BRAND MANAGEMENT
Case No. 3

SNAPPLE: REVITALIZING A BRAND

INTRODUCTION
In the 1990s, Snapple Corporation was one of the leading “New Age” beverage brands when the category was just beginning to take off. With the combination of a unique product, package design, and quirky advertising, the company grew form a regional underground favorite toa nationally recognized brand.

Snapple’s rise in the beverage industry was crowned in 1994, when the Quaker Oats Company purchased Snapple for $1.7 billion. Quaker expected to make Snapple a major player in the industry, as it had done with GAatorade. However, the company was unable to capitalize on the brand’s previous success.

In 1997, Quaker sold Snapple to Triarc Beverage Group for $300 million. Triarc faced a number of challenges, including reversing the sales slide, revamping the distribution system, and creating new products that will enable growth. Most importantly, Triarc had to find a way to reconnect the brand with its consumers. Triarc successfully resurrected the Snapple brand, and in 2000 sold Snapple to Cadbury Schweppes for $1.45 billion. Cadbury Schweppes then faced the challenge of maintaining Snapple’s brand strength in an increasingly competitive beverage environment.

THE EMERGENCE OF SNAPPLE
The roots of Snapple Corporation date back to 1972 in Brooklyn, New York when brothers-in-law, Leonard Marsh and Hyman Golden, left their window-washing business and teamed up with Marsh’s childhoAod friend and health food store owner Arnold Greenberg to sellpure fruit juice as the “Unadulterated Food Products Co.” In 1978, they created an apple soda that fizzled - so much that several bottles exploded - inspiring the “snap” in the drink’s eventual name. They bought the rights to the name from a man in Texas for what then seemed like a very expensive price of $500. Over time they established themselves as the “first company to produce a complete line of all-natural beverages,” that were “Made from the Best Stuff on Earth.”

In the 1980s, Snapple essentially created the non-carbonated segment of ready-to-drink beverages with its introduction of ready-to-drink fruit juices and iced teas. Snapple was also the first company to sell its drinks in single serving, wide-mouthed glass bottles,rather than the ubiquitous aluminum cans. The company clad its bottles in unique, bright labeling and introduced a new process called “hot-packing” (where they filed bottles with 180oF liquid to sterilize the contents) that eliminated the need for preservatives and enable it to extend its “all natural” claims to its entire line of products. Its goal was to “make a natural product and make sure it tastes good, and looks good.” Although Snapple remained a small niche brand throughout much of the decade, the strategy had begun towork. By the late 1980s, growing ranks of health-conscious consumers were snapping up Snapple products as an alternative to soda. By 1991, Snapple emerged as a nationally recognized brand.

In the spring of 1992, Snapple management raised capital by selling amajority stake of the firm to Thomas H. Lee, a Boston-based investment firm, for $140 million. Marsh, Golden, and Greenberg maintained control of the company and continued to improve operations. In December of the same year, the company went public by selling 4 million shares of common stock at a price of $20 per share. The offering was oversubscribed and, by the day’s end, the share price had risen 45 percent. A month later, Snapple shares traded at $34, and by the end of 1993, Snapple shares had exploded to $516 million, more than double its 1992 figures. The stock price had risen to five times its initial offering price and Snapple was a household name. Yet, operating costs were also on therise. Sales, and general and administrative expenses had grown from $22.7 million to $59 million from 1992 to 1993, and operating margins had fallen 2.3 percent.

The Snapple Formula
Over time, Marsh, Golden, and Greenburg had developed a set of tactics that they believed propelled Snapple sales. First, they tried to differentiate the company from its competitors by continually offering customers new and exotic choice of ready-to-drink beverages. In 1993 alone, the company produced 52 different flavors (see Exhibit 1 for list of Snapple flavors). In addition to offering diverse flavors, the company concentrated on providing quality flavors in its beverages. For example, 95 percent of Snapple teas came from India and a small percentage came from Sri Lanka. The extensive offering of new and exotic flavors helped stimulate consumer interest and support sales. Not all of Snapple offerings, however, were successful. Within the tea segment, for example, decaffeinated and unsweetened teas consistently performed below management’s expectations. Even so, the team was able to bring more blockbuster flavors to market than unsuccessful introductions.

Second, the team elected to focus its early marketing efforts on the East and West coasts, where demand for New Age beverages was highest. Early sales to Midwestern states were not as strong, leading some to believe that Snapple’s quirky urban advertising alienated middle America. International sales accounted for just 1 percent of total revenues and, despite the fact that faster growth would require a significant amount of capital, management planned to aggressively push into Europe, Central and South America, and Asia.

Third, the company initially developed its own distribution channels, eschewing the traditional wholesaler supermarket model used by its larger, established competition. Instead, Snapple sold “up-and-down-the-street” channels like convenience outlets, sandwich shops, gas stations, and delicatessens through a system of independent distributors.

Fourth, in the high-growth, ready-to-drink beverage market, Snapple management positioned and priced its products at a significant premium. In 1993, Snapple charged $1.00 to $1.25 for a 16-ounce bottle, a 30 to 38 percent margin. When asked to justify the beverage’s relatively high price, Snapple marketers responded that it was a premium product that was “available to anyone,” as opposed to traditional luxury goods, such a Porche automobile, which were out-of-reach of the average consumer. But critics wondered whether the company could sustain such a high price premium, especially in the iced tea segment, which could easily be prepared at home. Consequently, many analysts believed that in order to successfully enter the supermarket business, Snapple management would have to reposition the brand and sell product in multi-packs, in cans, and at a lower price.

Snapple Brand Equity
In 1994, Snapple was experiencing tremendous growth. Jude Hammerle, Snapple’s Director for Advertising and Promotion commented, “The velocity at which the brand is growing now is so monumental “that you could get dizzy just thinking about that.” Michael Bellas, the President of Beverage Marketing agreed, “Snapple has made us all believers.”

Consumers loved Snapple. Fan clubs, testimonials, letter writing, some considered it a kind of Snapple cult. Snapple appeared on license plates and even became the middle name for a New Jersey baby boy. Consumer surveys suggested that the Snapple name was catchy and popular and engendered positive feelings in consumers. As Hammerle explained, “The name is really one of the most user-friendly, consumer-friendly names that you can ever find.” The company’s marketing targeted mostly teens, 18 to 30 year olds, and the “traditional iced tea consumer.”

During the early 1990s, Snapple ran a series of very successful ad campaigns, and had a great deal of success advertising on national radio and television, user off-beat humor and consumer-composed jingles. One advertisement the company invited an art critic to analyze the Snapple label. Snapple also gained appeal through product placements in popular shows such as Seinfeld, movies such as Sleepless in Seattle, as well as official sponsorship of well-known celebrities such as Rush Limbaugh, Howard Stern, and Jennifer Capriati. Television commercials featured people such as New York’s ex-mayor Ed Koch defending his city and Snapple to a critical Kentucky farmer. Snapple also relied on “word-of-mouth” advertising and pursued unusual events throughout the country that Coke and Pepsi avoided, such as a Minnesotan Cherry Spitting and New Jersey Miss Crustacean contests.

The company’s most successful ad campaign, however, starred Wendy “the Snapple lady.” Wendy Kaufman, a woman with a thick New York accent, was a company employee in the order department. She took it upon herself to personally answer incoming consumer letters and became the drink’s unofficial spokeswoman. She rocketed to stardom after starring in the television commercials where she read letters from Snapple fans. Capitalizing on the growing trend toward testimonial advertising, the Wendy ads projected a “real people” image in unscripted and spontaneous commercials with real Snapple customers. Wendy gained national recognition through appearances in places such as the Oprah Winfrey Show. Snapple was now one of the leading brands in the exploding New Age beverage market, which had passed the fad stage and was a legitimate segment in the beverage industry.

THE NEW AGE BEVERAGE SEGMENT
For nearly two decades, the non-alcoholic beverage market had thrived. The soft drink sector reached a staggering $47 billion in retail sales in 1993 and dominated other ready-to-drink categories by a factor of nearly 50 to 1. Growth in the segment was expected to slow down to 2 or 3 percent per year so many of the large beverage companies looked into new categories to improve revenues.

During the late-1980s, a new trend - the New Age movement of the non-alcoholic beverage market - emerged and evolved in response to consumers’ growing concerns over calories and artificial additives. In 1994, New Age ready-to-drink beverages broke down into eight distinct groups; Ready-to-drink tea (30 share), Sports beverages (23 share), PET (plastic) bottled water (16 share), Single-serve fruit beverages (15 share), All-natural soda (14 share), Sparkling flavored water (Approx. 1 share), Sparkling fruit beverages (Approx. 1 share), and Ready-to-drink Coffee (Approx. 1 share).

Market research about the New Age ready-to-drink segment suggested that customers generally selected beverages based on fashion, taste, and status related considerations. Consequently, distinctive flavors, quality ingredients, and clean labels were generally more important than price. Product, packaging, and promotion considerations - as they combined to form overall brand image - played a critical role in the consumers buying decision.

As of October 1993, between 75 percent and 80 percent of all U.S. households drank iced tea, placing the product third to soft drinks and beer in the beverage consumption rankings. As the New Age movement gained momentum, the ready-to-drink iced tea segment grew at an amazing rate of 189 percent as health-conscious consumers embraced iced tea, with fewer calories and additives, as an alternative to soda and beer. In response, several beverage companies began to stress the importance of the high-quality ingredients in their advertising. For example, Perrier/Celestial Seasonings, Crystal Geyser, and White Rock highlighted the quality of their respective brands of spring water, which were used in their ready-to-drink tea products.

New Competition
Although Snapple may have penetrated the ready-to-drink beverage market first and precipitated the New Age category, few observers believed that it would continue to dominate the market for long.

With flat sales in the soda segment, Snapple had begun to attract the attention of beverage industry behemoths such as Coca-Cola and Pepsi. It was just a matter of time before new players entered the market. A key question would be whether newer, larger players would create momentum in the ready-to-drink market and carry Snapple along with it.

Pepsi, along with Unilever, became the first major brand to challenge Snapple. In 1992, the two companies announced a joint effort to sell Lipton’s iced tea in a ready-to-drink package. The new Pepsi/Lipton partnership first bottled the Lipton Original, “the only ready-to-drink iced tea brewed from real tea leaves,” followed by the canned Lipton Brisk. In 1993, the companies launched a $30 to $35 million advertising campaign featuring SportsIllustrated swimsuit edition model Vendela drinking Lipton in front of a fascinated audience of both men and women. The joint venture also launched an aggressive radio campaign targeting Snapple, attacking the company for its use of reconstituted tea powders.

At the same time, English beverage giant Tetley licensed the rights to manufacture and distribute all ready-to-drink products bearing the Tetley trademark to A&W. Tetley planned to invest $35 million to market a new round tea bag and saw opportunities to market to hot-tea drinkers. The Tetley/A&W combination’s advertising introduced “Pearle,” a sandwich shop waitress who couldn’t understand why the bags were round. Tetley also included coupons for the ready-to-drink product with every box of round bag tea.

In 1994, Coca-Cola entered the New Age beverage market with the introduction of a psychedelic fruit drink, Fruitopia, which was marketed using a retro peace-and-love ad theme and the slogan “Fruitopia. For the mind, body and planet.” The upstart brand totaled sales of $20.4 million in its first year on advertising spending of approximately $30 million. The new Fruitopia brand was able to piggyback on Coke’s extensive distribution system, thus bypassing some of its’ competitors logistical problems. Despite the hype surrounding Coke’s launch of Fruitopia, sales for 1994 finished at only $60 million, far below the target of $400 million.

At the time, the ready-to-drink tea market was suffering for several reasons. First, slower growth rates naturally occurred as the sales base grew. Second, the three largest brands in the category could no longer count on domestic geographic expansion to increase sakes. Third, fruit drinks were beginning to provide stiff competition (see Exhibit 2 for a partial list of Snapple’s competitors).

Further complicating things was additional competition. Arizona Iced Tea entered the ready-to-drink iced tea market. Like Snapple, Arizona was founded by two New Yorkers, Don Vultaggio and John Ferolito. The two developed a canned iced tea that captured a nearly 17% market share and $2 billion in revenues in 1995, putting it squarely in competition with the largest players in the market. Priced similarly to Snapple, the new company also added a liquor-like 20-ounce bottle. Despite the fact that the company 1) gave its products practically no marketing support beyond the point-of-purchase, 2) was slow to develop a formal product development process, and 3) was plagued by lawsuits from numerous angry ex-distributors, Arizona moved into a strong position in the ready-to-drink category.

THE QUAKER OATS TAKEOVER
Despite the new competitors in the ready-to-drink tea market, and plunging share prices in late 1995, Snapple executives remained bullish. However, Snapple’s majority investors, Thomas H. Lee, quickly accepted Quaker Oats’ proposed $1.7 billion acquisition deal - generating a gain of nearly $1 billion over a two-year period. All told, the $1.7 billion deal represented a multiple of about 17 times earnings, significantly more than the 10 or 11 times earnings yielded by other recent transactions in the beverage category or by comparable publicly traded companies. Some analysts believed that the deal was a god one. “There are some significant synergies,” suggested Michael Bellas, president of New York-based Beverage Marketing Corporation. “They are very professional, a big force on the horizon now. I’m sure that’s being considered by both Atlanta [Coca-Cola] and Somers [Pepsi].”

Snapple Under Quaker Oats Management
New competitors aside, by 1995 many analysts felt that the market for New Age drinks was changing dramatically. Increasingly, the young, trendy consumers that had created the ready-to-drink category seemed to be getting bored and began to shift back to the more neutral flavors of colas and clear sodas.

Quaker Oats attempted to respond to these trends with new advertising and promotional tactics. Because Snapple was considered a brand whose popularity spread primarily by wordof mouth, the company tried to ne especially receptive to the consumer ideas. For example, it introduced a new flavor, Ralph’s Cantaloupe Cocktail, when its namesake, Ralph Orafino, wrote to the company and requested a melon-flavored drink. Also, in August 1995, the company sponsored the “First Annual Snapple Convention” in Hempstead, New York for 3,000 of the drinks’ most hardcore fans. The idea for this “Snapple love fest” came from the brand’s self-proclaimed “#1 Fan,” Jennifer Murry, who wrote to the company:

Dear Snapple Woman,
Shouldn’t Snapple have some kind of special day or holiday or festival even?
Because, you see people on TV, I mean, like the man that didn’t believe
Snapple was made of natural things or fruits. I think there should be a holiday or festival. Or a Snapple parade.

Quaker sent announcements for the convention to the quarter-million Snapple devotees who had felt strongly enough about the product to send personal letters to the company. In exchange for a $5.00 admission fee and 20 Snapple labels, Quaker offered the fans “36,000 square feet of taste tests, a Wendy look-alike contest, television commercials on video monitors, web surfing, a cooking demonstration, panel discussions featuring Wendy and real-life ‘stars’ of Snapple TV spots, trivia contests, Snapple-inspired artwork and fashions, raffles, miniature golf, and carnival games. Plus, each attendee received two fee bottles of Snapple.”

Despite the apparent success of the convention, Quaker made several critical errors in its first major selling season after acquiring Snapple. In a world where refreshment drink sales skyrocket in the summer season, Quaker neither followed a regular advertising schedule for Snapple, nor introduced new products quickly enough. As a result, supermarket sales slipped. June sales of Snapple iced tea dropped 19 percent, fruit blends dropped 25 percent, and lemonades dropped 32 percent from the previous year.

Snapple’s “healthy” reputation began to suffer, too. Jane Hurley of the Center for Science in the Public Interest - the same women who exposed the nutrition fallacies of movie theatre popcorn and Chinese food - pointed out that Snapple drinks are mostly sweetened water, containing less than 10 percent fruit juice. “It’s about the same as Hi-C, and no one ever called that health drink. We’re not saying to you this stuff will hurt you. It’s more of a rip-off than a healthy drink.” Other critics noted that a bottle of Snapple iced tea contained more calories than a Coke.

Further complicating matters, Quaker had expected to use Snapple’s extensive distribution network of 300 national distributors to push Gatorade into smaller retail outlets that Quaker had traditionally used. The company discovered too late that the Snapple distribution systems were not compatible with its existing Gatorade system. Quaker responded by trying to transfer big supermarket accounts from Snapple distributors to Gatorade distributors and encouraging the Snapple distributors to push the up-and-down-the-street channels harder, which the Snapple distributors refused.

Quaker Attempts New Strategies
Quaker management responded with drastic changes. They installed new people in brand management positions, reduced the number of flavors offered from 50 to 35, reduced manufacturers, and tripled the ad budget. In addition, Quaker also made changes to the flavor line, including introducing seasonal products such as cider tea for Halloween. At the same time, the company continued to push into supermarkets with new packaging: 12-packs, 4-packs, and plastic 32- and 64-ounce bottles.

Quaker worked on a system to process orders faster and make the bottling plants more efficient. This move cut inventory in half and enabled deliveries to be made within two days, instead of 21 days. In addition, Snapple announced plans to place highly visible coolers in supermarkets, just like Coke and Pepsi, and introduce a diet line of drinks.

SNAPPLE SALES DECLINE
The efforts to save the summer of 1995 were too little, too late, and Coke and Pepsi aggressively promoted new iced tea and fruit juice campaigns. Despite spending more than $40 million for a national summertime sampling campaign, Snapple’s sales dropped another 20 percent for the quarter. Supermarket tea sales were down 14 percent and juice sales fell 15 percent, prompting critics to question whether Quaker Oats had made a mistake in purchasing the company. Tom Pirko, President of Bevmark commented, “They bought the brand at a point it was past its zenith.”

Despite the disappointing summer, Quaker Oats management continued to think otherwise. Margaret Stender, Quaker Oats’ vice president of marketing enforced, “Snapple is on the verge of a comeback.” Despite the company’s apparent optimism, Lipton overtook Snapple in volume sales in the ready-to-drink tea category in 1995, although Snapple maintained its number one position in dollar sales due to its premium pricing strategy.

In 1996, Quaker attempted to move Snapple back toward more traditional marketing approaches. First, it introduced an inside-the-bottle-cap game promotion for 1996 and began a $40 million nationwide give-away campaign during the summer. Backed by a TV and radio ad campaign touting how Snapple was “spreading taste all over the place,” extensive “sampling brigades” passed out free Snapple at beaches, parks, and on street corners. Consumers could also call a toll-free number to get coupons good for free bottles. Next, it launched a new advertising campaign to replace the “Wendy” ads. Those ads had aired for years and some key Quaker Oats staff believed that the ads were losing steam and that Wendy’s New York brashness might be hindering Snapple’s acceptance in the Midwest. The company hired Spike Lee to direct several new spots, “Threedom Equals Freedom” and “We want to be No.3,” which announced that Snapple knew it was running in third place behind Coke and Pepsi. The company also revived “The Best Stuff on Earth” theme. Finally, Quaker terminated its “risky” associations with Rush Limbaugh and Howard Stern.

Quaker’s trouble with Snapple continued, however. Although revenues in the new diet drink segment grew 23 percent in 1996 to nearly 12 percent of total sales, the company continued to struggle. “We have no evidence that [Quaker is] closer to solving Snapple’s problems,”said Naomi Ghez, food-stock analyst for Goldman, Sachs & Co. Others were more pointed in their comments. “They can’t even give Snapple away right” noted Brandweek. “What the hell is Snapple? No one knows what it means anymore,” stated Alan Brew, a corporate brand consultant. In the first quarter of 1997, Snapple’s market share in the iced tea category dropped another 4.7 points to 16.7 percent. Although it continued to retain its number one position in the juice drink category, the brand had lost 2 share points to its competition.

TRIARC ENTERS THE PICTURE
In 1997, Quaker sold Snapple to the Triarc Beverage Group for $300 million. Triarc was a subsidiary of the Triarc Companies, a holding company run by two buyout specialists, Nelson Peltz and Peter May. Formed in 1929, the Triarc Companies and its predecessor had focused on the specialty chemical, natural gas, and textiles industries. In recent years, the firm had begun to diversify by collecting assets in the food and beverage sectors. By 1996, it had acquired Mistic Brands, a producer of premium non-alcoholic beverages, Arby’s Corporation, a national fast food franchise, and Royal Crown, a producer of soft drinks such RC Cola and Diet Rite Cola. Triarc Beverage Group CEO Michael Weinstein commented, “Well, we really think we bought… not a company, but a brand and not only the largest brand in the premium beverage category, but a brand that actually defines what the category is.”

The sale was met with mixed reaction. John McMillin, a food industry analyst at Prudential Securities, stated: “It was a fire sale price…The bad news is the investment has been a disaster, the good news is they’re trying to put it behind them.” Michael Branca, a food industry analyst at Lehman Brothers, expressed a different view, stating, “Triarc beverage management is highly respected in the beverage distribution business…Snapple could well be reborn under Triarc.”

Triarc’s Initial Moves with Snapple
While beverage industry analysts predicted that the Snapple brand was doomed for phase-out, Triarc was confident that it could restore Snapple to its pre-Quaker market share and status. At the time of Triarc’s purchase of Snapple, consumers had more choices between ready-to-drink beverages than ever before. By mid-1997, the New Age market had undergone yet another shake-up. Pepsi stopped distributing fruit drinks from Ocean Spray and launched its own FruitWorks brand. Other new brands like Nantucket Nectars, a line of 100 percent juice drinks packaged in unique bottles, and Campbell’s Soup Co.’s V8 splash, a carrot-based blend of fruit juices targeting younger consumers, had entered the market rapidly and threatened to squeeze out even more market share from Snapple. To breathe life back into Snapple, Triarc invested heavily in new product development and employed dynamic marketing strategies that would differentiate Snapple from competitors and recapture consumer’s attention.

Amid much speculation, Weinstein, with the assistance of senior vice president of marketing Ken Gilbert, immediately began the process of rebuilding the brand. Triarc soon announced that it would apply the same marketing principles to Snapple that it used to turn around its successful Mistic beverage line: edgy advertising, strong distributor relationships, colorful labels, and focused street sales. Within weeks, Weinstein met with former Snapple spokeswoman Wendy Kaufman. “If we can just get the brand back to where it was, we’ve done a great job,” said Weinstein. He admitted that bringing Wendy back would not turn Snapple around, but he felt it would signal the return of “speed, fun, innnovation and quirkiness.” The first set of Snapple ads under Triarc’s direction featured Wendy’s reappearance on a desert island and the labels of several of Snapple’s products featuring Wendy’s face to symbolize thereturn of Snapple to its core values. “Wendy this year is going to do lots of local appearances,” said Steve Jarmon, vice president of communications. “We’re getting her involved with grass-roots kinds of activities. She draws well.”

New Products
One of Triarc’s most significant moves to revive the brand was to invest greatly in new product development. Some of new products included:

Whipper Snapple Perhaps the most innovative and important development to emerge out of Triarc’s product development efforts was the Whipper Snapple, a fruit smoothie beverage introduced in the summer of 1998. Whipper Snapple aimed at capitalizing on the growing popularity of juice brands and offered the first bottled fruit smoothie to hit the beverage market. Whipper Snapple was touted as a breakthrough product for Snapple because of its unique bottle design and eye-catching labeling, the product’s creative name, and the variety of flavors offered including a lineup of “power smoothies” containing popular herbal ingredients such as bee pollen, gingko biloba, and wheat grass aimed at capturing health-conscious consumers.

Sweet Tea To create greater appeal of Snapple among Southerners, Snapple introduced its Sweet Tea product line, which added cane sugar and other sweeteners to traditional Snapple tea recipes to create a Snapple version of the popular Southern beverage. The development of variations of a lemonade iced tea competed with a similar beverage marketed by Nantucket Nectars was begun and expected to reach consumers by 1999.

Snapple FarmsTriarc launched Snapple Farms, a 100 percent pure juice drink with the potential to enter the lucrative school lunch market. The fresh and natural approach of the Snapple Farms line was aimed at changing consumer impressions of Snapple as a sugary, unnatural beverage.

Snapple Hydro Snapple Hydro thirst quenchers were re-launched in April 1999 after an unsuccessful try in 1998 under the Refreshers brand name. The range was composed of several fruit juices and two real-brewed sun teas. Snapple Hydro had all the characteristics of a sport beverage: as with Gatorade, it contained sodium electrolytes, which enable the body to replenish the chemicals lost during exercise, and had less sugar than regular sodas. Hydro wanted to be seen as the ideal beverage for health-conscious consumers looking for easy-to-drink refreshment during leisure activities or simply when they were “on the go.” Hydro relied on Snapple’s keys of success: it offered all-natural ingredients and punchy fruit flavors in an innovative 20-ounce plastic bottle.

Snapple Elements In April 1999, Snapple launched Snapple Elements - a range of six-flavor herbal-enhanced fruit drinks and teas - positioned in the fast-growing Wellness Beverage Category along with SoBe. These new functional drinks were intended to offer more than refreshment. For example, Elements offered health-conscious consumers the benefits of guarana or gingko biloba, for energy and digestibility respectively, combined with the pleasure of great tasting fruit juice or tea. With product names such as Fire, Moon, Sun, or Earth and a “refresh your natural resources” positioning, the New Elements lineup was a means to enhance the healthy product side of Snapple’s brand image.

Rejuvenating Snapple’s Marketing
Many of Triarc’s marketing efforts aimed to recapture the “feel” Snapple had before it was purchased by Quaker (i.e., using off-the-wall marketing techniques such as nationwide contests and unusual bottle labeling). The company once again established a sponsorship agreement with two controversial personalities: shock jock Howard Stern for Snapple and conservative talk show host Rush Limbaugh for Diet Snapple.

In addition to the help of Wendy Kaufman, “the Snapple Lady,” In the brand’s marketing program, Triarc sought the attention of consumers through imaginative nationwide promotion campaigns and contests. The “Win Nothing Instantly” contest was a popular 1998 marketing campaign in which Snapple consumers won unique cash prizes such as “free rent for a year” or “no car payments for six months.” Subsequent promotion campaigns focused on using Snapple’s packaging and labeling to emphasize the renewed quirkiness of the brand.

Triarc’s marketing team hoped that these unusual marketing campaigns would restore “attitude” to the brand and give it the creative buzz it once benefited from while still a leading beverage brand earlier in the decade. As one Triarc executive explained, “This brand is not about marketing b.s., but about having fun, being quirky, having the best stuff - including real people.” Recognizing the importance of packaging and labeling of its products to capture the attention of consumers, Snapple executives redesigned the theme of the brand’s labels to reflect a woodcut motif to emphasize Snapple’s purity. Triarc also began exploring new methods of labeling so as to maximize color quality and reduce the occurrence of label damage.

Triarc’s innovative methods paid off. Despite the continued fierce competitiveness of the beverage market, Triarc slowed Snapple’s downslide by boosting sales across the board. In its first year operating Snapple, Triarc sold 100 million more bottles of Snapple than Quaker would have if Quaker’s 22 percent first-half sales decline had continued. In fiscal 1998, Triarc increased annual sales for the first time since 1995. Sales of Snapple rose 8 percent in 1998 and contributed significantly to Triarc’s 50 percent increase in premium beverage sales that year. “This is a fashion business,” commented Havis Dawson of Beverage World. “Snapple is coming back into fashion because it’s once again asking the question: What’s new?”

TRIARC’S PLANS FOR FURTHER GROWTH
With the Snapple brand “back on its feet,” Triarc now needed to implement new marketing plans to ensure its continued growth and prosperity. Snapple’s marketing program for 1999 was a mixture of traditional and more innovative elements. Triarc’s objectives were to re-assert the brand values that helped to build Snapple’s success, as well as to keep their brand on a cutting edge and moving forward. Back-to-the-roots advertising campaigns and sponsorship programs, combined with the launch of Snapple’s website and an innovative outdoor campaign, were also key points of Snapple’s marketing program.

Television Advertising
In April 1999, advertising agency Deutsch N.Y. developed two new commercials advertising Snapple’s core fruit juice and iced tea as part of a $27 million television and radio campaign. They both highlighted a strong product-focused message aimed at strengthening the key differentiating asset of Snapple’s core products against lower-end competitors. The spots stuck to the premium and all-natural positioning of the brand and emphasized thefact that Snapple was made from real juice. The ads presents the “Little Fruits” characters - actors dressed as bananas, strawberries, lemons, and other Snapple ingredients. One ad played on the idea of Snapple as a “safe home” for “at risk” fruit. As a narrator informed the audience, “At Snapple, we know the pressure facing young fruit today, and how easy it is to go bad,” the ad showed some of the little fruits committing crimes against other fruit. These scenes were contrasted with footage of fruits playing music and playing in the grass at the safe home with narration stating, “That’s why … we’ve created aplace where good fruit can come and get even better.” This product focus was presented in a quirky, off-kilter, not too adversarial tone, as summarized in the tagline, “The Best Stuff is in Here.” The ad was honored by Adweek magazine as one of the best ads of 1999.

The campaign included television, radio, outdoor media, and a new communication vehicle, which created impressions of the Snapple logo in the sand across U.S. beaches during the summer of 1999.

Sponsorships
In 1999, Snapple Iced Tea became the official tea of the New York Yankees, an appropriate match for the brand given Snapple’s Brooklyn roots. A fully integrated marketing program enhanced the local significance and impact of this program. Apart from traditional vending and signage, the newly-launched Sun-Tea and Diet Sun-Tea brands were specially promoted, commercials were aired during the games, and a donation of Yankees home game tickets was organized through acharity. Triarc also signed on Olympic figure skating champion Tara Lipinski as a Snapple spokesperson, promoting the sponsorship with a humorous ad spoofing the association.

Web Site
Snapple launched Snapple.com in May 1999. Designed by SF Interactive, the site was intended to be an active part of Snapple’s integrated marketing program. It provided an innovative vehicle to support on-going promotion programs, as well as to relive Snapple’s advertising campaign to unveil novelties. The tone of the website was designed to fit Snapple’s brand character, enhancing the humorous side of the brand image and leveraging the graphic look and feel of Snapple equities.

Brand Performance
Following these new marketing efforts, sales of Snapple cases rose 14 percent during the second quarter of 1999. The “New Age” beverage category grew 15 percent in 1999 and Snapple maintained the number one market share in the category. In 2000, Snapple’s had a 40 percent market share and surpassed its 1999 sales numbers.

Snappleintroduced its first brand extension in July 2000 in the form of four new candy products -Snapplets hard candy, Beans jelly beans, Fruits chewy candy, and Whirls gummies. The candies all bore the Snapple trademark, but were created and manufactured under license by Cody-Kramer Imports. During the development of these new promotions and products, Snapple’s financial performance continued to improve. In the first six months of 2000, Snapple volume increased 27 percent compared with overall juice industry growth of only 11 percent. For that period, Snapple’s revenues rose 7 percent from the same six months the previous year to $349.4 million.

Following this success, Triarc spun off the Snapple Beverage Group into its own business unit, which included Snapple, Mistic, Royal Crown, Diet Rite, Stewart’s, and Nehi. Triarc Beverage Group CEO Michael Weinstein became the new Snapple Beverage Group CEO.
THE SALE OF SNAPPLE … AGAIN
In September 2000, Cadbury Schweppes announced plans to purchase Snapple Beverage Group for $1.45 billion (12 times the estimated EBITDA for Snapple Beverage Group).Triarc expected to gain $700 million from the sale. Careful to avoid making the same mistakes as Quaker Oats, Cadbury kept Snapple management intact, preserved the company’s headquarters in Long Island, NY, and maintained the existing distribution system. Michael Weinstein remained CEO of the Snapple Beverage Group, which Cadbury administered separately from its Doctor Pepper/Seven Up unit. The acquisition of the Snapple Beverage Group gave Cadbury a 2 percent boost in its share of the overall (carbonated and non-carbonated) refreshment beverage market.

Cadbury had high hopes for synergies and cost benefits that could be gained from the purchase. The company identified nearly $500 million in cost saving opportunities that included savings in manufacturing and distribution, administration and systems, and raw material procurement. Cadbury also planned on significant potential revenue synergies by expanding Snapple distribution, while at the same time selling more Mott’s, Dr. Pepper, and 7UP products through the extensive Snapple distribution system. The company even had plans to extend the Snapple brand to Cadbury’s existing confections business.

The purchase of Snapple Beverage Group also made Cadbury a leader in non-carbonated premium New Age beverages, which according to Cadbury COO John Brock, “Put [Cadbury] in an outstanding position to compete.” Considering that Triarc bought Snapple from Quaker in 1997 for $300 million, its sale to Cadbury represented the final step in Snapple’s turnaround in the hands of Triarc management.

Cadbury Schweppes Takes Over
Cadbury Schweppes was a major international company with origins stretching back over 200 years. Cadbury, based in the United Kingdom, had over 58,000 employees worldwide and a market capitalization of over $20 billion. The company was organized around five regional operating units: Americas Beverages, Americas Confectionary, Europe, Middle East, and Africa, Europe Beverages, and Asia Pacific (see Exhibit 3). The Americas Beverages group sold abroad range of beverages, including carbonated drinks, fruit juices, iced teas, and water. The biggest brands in this group were Dr. Pepper, Mott’s, Snapple, 7UP, Hawaiian Punch, Sunkist, and A&W. Dr. Pepper was the most important carbonated soft drink brand and accounted for almost half of U.S. carbonated sales.

Cadbury had pursued an aggressive strategy of acquisitions since buying the Snapple Beverage Group. In 2003, the company purchased long-time Snapple rival Nantucket Nectars for an undisclosed sum. Also that year, Cadbury acquired Adams Confections for $4.2 billion, bringing the Halls, Trident, and Dentyne brands under Cadbury’s control.

Competitive Environment
With an ever increasing number of beverage categories (teas, juices, energy drinks, meal replacements, water, etc.), competition among beverage producers remained fierce. In 2002, Beverage World reported that 1,235 new beverage products were introduced in the United States alone. By November of 2003, only 250 of those products were still on the market. This was not a surprise to those in the industry - the failure rate for new beverage products had hovered at the 80 percent mark for years. In this environment, it was fully expected for Snapple to encounter significant competition. Many Snapple products, including Whipper Snapple, Snapple Farms, and Snapple Hydro, were either unsuccessful or discontinued to make room for new products (see Exhibit 4 for list of “Retired Flavors” and Exhibit 5 for growth estimates of Snapple revenues).

New Advertising
In 2001, Snapple added some “edge” to its advertising. The company retainedthe “Little Fruits” characters, and cast them in ads themed around reproduction and jail. One ad showed the fruit attending a sex-education seminar where the instructor read from “The Joys of Ripening.” Footage of a lime studying a centerfold in Peeled (the fruit equivalent of Playboy), a raspberry and lemon discovered in a compromising position in a closet, and a banana and strawberry locked in an embrace along the shore of a beach plays before the ad concludes, “With fruit joined together, it’s a very special thing - at Snapple.” Another spot featuring a prison was titled “Where Bad Fruit Go.”

In summer 2001, Snapple introduced a new energy beverage called Venom, designed to compete with the likes of Red Bull, Coca-Cola’s KMX, and Anheuser-Busch’s 160. Venom contained the equivalent caffeine of one cup of coffee and was flavored with a blend of citrus and juniper. Like other energy drinks, Venom was priced above $2.00 for a slender 8-ounce can. Venom initially received no advertising support.

In 2002, Cadbury developed a new advertising campaign to replace the “Little Fruits” spots, which had been running since 1998. Created by the ad agency Deutsch, this “Bottles Personified” series featured an anthropomorphized Snapple bottle in a number of real-life situations. The ads targeted many demographics, including 18-24 year-olds who wanted to be different, fun-seeking 12 year-olds, and core Snapple consumers in their 30s and 40s. The campaign also involved a promotion, called “What’s your story?” that asked consumers to share numerous anecdotes from their lives. Winning entries were then ”acted out” by animated Snapple bottles in nationally-televised commercials. These included a performance of a boy band made from dressed-up Snapple bottles, and a wild house party filled with Snapple bottle teens that comes to a halt when the parent Snapple bottles come home. Snapple took the campaign one step further in the summer of 2002 by launching the Dye Hard Snapple Tour. This 13-city extravaganza included Snapple chugging contests, music, a mobile barbershop that gave participants mullet-enabling hair extensions, gaudy dye jobs, and in some cases, Mohawk haircuts. The tour attracted audiences as large as 50,000 in some cities and huge media attention. By Snapple’s account, the 14,000 mile tour generated more than 70 million PR impressions.

Other ads in the “Bottles personified” campaign included wig-wearing Snapple bottles performing as a heavy metal band, peeking in showers a la Porky’s, and a King-Kong spoof, where a giant robot attacks a city, and stops only to pick up a lovely young woman (portrayed by a Diet Snapple Peach). One billboard ad caused some controversy in 2002. It showed two bottles with hair and Delta Omega Delta ball caps in a fraternity house looking smug over a prostrate pledge. A broken pledge paddle sits nearby. The ad prompted an e-mail campaign to Snapple headquarters, explaining that the ad, depicting violence, was targeted at teens. Overall, however, the campaign was effective; Beverage Digest reported that Snapple’s volume rose 3.2 percent for the first nine months of 2003, while the category shrank 0.9 percent.

“Official” Beverage of New York City
Building off the 1999announcement that Snapple was the official iced tea of the New York Yankees, Snapple and City of New York announced a five-year, $166 million vending and marketing agreement in 2003. The agreement made Snapple the exclusive provider (via vending machines) of water and fruit juices in the City’s 1,200 schools. Proceeds from vending machines were used to support sports and physical education programs. Outside of schools, another agreement made Snapple the official iced tea, water and chocolate drink (Yoo-hoo) for vending machines in the city.

There were some initial problems with the deal. New York agreed to sell 750,000 cases of Snapple in city buildings and parks during the first year. However, after seven months into the deal, only 26,000 cases had been sold.

Continuing Innovation at Snapple
While pursuing these other marketing efforts, Snapple continued to introduce new and exotic flavors and announce them in creative ways. In a 2002 tongue-in-cheek press release titled “Apricot and Orange Tie the Knot on Valentine’s Day,” the company wrote, “Snapple announces a fruit-ful union - the marriage of Ms. Apricot to Mr. Orange on Valentine’s Day. The new couple, and unexpected pairing of Apricot and Orange, will go by the name of Snapricot Orange and will reside in Snapple’s signature bottle.”

Snapple unveiled other new products around other special days. Just in time for April’s Fools Day 2003, Snapple announced its new Kiwi Teawi Iced Tea. Sporting an upside-down label, Snapple encouraged consumers to “Flip your hat, turn your shirt backwards, and keep a bottle close by your side - if anyone asks why you’re dressed so oddly, reply, ‘The Kiwi in me did it’.” Just two weeks later, Snapple took advantage of early-April tax season anxiety by proclaiming, “Whether you’re going crazy or handling the season in stride, Snapple hears your tax day by needs and just in time for April 15th has created the new ‘Go Bananas’ juice drink.” In honor of its 2004 drink “What-A-Melon,” Snapple offered a $25,000 prize and a year’s supply of the drink to anyone who could break the world record for growing the world’s largest watermelon.

Snapple entered the meal replacement market in 2003 with ‘Snapple-a-Day.” Touting it as a “Delicious way to keep fit,” Snapple-a-Day contained 24 essential minerals and vitamins as well as calcium, fiber, and protein. The product, squarely aimed at meal replacement stalwarts Slim-Fast and Ensure, was offered in a resealable plastic bottle that eliminated the metallic taste that Snapple claimed its competitors had, and allowed consumers to drink the beverage while “on the run.” Snapple soon followed with a low-carb version in three different flavors.

In the summer of 2004 Snapple began licensing its name and flavors to the lip balm company Lotta Luv. Lotta Luv produced Snapple-flavored lip balms flavors such as Kiwi Teawi, Pink Lemonade, Go Bananas, and Fruit Punch. The products were sold in containers that resembled screw top Snapple bottle caps. Prices ranged from $2.50 to $5.00.

In 2005, Snapple launched Diet Lemonade Iced Tea and Diet Plum-A-Granate (plum and pomegranate-flavored) Iced Tea. These flavors were promoted as part of Snapple’s “Return the Favor” series, where customers said nice things about Snapple and then Snapple finds people to say nice things about the customer. More importantly, these spots marked the return of Wendy Kaufman to Snapple’s advertising efforts. She provided narration for the television, radio, and Internet ads.

In 2006, Snapple launched three new television spots under the “Baby Steps” series. “Revolving Door,” “Recliner,” and “Treadmill” all highlighted the benefits of the antioxidants that naturally were in Snapple’s iced tea products. The three spots took on a humorous tone. In “Treadmill” an average looking guy in his early 30s held up a Diet Snapple and said to the camera, “Diet Snapple Iced Tea has antioxidants so it’s better for me.” Loud, triumphant music played as the man turned to the treadmill in his apartment and plugged it in. The music stopped suddenly and the man took a sip of his Snapple and walked out of the room. A Snapple voiceover explained, “Diet Snapple. A baby step to a better you.”

That same year, Snapple introduced Snapple White Tea to reverse its sliding market share in the tea category. White Tea was made from young white tea leaves and produced a lighter flavor with fewer calories than Snapple’s other tea flavors. Snapple launched three flavors - Green Apple, Nectarine, and Raspberry, and used the slogan, “The Lightest Tea on Earth.” Jim Trebilcock, Snapple’s senior vice president of brand management explained the strategy, “Antioxidants and nutritional benefits of tea are placing the spotlight in non-carbonated beverages. We want to bring this to Snapple drinkers.” Television commercials were planned to air in late 2006.

CONCLUSION
As the beverage landscape became increasingly competitive in the mid-2000s, Cadbury moved Mott’s and Snapple into a combined facility outside New York City, which completed the integration of the North America beverages operation into a unified entity. This move also further distanced Snapple from its roots as an independent upstart. Despite rising sales in 2005, which followed three years of declines, Snapple continued to lose share in the iced tea market (see Exhibit 6 for Snapple revenues).

Due to the increasingly competitive environment, many industry analysts believed that Cadbury would spin-off the Americas Beverage business, or the overall beverage business. When questioned on this point in December 2004, Todd Stitzer, Cadbury’s CEO, said that Cadbury was committed to the beverage business for the foreseeable future. When pushed to give a more direct answer to the possibility of a spin-off, Stitzer replied, “I never say never.” Snapple, which had survived a series of corporate owners, would likely remain intact following another sale or spin-off. The brand was not performing as well as it had at its peak, however, and Cadbury hoped that additional consumers would be attracted by marketing activities conveying Snapple’s independent spirit, while at the same time realizing efficiencies by combining Snapple with its other American beverage operations.

Exhibit 1: List of Snapple Flavors in 2006

Teas Lime Green Tea Mint Tea Very Cherry Tea Peach Tea Caffeine Free Lemon Tea Raspberry Tea Lemon Tea Kiwi Teawi Just Plain Tea Unsweetened

Juices Snapricot Orange Mango Madness Snapple Apple Orangeade Cranberry Raspberry Raspberry Peach Fruit Punch Summer Peach Kiwi Strawberry Go Bananas What-a-Melon

Lemonade Lemonade Iced Tea Pink Lemonade Lemonade Super Sour Lemonade

Diet drinks Lime Green Tea Peach Tea Pink Lemonade Raspberry Tea Cranberry Raspberry Kiwi Strawberry Lemon Tea Orange Carrot Snapple Apple Lemonade Iced Tea Plum-a-Granate Iced Tea

Snapple-a-Day Strawberry Banana Tropical Blend Peach

Elements Metal (orange) Venom (citrus) Fire (dragonfruit) Rain (agave cactus) Subzero (cherry) Meteor (Tangelo)

Exhibit 2: Selected Beverage Market Segments and a Partial List of Competitors

Segment Competitor (parent company)

Teas Nestea (Coca-Cola) Lipton (PepsiCo) Arizona (Arizona)

Juices Minute Made, Hi-C (Coca-Cola) VeryFine, Capri-Sun (Kraft) Tropicana, Dole (PepsiCo) Sunny Delight (Procter & Gamble) V8 (Campbell Soup) SoBe (PepsiCo)

Energy drinks Red Bull Monster (Hansen) Adrenaline Rush, No Fear (SoBe) KMX (Coca-Cola) Amp (PepsiCo) Frappuccino, DoubleShot (PepsiCo, Starbucks) 180 (Anheuser-Busch)

Water Dasani (Coca-Cola) Aquafina (PepsiCo) VitaminWater (Glaceau) Evian (Group Danone) Poland Spring (Nestle)

Meal replacements Ensure (Abbott Laboratories) Slim-Fast (Unilever) Advantage Shakes (Atkins) Odwalla (Coca-Cola)

Exhibit 3: Cadbury Schweppes’ Operating Units and Operating Profits

Source: Company reports

Exhibit 4: Snapple’s “Retired Flavors” as of 2006

Snap-Up/Snapple Sport
Fruit Flavored Lemon Lemon Lime
Orange

Snapple Refreshers
Lemon Sport Mountain Grape Orange Punch
Sport Punch Strawberry Lemon Strawberry Melon
Whipper Snapple

Teas
Cactus Tea Cider Tea Cranberry Iced Tea
Diet Sun Tea Ginseng Tea Green Tea with Lemon
Lemon Sun Tea Mango Iced Tea Orange Iced Tea
Orange Jasmine Passion Fruit Iced Tea Peach Sun Tea
Strawberry Iced Tea Sub Tea Sweet Tea
Just Plain Tea Sweetened

Juice Drinks
Apple Cherry Bali Blast Grape Watermelon
Guava Mania Papaya Colada Samoan Slash
Strawberry Ralph’s Cantaloupe Cocktail

100% Juice
Amazin’ Grape Apple Crisp Apple ‘N Cherry
Apricot Royale Cranberry Grapefruit Cranberry Royale
Dixie Peach Grapefruit Juice Papaya Holiday
Passion Supreme Pineapple Juice Pink Grapefruit
Raspberry Royale Straight Grape Strawberry Royale

Lemonades
Raspberry Lemonade Strawberry Lemonade Sun Lemonade

Sodas
Diet Lemon Lime Ginger Ale Jamaican Ginger Beer
Kiwi Peach Passion Supreme Peach Melba
Raspberry Royale Strawberry

Seltzers
Black Cherry Lemon Lime Original
Tangerine

Diets
Diet Mango Madness Diet White Grape Diet Ruby Red
Exhibit 5: Growth of Estimated Snapple Beverage Group Revenues

1997/1998 1998/1999 1999/2000 2000/2001 2001/2002
Brand
Elements Teas - - -4.0% -16.7% -70.0%
Regular Teas 12.9% 1.9% 9.8% 12.0% -12.4%
Snapple Teas 12.9% 9.3% 8.9% 10.3% -14.9% Elements Juices - - 92.0% -12.2% -18.0%
Whipper Snapple - -40.0% -73.3% -83.8% -76.9%
Regular Juices -15.1% -2.3% 2.3% 11.0% 0.3% Snapple Juices 7.1% 3.7% 5.2% 2.5% -3.9%

All Other Snapple
Mistic Teas 0.0% -7.7% -58.3% -16.0% -26.2%
Mistic Juices -16.4% -3.1% -9.6% -19.4% -18.4%
Stewart’s 16.0% 17.2% 14.7% 1.8% 15.6%
Orangina 5.2% -5.2%
Yoo-hoo 4.0% -3.4%
Nantucket Nectars 4.8% 17.4%
TOTAL 4.3% 6.6% 3.3% 3.1% -1.4%

Source: Beverage Marketing Corp.

Exhibit 6: Snapple Beverage Group Revenues

Year Revenues (in millions)
1997 746
1998 778
1999 829
2000 856
2001 882
2002 870
2003 797
2004 762
2005 792

Source: Beverage Marketing Corp.

QUESTIONS:

1. How would you characterize Snapple’s brand image and sources of brand equity? What are the strengths and weaknesses of the brand’s existing personality and image?
2. Where did Quaker go wrong? What could it have done differently? Is Cadbury in danger of making the same mistakes as Quaker did?
3. How effective and appropriate do you think Triarc’s marketing program was? How effective and appropriate do you think Triarc’s marketing program is? What changes, if any, would you recommend Cadbury make to Snapple marketing?
4. How has Snapple’s sale to Cadbury affected Snapple’s equity? Are there dangers of the brand’s association with a large corporation?
5. What do you think Cadbury’s next moves with Snapple should be? Should the company attempt to expand or reposition Snapple? Should Cadbury spin-off its America Beverages group?