The Growth of Innocent Drinks - Essay Example

CASE STUDY: INNOCENT DRINKS [The of the will appear here] [The of the id will appear here] [The of the will appear here] [The name of the course number will appear here] Introduction Innocent Drinks is a new fruit drink sensation within Europe. The company began as an experiment in a music festival in London and soon became the number one selling smoothie in Europe. The journey for the company began with three founding Cambridge graduates but later the brand joined the list of products sold and marketed by the giant soft drink company, Coca-Cola. Innocent Drinks unique selling proposition is its 100 percent fruit smoothie with no added artificial flavors. The company has been popular for the positive vibe that it creates amongst its consumers. In this paper, Innocent Drinks would be studied with respect to its organizational structure, growth, strategy and its alignment with Coca-Cola Company. Organizational Structure Innocent Drinks began as a small company by three Cambridge graduates, Richard Reed, Adam Balon and Jon Wright in 1999. The company began as a small operation where the three graduates worked on developing the recipe for the smoothies. These young entrepreneurs controlled the company fully and had decision making power in their hands. Employees were encouraged to participate in the decision making process to a great extent. However, in 2009, the company sold 18 percent of its stake to the giant soft drink company, Coca-Cola. This was necessary because the company was growing at a rapid pace and the founders were unable to keep up with the growth. They did not have the capital or the platform to give the company the exposure that it required. Therefore Coca-Cola was brought in. At that time, Coca-Cola controlled a small stake in the company. The three founders were still in charge of the company and it was with them that the decision making power rested. In 2010, the industry for smoothies increased further and competition began to increase. At this time, Coca-Cola’s stake in the company increased to 58 percent. With the increase in stake, Coca-Cola’s intervention in the company increased and the giant contributed to the decision making power in the company. Later in 2013, Coca-Cola acquired 90 percent stake in the company. This left the three founders with very little power within the company. Naturally the decision making power shifted over to Coca-Cola. The role of the founders shrunk from major decision makings to mere advisors. Founder, Richard Reed states that the change was necessary in order to the company to gain international exposure (Neate, 2013). The Growth of Innocent Drinks When Innocent Drinks was first launched in 1999, it was not the first company to offer fruit smoothies. Despite this, the company was able to draw in a large number of customer bases. By 2010, the company’s share of the market accounted to 69 percent with 2 million products sold each week. The growth of the company is mainly attributed to one characteristic. The company was successful in launching the right product at the right time. When the product was launched in 1999, the consumer trend and attitude towards drinks were changing. Previously carbonated soft drinks such as Pepsi, Coca-Cola and Sprite accounted for a main chunk of the soft drink industry. However, this began to change as consumers began to realize the impact of the soft drinks on health. Soft drinks quickly acquired a negative image among the growing health and diet conscious consumers. Thus a void for the right drink was created in the market. This was a time when Innocent Drinks was launched. Innocent Drinks claimed to contain 100 percent fruit with no artificial ingredients. This appealed to the consumers and they began trying out the smoothie. Additionally, the drink was also tasty which helped in retaining the customers. The company has won the most taste awards as compared to the rest of the industry. Another reason for the growth of the drink was that the drink was marketed towards the masses. This included children, young adults and even families. To cater to each market, the company developed different sizes and even different tastes. 250 ml bottles were targeted towards children while economy size of 1000 ml was targeted towards families. The founders of the company were also proactive in their approach towards the company. When they began receiving positive response towards their products, they did not stop. Rather they increased their product range to include 17 different recipes instead of just 3 (Innocent Drinks. 2014). The company has also developing a position of an ethically responsible company. It donates 10 percent of its profits to charities, mainly the Innocent Foundation. Also the company takes into account its carbon footprint and has taken steps in that direction to be an environmentally responsive company (Turner, 2008). This contributed to the growth of the company as consumers today demand companies to be socially responsible. Consumers, considering the impact of industries on environment, wish to engage with organizations that take their impact of the environment seriously. Despite this, the company still faces certain challenges. This included the price of the product which was positioned above that of other soft drinks. Also the features of the product were not well-known among the customers since the product was relatively new in the market and was still gaining awareness. The product was also competing with giants such as Pepsi who had started to launch their own brand of smoothies. Business Strategy The business strategy of Innocent is to understand the customer needs and present a product that aligns with the needs of the consumers. Most fruit juices offered before Innocent Drinks did not contain 100 percent fruit juice. Artificial flavors and additives were added to these. Innocent Drinks was able to capture the interest of the consumers by developing an image of a caring brand that allowed consumers to complete their daily fruit intake by consuming the brand. With the launch of Innocent Drinks, the market for 100 percent fruit juices began to expand. The company became an instant success and accounted for 59 percent of the total 2.3 billion pound soft drink industry in 2006. This rapid expansion created the need for the company to revise its business strategy. The company also appealed to the customers because of the way the brand was developed. The company portrayed itself as an ethical company. It donated 10 percent of its profits to a charity organization it developed, the Innocent Charity. The company quickly expanded in terms of its product offerings. New flavors were introduced in the market. In fact, Innocent Drinks was the first company to introduce its yogurt line and the seasonal smoothie line. The company also experiment with different sizes of packaging. It was the first to offer the PET bottle. The company focused on the consumers and the taste of the product. For its superior taste, the company won the most taste awards as compared to the rest of the industry (Reed, 2004). The company’s strategy is reaching the highest number of customers. For this, the company faced a setback in 2008. The company was expanding at a rapid rate but it did not have the resources to keep up with the growing pace. For this reason, the company sold 18 percent of its stake to Coca-Cola. Even then the strategy of the company remained the same with decision making power resting in the hands of the three founders. Even when gradually, Coca-Cola share increased to 90 percent, the strategy remained the same. Innocent Drinks is treated separately than the other Coca-Cola brands. Innocent Drinks and Coca-Cola In 2009, Innocent Drinks sold 18 percent of its stake to Coca-Cola. The company was suddenly in the negative limelight as consumers considered this collaboration to be against the brand image of the drinks. Many consumers even called for a boycott of Innocent products. A Facebook page was created against the collaboration. However, the founders of the company had their own reasons for the collaboration. The major reason for collaborating with Coca-Cola was increased funding for the company. When Innocent Drink was launched, the three founders faced significant problems in raising the capital to set up the company. With the demand for their products growing at a very fast pace, the founders were unable to properly fund the venture. They were increasing their product range which required more investment (Hurely, 2013). At this time, Pepsi, another giant beverage company came up with its own brand of smoothie, P&J Smoothie. This increased pressure on the small brand to proportions that they were unable to keep up with. Thus, Coca-Cola was brought in for investment purposes. Another reason that the collaboration was required was increased exposure for the brand. Coca-Cola has a strong distribution system. They had a strong presence within UK where the company was initially set up. Innocent Drink, thus also benefited from the distribution network of Coca-Cola to reach a bigger number of people. Richard Reed cites one example of the added exposure as being able to sell its products in the Olympics (Lucas, 2013). With time, the stake of Coca-Cola within the company increased to the extent that the company bought 90 percent stake in the venture. This was seen as a positive change by founder, Richard Reed. He claimed that Coca-Cola investment in the company allowed the company to improve its position in the industry. According to Reed, the company doubled in size and became a leader in the smoothie market across Europe. The brand now has developed presence in many European countries such as Denmark, Sweden, Austria and France (Callander, 2013). The sales for the company increased to double with the increased stake of Coca-Cola in the company. The increase in sales and exposure of the company further prompted the founding members to allow Coca-Cola to have controlling stake in the company. When the members decided that it was time that the company became an international brand, they sold 90 percent of the company’s stake to Coca-Cola. However, the company’s strategy would remain the same. The essential 100 percent fruit ingredients would remain the same. The company would still give 10 percent of the profits to Innocent Charity (Neate, 2012). Conclusion Innocent Drinks was developed at a time when the market for fruit drinks was developing. In 1999, the carbonated soft drink market was declining with consumers becoming more health and diet conscious. At times, Innocent Drinks took up the consumer interest with just 3 smoothies which were later expanded to 17 flavors. The growth of the company was phenomenal to the extent that the company was unable to manage the demand for its product. Therefore collaboration with Coca-Cola was created. This collaboration was further increased to a buy out of the company by Coca-Cola since the giant’s investment in the small company doubled the sales and allowed the company to become the number one selling smoothie in Europe with promise of international exposure. References Callander, R. 2013, Innocent squeezes record profit out of 2012, The Telegraph, Retrieved from http://www.telegraph.co.uk/finance/businessclub/10345437/Innocent-squeezes-record-profit-out-of-2012.html Hurely, J. 2013, Innocent’s founders sell up to Coca-Cola, The Guardian, Retrieved from http://www.telegraph.co.uk/finance/yourbusiness/9889050/Innocents-founders-sell-up-to-Coca-Cola.html Innocent Drinks, 2014, Things we make, Retrieved from http://www.innocentdrinks.co.uk/things-we-make Lucas, L. 2013, Coca-Cola swallows most of Innocent, Retrieved from http://www.ft.com/intl/cms/s/0/0b01403a-7d0e-11e2-adb6-00144feabdc0.html#axzz2vAt5Jp19 Neate, R. 2013, Coca-Cola takes full control of Innocent, The Guardian, Retrieved from http://www.theguardian.com/business/2013/feb/22/coca-cola-full-control-innocent Reed, W. (2004) An innocent rise to the top, Retrieved from http://www.thefreelibrary.com/An+innocent+rise+to+the+top.-a0125568335 Turner, C. 2008, The marketing secrets behind Innocent Drinks, Retrieved from http://www.utalkmarketing.com/Pages/Article.aspx?ArticleID=4113&Title=The_marketing_secrets_behind_Innocent_Drinks Read More