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QUAKER SHUFFLE CALLED MUSIC FOR STORES

CHICAGO -- The reorganization of Quaker Oats Co. here should bode well for retailers by making the manufacturer more nimble in responding to the changing needs of the marketplace, industry consultants and securities analysts told SN.Quaker announced in late March that it was realigning the company and dissolving its separate cereals, snacks and convenience foods divisions. The announcement followed

CHICAGO -- The reorganization of Quaker Oats Co. here should bode well for retailers by making the manufacturer more nimble in responding to the changing needs of the marketplace, industry consultants and securities analysts told SN.

Quaker announced in late March that it was realigning the company and dissolving its separate cereals, snacks and convenience foods divisions. The announcement followed Quaker's purchase of Snapple Beverage Corp. late last year, and the sale of its pet foods division to H.J. Heinz earlier this year.

"We are restructuring our organization to give us the competitive capabilities we need to successfully grow our new portfolio," William D. Smithburg, Quaker chairman and chief executive officer, said in a statement.

"The reorganization will enable us to deliver greater profitable growth and build a significant competitive edge in the grocery industry. We are totally changing our structure in order to better achieve excellence in the capabilities required for success in today's grocery industry -- capabilities embodied in the Efficient Consumer Response approach to doing business -- supply chain management, consumer marketing and total customer development.

"While we are achieving strong growth and market shares in our core businesses, to reach the next level of profitability we need to simplify our management structure, run our businesses more efficiently, make decisions faster and move more quickly to satisfy our customers and consumers," Smithburg said.

Naomi Getz, a securities analyst at Goldman Sachs, New York, said Quaker's restructuring follows the grocery industry trend toward consolidation.

"Retailers will have stronger parties to deal with, but at the same time they will also have stronger partners to deal with. As the retail industry becomes more consolidated and emphasis is put on Efficient Consumer Response, etc., you need a strong counterpart to help you manage the category and the business more efficiently," she said, adding that she views the consolidation as good for the industry.

Jeffrey Hill, managing director at Meridian Consulting Group, Westport, Conn., said the restructuring at Quaker should result in a much stronger manufacturer.

"Quaker's infrastructure has gotten larger than is necessary," he said, noting that consolidation continues to sweep the industry, both on the retail and supply sides.

"Every major consumer goods manufacturer is undergoing this kind of transition to specifically focus on ways to eliminate costs of doing business and recognizing the industry is changing and to address the new industry structure," he said.

"Quaker believes this move will make them more effective and help them to roll out new products faster, and I don't think there should be any reason on the part of retailers to doubt that," said John Bissell, managing partner at General Management Consulting division of Gunderson Partners, Bloomfield Hills, Mich.

Bob Hilarides, a senior consultant at Cannondale Associates, which maintains dual offices in Wilton, Conn., and Evanston, Ill., said as a result of the restructuring Quaker will be more focused on making things happen in the marketplace and less on the processes involved in making things happen.

"Quaker is now giving a key individual greater responsibility for an account. There is less tag-teaming with different divisions being represented by different people. They get a real strong player calling on the account who is responsible for the whole Quaker shooting match," Hilarides said.

"From a cost perspective it will definitely help them. They are taking costs out of the system. That can only help them maintain price competition or even lower costs at the store shelf," he said.

Getz of Salomon Bros. said the restructuring will cause Quaker to examine its numerous stockkeeping units now gracing store shelves.

"Whenever there is such a consolidation you will see a new and fresh look at existing SKUs. The positive will be that you will see a paring down of SKUs and at the same time efforts in new products and higher value-added products. I think this will be particularly true with Snapple, where there are just too many flavors out there," she said.