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Snapple's Second IPO

The long and interesting story of beverage company Snapple took another turn last week as the company officially filed for its second IPO. The current owner, Triarc, seems to have repaired what the previous owner, Quaker Oats, had damaged.

By Paul Larson (TMF Parlay)
July 6, 2000

Last week, the premium beverage company Snapple filed to go public. Again. Snapple is hoping to raise $115 million as parent company Triarc (NYSE: TRY) spins off portions of its beverage businesses. Snapple will eventually be a completely independent entity again and will even get some of Triarc's brands such as RC, Mistic, and Nehi in the deal.

On the surface, it appears that Triarc has done a much better job with Snapple than its previous owner, Quaker Oats (NYSE: OAT). Quaker paid a whopping $1.7 billion for Snapple back in 1994, giving most of Snapple's old investors oversized profits. Quaker was hoping to replicate the success it had seen with its 1983 purchase of Gatorade, which had become one of its most popular and profitable products.

But soon after Quaker bought the company, Snapple's business hit a wall. It suffered the double whammy of being hit with decreasing consumer interest and increased competition. Quaker didn't help the situation by messing with Snapple's previously successful marketing campaign (remember the Snapple Lady?) and also fouling some of Snapple's distributor relationships.

Soon after Snapple was in Quaker's control, it started to bleed in a big way. Thirsty for cash to pay for the acquisition, Quaker was forced to hit the financial pawn shop and sell several of its frozen food and pet food businesses. Meanwhile, Snapple continued to drift further and further out of the mainstream's consciousness.

By 1997, Quaker shareholders were seeing red. Profits were suffering, and the stock had been flat as Kansas for three years. Quaker's CEO of 18 years was shown the door, and the pressure was on to do something with Snapple. That something ended up being a sale to competitor Triarc for $300 million, a price less than 20% of what Quaker had paid for Snapple just three years earlier.

Quaker has gone on living just fine without Snapple, and Triarc appears to have done quite well with the previously troubled business. Beyond bringing back the Snapple Lady, Triarc has also brought back the profits to the beverage company. According to its IPO filings, the new, improved Snapple had sales of $854 million and profits of $14 million in 1999. The profit margins are nothing to crow about, but the trends are encouraging for a turnaround story.

Snapple's fourth incarnation is likely to be much different from any of its previous three. The company will have the flexibility of a funky, independent company again, but it will also have Triarc's established brands under its belt.

Your Turn:
What do you think of Snapple's IPO? Will Snapple's shares be a hot commodity like the drink was in the early '90s, or will it be stale on arrival? Take our poll.

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