, drinking Snapple allowed consumers to say something about themselves. The product had some social signaling value. This tied in with the promotion of the product. Snapple was not a big corporation; it was small and quirky. Consumers could feel good about drinking Snapple because it was healthy (without being just about good health) but also because they were supporting the quirky, little brand. The advertisements went along with this concept in that they were unpolished, not “slick”, and authentically amateur. Wendy Kaufman, the Snapple spokeswoman, was not a professional pitchwoman. 5 She was far from “corporate.” Authenticity was also apparent in television ads such as one in which tennis star Ivan Lendl mispronounced the word “Snapple” and another where a dog failed to respond to the opening of a Snapple bottle, as he was expected to do. By leaving these humorous “errors” in the ads, Snapple perpetuated its image as a different kind of company that appealed more to “hipster” sensibilities than to corporate ones.

3-4. Quaker, Gatorade, and Snapple Between 1994 and 1997, the Snapple brand was under the ownership of Quaker. Quaker had proved itself in the beverage industry with its management of the Gatorade brand. Quaker seemed to believe that Snapple could be marketed and managed using the same strategies and lessons learned from the successes of Gatorade. This proved not to be the case. Quaker held on to Snapple for three years, but ultimately gave it up to Triarc at a crushing loss. The New York Times called the Quaker-Snapple episode “the worst acquisition in memory,” citing “advertising miscues that compounded [Quaker’s] marketing mistakes.”6

3

Deighton, John "Snapple." Harvard Business Review 5 Dec. 2003. pg. 3. Ibid. pg. 8. 5 See Exhibit 2. Wendy Kaufman appears in the first two images. 6 Feder, Barnaby J. "Quaker to Sell Snapple for $300 Million." New York Times 28 Mar. 1997. 4

A Quake Spokesperson stated: “We believed Snapple had tremendous possibilities. Unfortunately, the synergies did not materialize and [Snapple] did not grow at the rate we anticipated.” What this spokesperson fails to note is the strategic and managerial problems that resulted in these “synergies” not materializing.”7 In contrast to Snapple’s “cold-channel” distribution, Gatorade had seen success in the “warm channel:” supermarkets and other large retail establishments. Using Gatorade as a blueprint for Snapple is extremely problematic given the relationship between brand perception and distribution channel. Focused on athletics, sports, and physical activity, the Gatorade brand did well in the warm channel. Meanwhile, the Snapple brand was not focused on specific activities, but rather on a state of being. It represented quirkiness and expression of identity—more fashion than function—and as such, Snapple consumers are much prone to seek it in a holein-the-wall coffee shop, a neighborhood deli, or a retailer with a home-grown, local flair. Purchasing Snapple at a big-box retailer or supermarket would cheapen the experience, and devalue the brand. This is the market that Quaker was unprepared and unable to appeal to. Quaker’s established processes as well as corporate culture were incompatible with Snapple’s original brand appeal. The advertising shift towards a more corporate style was unwelcome.8 John Deighton previously noted that “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.”9 Such was the case for Quaker. Acquiring Snapple was almost certainly a misstep. Not because Quaker lacked the managerial prowess, and not because Snapple’s brand was a passing fad, but because of the fundamental disconnects between the Quaker’s corporate model (and distribution infrastructure) and the nature of Snapple’s appeal as a brand.

5. Triarc’s Snapple Strategy The anthropological research conducted by the Cultural Analysis Group (CAG) in December 1997 clearly shows that the Snapple brand still retains powerful associations in the minds of consumers. Despite the 1994 acquisition by Quaker and the sales decline that followed, Snapple’s name conjured up associations of fun, authenticity, and sensuality in the minds of the focus group participants. The research suggests that Snapple occupies an important space between extremes. It falls in the middle of the spectrum between “ghetto” beverages (store-brand colas) and expensive, exotic drinks associated with snob appeal (Perrier and Evian). With respect to health, it occupies a middle ground between beverages that would only be consumed by those who didn’t know or care about nutrition (sodas) and those that would only be consumed by people consciously making a health choice. Pharos’ positioning map, attached as Exhibit 1, shows that Snapple resides in the relatively-uncrowded space of natural drinks that are neither considered “premium” or “non-premium” to cost-conscious consumers. 7

Peltz, James F. "Quaker-Snapple: $1.4 Billion Is Down the Drain." Los Angeles Times 28 Mar. 1997. See Exhibit 2. Quaker’s new add appears in 1995 9 Deighton, John "How a Juicy Brand Came Back to Life." Harvard Business Review Jan. 2002. 8

Weinstein can bring Snapple back with the right marketing strategy. An original, down-to-earth campaign reminiscent of the old Wendy Kaufman advertisements has the power to reach two important groups: first, an older demographic that remembers Snapple as being authentic and unique; and second, an entirely new generation of potential customers who have come of age after Snapple’s original heyday. Marketing that combines Snapple’s core traits of authenticity and wholesomeness with hip, nostalgic references to the late 1980s can effectively target both of these groups. The original Wendy ads were so effective because they introduced subtle elements of humor in a way that was natural and non-contrived. The example cited in the case – that of the dog that didn’t run towards its owner when she opened a Snapple – embodies that sort of quirky, offbeat character. Weinstein can have the same effect today by including grainy “man on the street” footage of everyday Snapple consumers in the ads. One of the most important lines in the CAG analysis is that “Snapple use needs to be socially reinforced. It is not physiologically addictive, and it lacks the conceptual coherence that drives bottled water…or Gatorade.” For precisely this reason, the future success of Snapple hinges almost entirely on the way it is marketed.

6. General Lessons Pharos has concluded that Quaker’s acquisition of Snapple was a major strategic, operational, and tactical error. However, the strength of the Snapple brand has not been damaged beyond repair. In fact, the very same drivers of its initial success between 1972 and 1993 can be used to restore the strength of the brand today. Operationally, the shift of control to Quaker meant that the cold-channel distribution channel was discarded in favor of a system that stripped away Snapple’s strength as a single-serving beverage consumed in sandwich shops and delis. By 1997, even as Snapple held a whopping 35 percent of supermarket brand share in the alternative beverage category, its sales were continuing to freefall from their early-1990s peak. Quaker failed to realize that Snapple – unlike Gatorade – is consumed socially and experientially, not functionally. At the tactical level visible to the consumer, Quaker committed several successive blunders. By taking away the quirky Wendy Kaufman ads, Quaker confirmed the worst fears of those who felt that corporate, middle-American blandness had hijacked a formerly authentic symbol of the Big Apple. To make matters worse, Quaker then pulled the plug on their deal with Howard Stern – another authentic New York cultural icon – as well as Rush Limbaugh, a man whose followers are so dedicated that they proudly call themselves “dittoheads.” In a likely attempt to avoid controversy, Snapple alienated previously-loyal fans, with little apparent upside. Despite all of this, Snapple can rebound to its former greatness by capitalizing on the unique value of its “in-betweenity.” As Gilbert says in the case, “Snapple users are really very average, normal people but the brand helps them to think of themselves as offbeat.” A marketing campaign that emphasizes the wisdom and uniqueness of its consumers, as well as a move to switch distribution channels back to corner stores, can reach a slightly older consumer who still associates Snapple with Wendy Kaufman and Ivan Lendl, as well as a newer, younger consumer who may be searching for the very things that drew Snapple’s original users to the beverage during its meteoric rise in sales.

Exhibit 1 Perception Map of the Soft-Drink Beverage Market

Exhibit 2 Samples of Snapple Television Advertisements 1993 (Independent)

1993 (Independent)

1995 (Quaker)

1997 (Triarc)

2002 (Cadbury Schweppes)

2012 (Dr. Pepper Snapple Group)