The Kraft plan to buy Cadbury hinges on synergies between their distribution channels, which brings up an ugly memory: the Quaker Oats purchase of Snapple for $1.7 billion in 1994, followed by the sale of Snapple three years later for just $300 million (accompanied by the departure of the longtime Quaker CEO). [You can hear an audio excerpt of our Quaker Oats case study at the Billion-Dollar Lessons website.]

At a high level, the Kraft strategy makes sense. Cadbury has a large presence in emerging markets, which are growing rapidly, and Kraft hopes to use Cadbury’s distribution network to sell more Kraft products.

But the Quaker strategy made just as much sense at the level of analysis used for the PowerPoint slides that are typically used to sell deals. Quaker was to bring efficiency to the mom-and-pop Snapple distribution operation and get Snapple shelfspace in the big chains where Quaker had relationships. Snapple was to give Quaker a presence in the little stores and delis where Snapple sold most of its drinks.

The thing of it is, distribution networks are often more complicated than they seem when viewed from 50,000 feet. Personal relationships or side deals can come into play that aren’t visible unless someone has done a truly thorough investigation, which often doesn’t happen until after a deal is done. In the case of Quaker and Snapple, Quaker got only a modest amount of shelfspace for Snapple in chains. Meanwhile, the Snapple distribution network rebelled rather than work with Quaker. Distributors had their own way of working and resented Quaker’s attempts at efficiency. They didn’t even try to get Quaker products shelf space next to Snapple because their return per square inch was much higher on Snapple products than on Quaker’s.

It may be that things would go smoothly as Kraft tried to move its products through Cadbury’s distribution, but Kraft would do well to have a robust plan for addressing the kinds of mistakes that Quaker made with Snapple. The fact that Kraft is hoping for gains in emerging markets, which are notorious for complicated distribution networks, kickbacks, etc., makes it all the more likely that the high-level perspective is leaving important details out of the picture.