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SNAPPLE GIVEAWAY FAILS TO HEAT UP SUMMER SALES;BIG PROMOTION UNABLE TO STOP OUBLE-DIGIT DECLINES IN SALES

By Published on .

Despite a hastily arranged, $20 million program personally overseen by Quaker Oats Co. Chairman-CEO William D. Smithburg to give away Snapple, the brand's sales and market share dried up during the crucial summer period.

In announcing the promotional campaign in July, Mr. Smithburg assured investors its success or failure would dictate Snapple's future with Quaker Oats.

JUICES DOWN 15%

In convenience and grocery stores, which account for about half of Snapple's sales, dollar volume sales of its fruit juices dropped 15% during the 12-week period ended Sept. 14, according to A.C. Nielsen Co. data. Juices-which Quaker said accounted for about 54% of Snapple's $600 million in 1995 sales-weathered a 1.1-percentage point year-on-year drop in market share to 7.3%.

At the same time, Snapple tea sales plunged 14%, losing 2.5 share points to 21.4%.

LAGGING BEHIND CATEGORY

Snapple's setback was worse than results for the overall categories in which the products compete. Juices were down 5% industrywide this summer, while ready-to-drink teas dropped 4%.

Some prominent competitors did see bigger declines, albeit not after big promotional campaigns.

Coca-Cola Co.'s Minute Maid saw a 72% drop in sales, and Veryfine Products' juice drinks fell 25%, the Nielsen data show.

The Nielsen data represent about half of Snapple's sales volume, Quaker said. The other half is distribution in smaller outlets such as delis and sandwich shops, considered difficult to monitor.

Quaker will release third-quarter earnings Oct. 24, when Mr. Smithburg is expected to brief financial analysts on his plans.

"He's analyzing the performance data and doing what he said he would do," said a company spokesman, who declined to comment on the significance of the summertime sales. "We are looking at a broad range of options."

"They should do some prudent things in scaling back Snapple or looking at divestitures," said John McMillin, a food analyst at Prudential Securities Research.

The disappointing numbers are yet another comedown for Quaker since it bought Snapple for $1.7 billion in late 1994. Last year, Snapple lost $100 million, including one-time charges, and in February, Quaker President Philip Marineau resigned. In August, Quaker named former Arizona Beverages operations chief Michael Schott to head Snapple.

SMITHBURG IN CHARGE

Even before hiring Mr. Schott, Mr. Smithburg personally took charge of this summer's campaign, in which Quaker handed out millions of bottles of Snapple.

In an August conference call, Mr. Smithburg disclosed a fallback position, saying that if he were to "regionalize" the business to the coasts, Snapple immediately would become profitable.

The Northeast, for example, accounts for about 50% of Snapple's sales; the West Coast generates 20% to 25% of the total.

Ms. Waters is associate editor at Crain's Chicago Business.

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