As a Fool, it's pretty hard not to admire a company like premium juice and smoothie maker Odwalla (NYSE: ODWA) for including in its corporate core values such noble themes as empowerment of the individual, personal responsibility and accountability, cultivating community and diversity and leadership through creativity and innovation.

California's Odwalla has had to call upon all of its values over the past several years, the company's stock falling steadily from late-1996 highs after tainted apple juice made 40 people ill and a young girl died in connection with an E.coli bacteria outbreak. While it may be unfair to dredge up something that happened more than three years ago today, the stock simply hasn't recovered from the shock.

While the news prompted a short dip then recovery as investors saw a "buying opportunity," this 1997 Foolish Trouble recalls, the business was hurt as much as the company's image since juice -- if not premium juice -- is a commodity item and the idea of paying more for illness-inducing beverages doesn't appeal to many.

It showed up on the company's income statement for sure. Sales took a quick step backward in 1997 before climbing back to 1996-like levels the following year and operating margins came under pressure as the company had to work to restore goodwill with consumers despite softening sales.

Odwalla seems to be making progress, though. Sales growth has resumed and appears to be on track through the late-November end of fiscal Q1. The company continues to roll out new products, and although Odwalla has yet to turn a profit since "the incident," some analysts believe it would have done so in Q1 if not for presumably temporary issues out of its control -- the development of new packaging that increases shelf life and a crop freeze that has been hurting product supply and quality. If that turns around soon, a slim and shrinking cash balance might not be a problem.

Of course, a loss is a loss whether it's caused by temporary issues or not. The question for investors is how a company can shield itself from downward exposure to factors like those discussed above by scaling up its output and sales. The plans, announced today, to purchase privately held Fresh Samantha Inc. -- another premium juice company with growing distribution on the East Coast -- are likely a step in the right direction.

Odwalla will trade about 3.8 million shares of its common stock, valued at approximately $27 million as of last night's close, for all of Fresh Samantha's stock. Further details and any perspective on what this deal might mean to Odwalla's financials weren't available in the press release. Some wild hypothesizing: take Odwalla's market capitalization-to-revenues ratio of 0.57 and apply it to the $27 million buyout price and you get about $15 million in sales for Fresh Samantha -- not a bad pickup.

Related Links:
Odwalla page
Odwalla message board
Daily Trouble, 11/25/97, Odwalla
Fresh Samantha

Feedback about News & Commentary? Please send mail to news@fool.com.