Richard Corbett

Comment - Soft Drinks & Water - Innocent on all Charges

By | 21 March 2013

Is Innocent dancing with the devil by selling out to Coca-Cola Co?

Is Innocent dancing with the devil by selling out to Coca-Cola Co?

Late last month, the Coca-Cola Co announced that it is set to take majority control of UK smoothie and juice producer Innocent. Sure enough, the cries of "sell-out" came thick and fast. But, Richard Corbett argues, the firm's tie-up with the world's biggest soft drinks company is not only a good thing; it's also vital for the brand's future growth.

The founders of Innocent were probably drinking something a little less healthy last month following the announcement that Coca-Cola Co has upped its stake to more than 90%, effectively taking charge of the company.

The inevitable cynical voices are suggesting it is akin to Luke Skywalker joining the Galactic Empire. But, I, for one, wish them well.

The deal will give them a good chance of attaining their ambition to take the brand onto a global stage and it fulfils their responsibilities to their investors. After all, you don’t own a football team to play in the lower leagues.

It has been a whirlwind journey since the three founders first presented their concept to music festival goers back in 1999. It was a straightforward idea: Put a drink on the market that is good for you and tastes good. But, the idea still had to be executed.

The results certainly endorse the way the brand was brought to the market. Drinks research specialists Canadean estimate that, in 2011, the company sold around 100m litres of its namesake smoothie brand to at least 20 markets. The numbers look good and indicate that the Innocent story is one of extraordinary success. Against the odds Wright, Balon and Reed managed to establish a brand at the heart of the UK soft drinks market.

Making money, however, has not always been as easy as selling the drinks. This factor is often ignored by the critics, who should appreciate that, by inviting Coca-Cola to the party, they have secured financial security for the company to take the brand forward.

In the early days, I can remember ringing 'Fruit Towers' in the hope of learning more about the company, only to be told that everybody had gone off snowboarding and could I call back next week.

Innocent were unconventional and approached the drinks business with a quirky and fun ethos that ingrained itself in every facet of the operation. There were the free Fruitstock music festivals, later the village fetes and there was an all-round wackiness that trod the line between stupidity and hilarity. The marketing reinforced all of these off-the-wall ideals to help the company build a genuinely unique brand proposition.

When the money started rolling in, 10% of profits were given over to the Innocent Foundation, which authenticated the ethical values of the company. Innocent stood out from all other soft drink operators. The founders had created an unorthodox way of doing business in the soft drinks industry that was very hard to replicate, as many, including Coca-Cola found when they tried to dabble in the smoothie market.

It is for this reason that Coca-Cola will have to remain true to the principles of Innocent and preserve the culture that makes it tick. Today, consumers often associate smoothies with small, start-up ventures that often began life in somebody’s kitchen; it is this that generates the consumer goodwill that is not present when the big players have attempted to get involved.

As a result, it is easier for the soft drink magnates to enter the market through acquisition rather than through NPD. As PepsiCo will testify, even this does not guarantee success as their ill-fated purchase of UK smoothie maker PJ Smoothies illustrates. The company ceased production just three years after it was purchased by PepsiCo back in 2005.

So, where will Innocent go from here? Geographically, there will inevitably be further expansion into other markets. In terms of the brand itself, the process of evolution from super-premium smoothie brand to premium juice brand will continue.

Branding in the juice category is notoriously difficult, borne out by the high penetration of private label juices. Efforts by Coca-Cola to launch Minute Maid juice in the UK had a limited effect and already the Innocent brand looks to have provided a more suitable vehicle with which to increase Coca-Cola’s presence in the UK juice market.

Lowering the price-positioning of Innocent will be critical to widening the audience of the brand and making it more immune to the economic uncertainty that is making consumers more price-conscious. I think, in ten years’ time, Innocent will be more associated with regular juice than smoothies.

Innocent will be a considerable asset to Coca-Cola if it handles the brand sensitively, and understands that much of the brand's success stems from the fact that it is not Coca-Cola. To realise the founder’s global aspirations, and to get to the next level, Innocent needed the world-wide experience and distribution muscle of Coca-Cola.

For this reason, it was the right decision to link up with the world’s biggest soft drink company. The cynics should be more inclined to celebrate a great success story than snipe. I don’t feel duped. So, good luck to Richard, Adam and Jon – it looks like you will have more time for snowboarding now.

Expert analysis

Innocent Drinks case study: capitalizing on the health trend in the smoothie category

Introduction This case study on Innocent Drinks forms part of Datamonitor's case studies series, which explores business practices across a variety of disciplines and business sectors. It focuses on the company's achievements as it copes with recession, competition and takeovers. Reasons to Purchase Gain insight into the methods used by important industry players to give them a competitive edge Identify specific areas for operational improvements Capitalize on the knowledge of experienced companies when entering a new niche or market

Sectors: Mergers & acquisitions, Soft drinks

Companies: Innocent, Coca-Cola Co, PepsiCo

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