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CAN THE SNAPPLE DEAL WORK FOR QUAKER?
Published November 7, 1994
That's the question Greg Burns poses in this week's BUSINESS WEEK. The answer: "It can, but not right away. Quaker will pay dearly for a company whose profits dropped 74% in the third quarter. ... Shoring up Gatorade and Snapple, both top brands with declining market shares, probably will cost big bucks and take more time than Quaker admits." Distribution will "make or break the acquisition." Quaker sells most Gatorade in supermarkets and convenience stores, while Snapple "made it big with cold, single-service glass bottles through vending machines, restaurants, and independent retailers." Quaker needs to convince Snapple's 300-plus distributors to carry Gatorade. It also needs to renegotiate their "exclusive-territory agreements to bring Snapple into supermarkets on grocery wholesaler trucks." Two things to looks for: Snapple overseas and Snapple in plastic bottles (BUSINESS WEEK, 11/14 issue). Salomon Brothers analyst Les Pugh "notes that the Snapple merger does little to boost Gatorade's strength outside America" (THE ECONOMIST, 11/5 issue). Documents filed by Snapple after Quaker's $1.7B bid for it late last week showed that Snapple "has cut its internal earnings projections for the rest of the year, seemingly indicating a continuation of problems that hurt Snapple's summer performance" (Gibson/Grossman, WALL STREET JOURNAL, 11/7).