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General Information and Confidential Information for VP of Sales and Distribution

You have been VP of Sales and Distribution for over five years now. The VP of Marketing, VP of
Finance and VP of Corporate Planning are originally from Quaker Oats, and only came to Snapple
after Quaker Oats bought Snapple. As such, you are not entirely sure that their goas are in the best
interests of Snapple per se.

The president of Quaker Oats’ Snapple division strongly believes in worker empowerment and Total
Quality Management. As a result, the president places a lot of trust in the task force to come up with
a strategic product mix and marketing plan to establish Snapple as the leader in the “New Age Drink”
beverage market. The president will rely heavily on your task force’s recommendations. Therefore,
you do not want to let the president down by being unable to come to an agreement. Nevertheless,
you have some specific interests in the outcome of the task force’s deliberations.

If you had a choice, you would prefer to expand into other countries. This would allow you to sell
even more, although it would initially require some had work on your part in setting up distribution
channels. However, you believe that some the others may have reasons not to want to expand at all.
Since you do not care that much about expansion, you are willing to keep quiet about the issue until
someone else brings it up. The way you don’t have to tell the others what your preferences are, and
you may learn something if someone else brings up the issue first.

Your position on each of the issues the task force must address is as follows:

1. Product Mix

New Fruit Flavors and Teas: With more flavors, you will need more bottlers and the production
will be more costly. If too many exotic flavors are produced, the supply will exceed the demand.
In fact, rather than introducing new flavors, you want to cut back on the currently available
flavors. If the FDA decides to take action against Snapple, you think that Snapple will be in a
better position to respond with fewer floavors rather than more. It also will be less costly to
make changes if you have fewer products than more.

In the past, plenty of new products have been withdrawn because there was a over-abundance
of tea and fruit flavors, which confused the customers and resulted in a loss in sales. Retailers
have complained that there is lack of product identity when new flavors are created and then
discontinued in a matter of months. Retailers basically dislike the fact that Snapple uses their
resources (shelf space) to experiment with different flavors. Thus, it is your goal to sell less
variety of products but with a higher volume for each product. However, if Snapple is to create
new flavors, it better thoroughly test market them first so there is no longer a revolving door of
flavors. In addition, if you must accept new flavors in either juices or teas, you would only do so
 if the others could convince you that high sales were almost certain. That way, you would be
worth their while to shelve. A report by your sales staff indicates that the maximum penetration
for new flavour is expected to be 2,500 shipments, or approximately 2.5% of total sales.

Sports Drinks: Your customers are demanding a sports drink. The typical Snapple buyer is
young, upwardly mobile and image conscious. Unless Snapple can come with sports drinks, you
will lose potential customers (who like sorts drinks) to the competition, which ultimately means
that your unit sales will decrease. You believe that introducing a sports drink will be profitable to
Snapple and since you compensation is tied to the number of units sold, the introduction of
sports drinks is critical for you as well. You therefore have decided to do your best to defend the
introduction of sports drinks.

Some of the “Quaker Oats people” may argue that by introducing a sports drink, Snapple will
end up competing directly with Gatorade, which is also a subsidiary of Quaker Oats – the parent
company. Although this may be true, you believe that this is healthy competition that will forece
both Snapple and Quaker Oats to improve their quality, thus helping both of them in the market
place.

2. Price

Your performance is evaluated on the total number of units sold. You believe that lowering the
price would increase sales volume, so you would prefer Snapple to lower prices by at least 10%
across the board1. This, you believe, will increase Snapple’s profitability because the additional
profits from higher volumes will more than offset the profits lost with a lower price. If you
cannot get a lower price, you will at least want to increase the amount of money offered to
distributors per unit sold. After all, with a higher price, Snapple would have the luxury to offer
dealers a higher cut. Retailers have hinted that an incentive like this would improve the
relationship enough to offer Snapple more shelf space. The retailers have cut back on the shelf
space allocated to Snapple because they are no longer ordering all of the exotic flavors. More
shelf space usually translates to higher sales because some other product is squeezed out of the
mix.

3. Image

You do not want an exclusive image for Snapple’s product. As mentioned earlier, you would like
a higher volume and a lower price since you want to sell the products to the mass market. You
do care about how customers perceive the quality of your products, as long as the product sells.
If the group wants to push for a “high quality” advertising campaign, that is fine with you as long
as it doesn’t give Snapple products an elitist image, because an elitist image would hurt unit
sales.

Rumors are circulating that some VPs want to change the company spokesperson. Although you
like Wendy as a person, studies have shown that she is not popular enough and you want to
replace her with someone else. This may be a “touchy” issue as you suspect the VP of

1
Note that percentage changes in distributor priscing correspond to percentage changes in retail pricing.
production is dating Wendy. You haven’t had time to investigate who else would make a better
spokesperson. But certainly, if someone else in the task force has suggestions, you would be
more than will to try out a new spokesperson.

4. Ingredients

You want to keep the same ingredients, using ingredients which the FDA has approved for use in
“all natural” products reduces the shelf life of your products. When customers drink Snapple
products after the expiration date, they detect a bitter taste which in turn hurts repeat buying.
Also, when your products are returned (after expiration date), it hurts both your relationship
with the dealers and Snapple’s profitability. Moreover, you believe the current ingredients are
all natural and you are convinced that changing the ingredients to meet the new FDA
specification would cause confusion among consumers and even more problems. If the FDA
decides to take action, you would rather remove the claim that Snapple has all natural
ingredients than change the formula to include only those ingredients which meet the FDA’s “all
natural” specification.