Snapple Case
Essay Preview: Snapple Case
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1. What were the key decisions that contributed to Snapples early success in the period 1972-1986?
Good channel design by allocation tasks, making smart decisions about aligning incentives with distributors and when to outsource. For example, Snapple used internally generated funds, outsourced production and product development, and built a network of (individual) distributors across New York City.
In addition they broadened the product line to further incentivize and align the objectives of the distributors with Snapple (i.e. “keeping them occupied”).
Experimentation regarding coordination and incentives with distributors: “Some succeeded and many failed, but premium pricing on the successful products covered losses on the failures.”
Brand recognition through unique advertising targeting the right market segment e.g. health conscious urban professionals. Though the ads were so bad they didnt do any harm to the brand, and luckily the ads actually came off as charming and connected with the brand image.
2. What were the key decisions that contributed to Snapples later success during the “glory years” 1987-1993?
Snapple managed their channel design very well. As the company grew, they brought in professional management, intensified the independent distributor system and focused on increasing the brand name and presence in the East Coast. They wisely postponed to try and win the West Coast prematurely and instead decided that “let the West Coast come and get us”.
As such Snapple invested strongly in their cold channel distributors, which were predominantly family-owned, servicing convenience chains, delis, restaurants. These aligned incentives contributed to overall success of Snapple.
The effective use of advertisement and sponsored radio programs contributed heavily to the differentiated brand image of Snapple. For example, Snapple created a unique “counter-marketing” strategy appealing to 1980s yuppies by using Wendy Kaufman, Howard Stern, Rush Limbaugh and Shane the wonder dog. In doing so, Snapple created an atmosphere of authenticity around it, which was also strengthened by the story of the founders success in the multinational dominated industry.
3. Why was Quaker willing to pay so much for Snapple?
Quaker needed a new product to expand its rapidly growing business of beverages, which at that point mainly consisted of Gatorade. Snapple, focused on a different market segment, could be complementary to Quakers Gatorade consumer group.
After its failed overseas joint venture with Coca-Cola, Quaker explored how to increase Gatorade sales in the domestic US market. For