Sluggish Snapple Sales Continue to Be a Drain on Quaker Profit

From Times Staff and Wire Reports

Snapple sales continued to drop at the end of last year, dragging down profit at Chicago-based Quaker Oats, which hopes to halt the slide and the brand’s red ink this year, the company said Thursday. It declined to comment on rumors the unit might be sold.

Sales volume for the iced-tea and juice-drink brand fell 9% for the final three months of 1996 and 11% for the year, while cold cereal sales rose 11% in the quarter and Gatorade gained 6% in U.S. sales.

Quaker posted net income of $17.3 million for the fourth quarter, contrasted with a loss on operations of $23.3 million in the final quarter of 1995 before special charges. Sales for ongoing operations were about flat at $1.5 billion.

Quaker Chairman William Smithburg predicted that if the company can stop the Snapple sales plunge, it can turn a profit on Snapple operations this year, especially because it won’t be spending the extra $25 million it spent in the summer to give away millions of free Snapples in an attempt to boost sales. The company is now running ads pushing its fast-growing diet flavors, which have grown to 12% of Snapple sales.


“Our goal is to operate Snapple at cash profit in ’97, which we have not been able to do in the last two years,” Smithburg told industry analysts in a telephone conference, adding that he expects Quaker’s earnings to grow at least 10% a year.

Smithburg said that under accounting rules, the company’s projections do not qualify Snapple for a write-down.

Fountain Valley-based FHP International Corp. reported Thursday that earnings jumped 79% for its second fiscal quarter, exceeding analysts estimates.

Analysts attributed the gains in part to the managed-care company’s cuts in administrative and marketing expenses in anticipation of its acquisition by Orange County rival PacifiCare Health Systems Inc.


FHP has refrained from spending on marketing materials and billboards that would push the FHP name and isn’t hiring staff, said Kenneth Abramowitz, analyst at Sanford C. Bernstein.

The company earned $24.9 million, or 44 cents a share, for the three months ended Dec. 31, up from $13.9 million, or 18 cents, for the same period a year ago. Analysts had estimated earnings of about 39 cents a share for the second quarter. Revenue increased 9% to $1.1 billion, from $1.0 billion.

Transamerica Corp. said fourth-quarter earnings fell 3.4%, dragged down by its consumer lending business. The San Francisco-based insurance and financial services company said profit excluding gains from investment sales fell to $113.9 million, or $1.66 a share, from $117.9 million, or $1.66 a share, a year earlier. The company kept earnings per share unchanged by repurchasing about 2.02 million shares last year.

Among other insurers, Allstate Corp.'s fourth-quarter earnings gained 35% as the streamlined company benefited from greater sales, higher premiums and lower losses in its automobile and other personal insurance lines. Earnings from operations, or earnings excluding gains from sales of investments, rose to $514 million, or $1.15 a share, from $379 million, or 85 cents, a year earlier.

At a Glance:

Hasbro Inc. said fourth-quarter earnings rose 16% on increased sales of its “Star Wars” products and of new CD-ROM versions of the Monopoly, Clue and Battleship games. It earned $99 million, or $1.13 a share, up from $85.2 million, or 97 cents a share, last year.

Electronic Data Systems Corp. said net income rose 1.2% to $272.8 million, or 56 cents a share, from $269.5 million, or 56 cents, in the year-earlier period.

AlliedSignal Inc. said fourth-quarter net income rose 16% to $270 million, or 96 cents a share, from $233 million, or 83 cents, a year ago.


Foodmaker Inc. reported first-quarter earnings of $9 million, or 23 cents a share, up from $4.7 million, or 12 cents a share, a year ago.

Manpower Inc. reported fourth-quarter earnings of $48.1 million, or 58 cents a share, up from $36.6 million, or 45 cents a share, a year earlier.