Most Stupid Moves

5. Quaker Oats

Mistake: Insufficient Diligence on Due Diligence

In the 1990’s Quaker Oat Company was rolling in profits from their dry foodstuffs business, so they branched out and acquired the Gatorade sports drink franchise from Stokley. Flush with that success, they later acquired trendy bottled tea maker Snapple for $1.7 billion in a leveraged buyout. To their horror, Quaker soon learned that unlike all their other products—including Gatorade– Snapple beverages required refrigeration. A panic inventory revealed that Quaker had a shining fleet of exactly zero refrigerated vehicles to distribute Snapple. Distribution companies learned this and priced accordingly; robbing Snapple of funds badly needed for marketing and R&D. Triarc eventually bought the failing Snapple business from Quaker for $300 million. “In retrospect,” said one Quaker executive on the merger, “we should have had someone arguing the “no” side.”

Source: “Triarc to buy Failing Snapple Business from Quaker Oats for $300M”, Oklahoma Journal Record, April 3, 1997 AND “The Dumbest Moments in Business History: Useless Products, Ruinous Deals, Clueless Bosses, and Other Signs of Unintelligent Life in the Workplace” by Adam Horowitz.

4. AdPro/Merit Industries

Mistake: Subcontracting the Illiterate

For their 2002 Martin Luther King Day celebration, the Lauderville, FL Chamber of Commerce invited actor James Earl Jones to appear as a featured speaker. As thanks, they commissioned a plaque featuring African Americans from the US Black Heritage postage stamp series. Too bad they went to local promotions company AdPro Specialties, who subcontracted the job to Texas-based Merit Industries. Merit faxed AdPro a list of 15 African American stamps to choose from, and promised to handle all the details. Four days before the celebration, AdPro received the Black Heritage plaque, and were stunned to see that the plaque thanked not James Earl Jones, but James Earl Ray, Martin Luther King’s ASSASSIN. Merit blamed its near-illiterate employees for bungling a rush job, while AdPro repaired the plaque locally. When he heard about the mix-up, Mr. Jones was supremely gracious and said “I think we have much bigger things to worry about.”

3. Schwinn Bicycle

Mistake: Non-compete clause? We don’t need no stinkin’…

Faced with striking workers at its Chicago factory, Schwinn suits outsourced manufacturing to Taiwan, choosing the aptly-named Giant Bicycle Company to fill the demand. And there is simply no better example of letting the fox guard the henhouse. Since bicycles are a simple technology, labor is the highest cost, and Giant’s Taiwanese workers are the cheapest anywhere. Giant to this day builds 90% of all bikes in the world at the same factory, often storing finished units of competing brands side-by-side. For Schwinn, the Giant outsourcing worked so well that when the strike ended, they continued outsourcing and didn’t upgrade domestic factories. Too bad they didn’t get a “non-compete” clause. Giant learned everything about Schwinn bikes and then some: they soon realized they were the tail wagging the dog. So Giant covertly sent sales reps to every Schwinn dealer in the US with the following sales pitch, in its entirety: “We know you like Schwinn, but we make Schwinn and we’ll charge you 30% less.” Schwinn dealers baled and a panicked Schwinn proposed a joint Schwinn-Giant brand, while pursuing a separate manufacturing deal with a Chinese manufacturer. But all leverage was gone– at the time of the offer, Giant was already selling 300,000 bikes a year under its own name. Schwinn declared bankruptcy in 1991, and today the brand is a shell of what it once was. Giant continues its uncontested reign as the largest bicycle manufacturer in the world.

Source: “No Hands, The Rise and Fall of the Schwinn Bicycle Company, An American Institution”, by Judith Crown and Glenn Coleman, 1996

2. Northwest Airlines

Mistake: HR’s Guide to the Employment-Challenged

In July, 2006 bankrupt Northwest Airlines laid off thousands of ground workers, cushioning the blow with the handy guidebook “101 Ways to Save Money.” Stashed in the dreaded layoff packet, this booklet included shameful tips such as “Don’t be shy about pulling something you like out of the trash”. Other tips focused on homemade baby food and using newspapers for cat litter. The best had to be “take long walks in the woods as a low-cost dating alternative” (don’t worry; your blind date won’t think you’re a serial killer. She’ll think you’re a CHEAP serial killer). Northwest pulled the offending booklet soon after the public got wind of it.

1. Washington Agricultural Commission

Mistake: Everybody loves a Gimme Cap, Right?

A Washington State agriculture official touring China in 2000 handed out bright green baseball caps at every stop but never noticed that none of the men would put them on, or that all the women were giggling hysterically. Why? Well, in some dialects of Chinese the words “green hat” sounds like very much like “cuckold”. Thus, legend holds that if you wear a green hat, it means that your wife has cheated on you, and if you give a man a green hat, it means that you have had sex with his wife. Pretty much defines “awkward”, wouldn’t you say? The Chinese delegation was very polite, and finally someone took the agricultural commissioner aside to clue him in. And the deal? Not much happened.

Source: “Mind Game, Unlocking the Hidden Agenda of the Asian Business Culture- A Westerner’s Survival Manual”, AND “BUSINESS TRAVEL; Beware of Green Hats in China and Other Cross-Cultural Faux Pas”, New York Times, Craig Smith, April 20, 2002.