SNAPPLE vs SOBE

Brandweek, July 10, 2000 by Gerry Khermouch

gloves-off distribution battle that has erupted in New England between new age beverage leader Triarc and up-and-corner South Beach is the latest indication of how alternative beverages, despite their laid-back image, comprise a rough-and-tumble segment in which seemingly complementary brands can quickly become bitter rivals, with wholesalers caught smack in the middle.

The dogfight comes as Triarc responds to SoBe's growth with similar, but successful, products: Snapple Elements, out last summer, and Mistic Zotics, off to a brisk start this summer. The result: a monumental channel conflict as once-complementary brands have become direct competitors.

The brouhaha commenced just before the July 4 holiday weekend when two New England distributors of Snapple, Mistic and SoBe were abruptly terminated by SoBe and that brand assigned to Polar Beverage, Worcester, Mass. The broad swath of New England in which Polar operates immediately prompted suspicion among other dual distributors that SoBe plans a sweeping shift to distributors not so beholden to Triarc. Fueling the rumor was the fact that Tim Healey, part of the buyout group currently acquiring SoBe, sits on the Polar board.

Already in the Fairfield County, Conn., territory of B&E Juices--which includes SoBe's Norwalk backyard--B&E and Polar have been warring over shelf space and offering bounties on rival POP. "It's gotten to be fisticuffs out there," said B&E co-owner Mitchell Clyne, who plans to sue SoBe. "I've got my entire group fired up." At also-discontinued Atlas Distributing, Auburn, Mass., principal Ken Sadowsky argued his 82% gain on SoBe this year hardly justifies termination.

In Fairfield, SoBe will run local ads flagging its loyal retail accounts. Meanwhile, its lawyers have sent Triarc a cease-and-desist letter demanding it stop spreading rumors that SoBe is in financial straits and that SoBe cofounder John Bello has had a nervous breakdown. Triarc executives, in a pre-IPO "quiet period," wouldn't comment, but privately scoffed at the notion they would spread those rumors. A nervous breakdown? "The bottom line," Bello said, "is that I'm no crazier than I've ever been."

That has all left distributors waiting for the next shoe to drop. One situation being watched closely involves Nest Fresh, in Accord, N.Y., one of several distributors who invested in SoBe when it suffered a liquidity crisis two years ago. One rumor has that SoBe business heading to a combination of Polar and a local Pepsi bottler, to head off Nest Fresh's rumored acquisition by Triarc, which has been buying up distributors in key markets, with a pair in northern New Jersey also seen on the list. Cash from Triarc's IPO could accelerate that process. Bello denied any plans to pull the brand from Nest Fresh or other operators in Polar territory, and noted that he has recently moved into Snapple houses in some markets. "Polar clearly wants all of Connecticut and Massachusetts, and we've told them no," he said. Still, the recent moves are "a sentinel signal: either treat us fairly or we're going to move the brand. Snapple has been threatening and intimidating (dual wholesalers) and where we have options we're go ing to take them."

The two rivals' bad blood goes back some time, inflamed by Bello's penchant for ridiculing the competition. Triarc execs are still seething over a Bello antic at a food show in Chicago in May, when his staff handed out invitations that read: "Triarc's Research and Development Group cordially invites you to stop by the SoBe booth to sample the new products that Snapple will introduce next year."