Quaker Oats Co.

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Three millers—Ferdinand Schumacher, Henry Parsons Crowell and Robert Stuart—founded Quaker Oats Co. in 1901. Each man had his own area of expertise: Mr. Schumacher focused on milling; Mr. Stuart, on packaging, production and shipping; and Mr. Crowell, on advertising.

For Quaker, Mr. Crowell pioneered scientific endorsements, customer testimonials, cash-prize contests, sampling, market testing, giveaways and box-top premiums. He also developed the Quaker gentleman icon the company continues to use.

The company came out with its first cold cereals, Puffed Rice and Wheat Berries, and in 1908 hired advertising agency Lord & Thomas to help promote them. Agency head Albert D. Lasker convinced Mr. Crowell to change the name of Wheat Berries to Puffed Berries to simplify the advertising by promoting two puffed cereals, and he convinced him to raise the price of the first cold cereals from 10¢ to 15¢ a box and invest the extra nickel in advertising.

The relationship lasted for 30 years until Quaker hired a company to judge all its advertising for effectiveness before it was released. Mr. Lasker resigned the account in 1938.

By 1940, the business was divided between Ruthrauff & Ryan (Quaker Oats, Puffed Wheat and Puffed Rice), Sherman & Ellis (Aunt Jemima), Mitchell-Faust Advertising (macaroni products) and Sherman & Marquette (Farina and Ful-O-Pep Feeds). After World War II, Needham, Louis & Brorby replaced Sherman & Ellis. A decade later, further agency changes were in place, with Compton Advertising, Clinton E. Frank Inc. and J. Walter Thompson Co. taking the major brands.

Second generation

Creative advertising continued after the founders passed the torch to the next generation. R. Douglas Stuart, the son of one of the co-founders, was a master of promotions whose campaign ideas included featuring the internationally famous Dionne quintuplets in Quaker Oats ads. He also was among the first corporate ad executives to believe a company such as Quaker, which was expanding, should have multiple ad agencies.

Diversification efforts became a company strategy for growth. By the second half of the 20th century, Quaker's corporate portfolio had grown to include chemical products, restaurant chains and toy companies, most of which it divested by the early 1990s, when Quaker decided to focus on food products.

In the 1960s, the company decided to take much of its advertising in-house and in 1969 formed an agency called Adcom, which was billing nearly $50 million by 1985. It was spun off shortly thereafter and became an independent shop (although with Quaker business) under the name Bayer Bess Vanderwarker.

Quaker repeatedly returned to the basic healthfulness of oats as its central marketing point, but it sought to appeal not just to parents, but to their children as well; cereal, according to Quaker, could be nutritious and taste good at the same time. For example, in its first and only ad for Quaker, Doyle Dane Bernbach created the "Hey, Mikey" campaign in 1971 in which two boys discover that their finicky 3-year-old brother likes Life cereal. Although that advertising campaign continued, Quaker's relationship with DDB ended in 1972.

By far the biggest of Quaker's acquisitions was Gatorade, a sports drink acquired with the purchase of Stokely-Van Camp in 1983. Gatorade became Quaker's largest single brand worldwide by the early 21st century, accounting for almost 40% of sales and operating income, and a more than 80% market share in the category. After Gatorade was spun off into a separate division in 1991, division head Peter Vitulli signed a deal to make basketball superstar Michael Jordan the brand's worldwide spokesman.

Misjudging Snapple

After Quaker's tremendous marketing success with Gatorade, analysts were aghast at the marketing debacle of Snapple, a New Age line of fruit juices and iced teas the company acquired in late 1994 for what was immediately perceived as too high a price-$1.7 billion. Prior to Quaker's purchase, Snapple had been a cult favorite, aided by the quirky use of Snapple employee Wendy Kaufman as the "Snapple lady" and of controversial radio personality Howard Stern in its advertising.

Quaker's first act after the acquisition was to drop both of them. Quaker took its marketing and distribution formula for Gatorade and applied it to Snapple with dismal results. By mid-1996, Quaker had fired the New York ad agency of Kirshenbaum Bond & Partners, which sought to position Snapple against soft drinks Coca-Cola and Pepsi Cola and switched the account to Foote, Cone & Belding. FCB kicked off a $40 million media spending and sampling effort to get people to try Snapple, with the tagline, "Spread the good taste all over the place." The campaign failed and in 1997 Quaker sold Snapple to Triarc Cos. for a fire-sale price of $300 million.

In early 1997, Quaker received approval from the U.S. Food & Drug Administration to make claims about oatmeal's ability to lower cholesterol and reduce the risk of heart disease. It ran simultaneously with the "Oh, what those oats can do" campaign from Jordan, McGrath, Case & Taylor, New York.

In fall 1998, Quaker oatmeal's "Warms You, Heart & Soul" campaign highlighted about 100 residents of Lafayette, Colo., who, by eating Quaker oatmeal every day for 30 days, had succeeded in lowering their cholesterol levels. The seven TV spots and one print ad from FCB were the second effort from the agency since it had won the hot cereal business from Jordan, McGrath in 1997.

In 2000, PepsiCo, which was eager to enter the athletic beverage field with the leading brand, Gatorade, acquired Quaker for $13.8 billion, PepsiCo's largest acquisition ever. In September 2001, PepsiCo fired FCB and moved its $300 million-plus account, including Quaker cereals and Gatorade, to Omnicom Group.

In 2002, PepsiCo continued to integrate the new Quaker Foods & Beverages unit into its business structure, telling retailers that it planned to introduce at least 20 new products in the snack aisle in January 2003, with advertising handled by Omnicom Group's Element 79. For the first six months of 2002, the company spend $26 million in measured media, according to Taylor Nelson Sofres' CMR.

In April 2002, Quaker announced plans for an unprecedented $66 million campaign for its breakfast offerings. Quaker planned a $26 million push for its Fruit & Oatmeal lineup, including support for the June launch of new Quaker on the Go Bars and $40 million to tout Oatmeal Breakfast Squares' relocation to grocery stores' hot oatmeal sections.

As the fervor over childhood obesity grew through 2003 and into 2004, the healthier Quaker products played a pivotal role in PepsiCo's efforts to develop a more nutritional portfolio. In early 2004, PepsiCo started a test of school vending machines in Dallas that contained Quaker snacks along with "better-for-you" Frito-Lay items, Gatorade beverages and healthier SoBe drinks.

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