Innocent Company Strategic Growth - Case Study Example

Innocent Company strategic growth Name College Course Tutor Date 1. Introduction Innocent Drinks Company is a soft drinks company based in Britain is widely acknowledged as one of as fast growing company according to Raynolds(2013) and Phelvin& Wallop(2008). Brief company overview, which involves analysis of growth prospects of the company as well unforeseen future challenges, shall be conducted. According to Kotter& Heskett(1992) cultural environmental plays a vital role in determining the overall success of the company therefore, analysis of the culture shall be done to determine the cultural impact of the company. Based on the overall analysis raft of recommendations shall be effected. 2. Overview Founded in 1999 by three Cambridge student friends Richard Reed, Jon Wright and Adam Balon with capital of 500 pounds following sales of smooth drinks, which were a largely successful. The sales took place in a music festival. Before launching the company, the three friends spent six months researching on market needs and trying to come up with smoothie recipes that could define the company’s unique market niche. The three friends realized that consumers were craving for natural fruit drinks and that is where the company capitalized on. The north London based company provides smooth drinks whose main ingredients are natural fruit laced with flavored spring water. Blended fruit which is the main ingredient is characterized by thick juice is often referred to as ‘smoothie.’ The company products are sold in supermarkets, retail outlets as well as coffee shops. According to BBC news (2010), the company share of the UK market is 69 percent, which is worth 170 million pounds. It sells 2 million worth smoothies per week. According to UK Food Standards Agency (2007) report, of the 2.3 Billion soft drinks market, fruit juice drinks constitutes 59 percent. The Nelsen report (2010) where Innocent Company carried out analysis of competitors found out that the company had 30 percent of the soft drinks market share comprising 50 Million pounds value of its retail market. The main brands in the market are Ribena, Tropicana, Britvic soft drinks and Robinson Schoeler that are doing well in terms of brand advertisement. Innocent company apart from leveraging on naturality of its drinks should embark on aggressive brand advertisement, the report recommends. The growth of the company has been commendable just from a small stall in London’s green jazz festival to one of the Europe’s best smoothie products company. According to Rubin (2010) the company, as at 2012 the revenue was 213.5 million pounds. The company mission is to make people feel good by offering good tasting products (Rubin.2010). The company core values are to be responsible, natural entrepreneurial, generous as well as being commercial (Innocent Drinks, 2014d). The company through its corporate responsibility program donates 10 percent of its profit to charity. The company has classified its products into four categories namely; kids products, smoothies, juices and foods. Children drinks multivitamins that meant to address the growth needs of children. The adult drinks provide energy and it is refreshing. 3. SWOT Analysis SWOT analysis will help appreciate the weaknesses, strengths as wells potential threats facing the company while acknowledging the vast opportunities. Strengths Innocent Drinks Company has registered meteoric growth over the years. The company registered 35 percent more sales than Britvic soft drinks in the year 2013 according to Reynolds (2013). The company recorded sharp increase in demand of its products following the sponsorship of London 2012 Olympic Games. The sales volume increased by up to 60 percent. O’Reilly (2014) acknowledges that Innocent Company continuous increase in product range helps increase the customer base hence increase the sales volume. The idea, dedication and commitment of the founders and the staff of the company has enabled it to grow in leaps and bounds. Innocent Company inculcates strong ethical values among its staff and this enabled them top the list of 2012 social brands (Innocent Drinks, 2014e). This enhances company reputation among the public since the company is seen as adhering to environmentally friendly policies and this could easily translate into competitive advantage resulting into financial gains (Markley& Davis, 2007). In fact Innocent company products represents changing consumer demands for natural food as opposed to synthetic or refined foods. The company has huge potential in satisfying demands for markets such as for older people where other competitors has completely ignored. The kind of products they of offer and price is quite competitive that is the reason they have been able to penetrate the already saturated market. The strategic partnership between Innocent company and coca cola in 2009, which saw coca cola, buy 18 percent of company shares hence becoming majority of shareholder has enabled the company to take advantage of media, buying and marketing power. Neate (2013) implies that the reason why the Innocent Company become the official sponsor of London 2012 Olympics was directly attributable to the partnership with Coca cola. The coca cola company increased its stake in the company in 2010 to 58 percent by paying about 65 Million pounds. On the other hand, its competitor was being taken over by Pepsi cola in 2011. In February 2013, Coca Cola Company increased further its stake in Innocent Company to 91 percent hence leaving its founders as minority shareholders. The transfer actually saw Coca cola seize complete control of the company on January 1, 2013 There were jitters among the public since Innocent Company was playing unique role in the UK charities as well as provision of natural drinks. The founders insisted that the firm would remain as a separate entity despite the takeover by coca cola (Daily telegraph, 23/02/2013). Weaknesses Innocent Drinks Company is still a new brand in the market as compared with other juice brands. It faces choking competition from Pepsico products like Tropicana, which occupies first position in UK juice brands. Richard Reed one of the founders commented that the competitor, pepsico, is one of the ferociously competitive in the planet.This was the time PepsiCo was launching its range of Juice products and Innocent Company saw itself as one of its major targets(Sibun, 2008). Tropicana’s experience of over 60 years places them in a better position as compared to Innocent company experience.As compared to other juice brands Innocent Company Brands are expensive in the market and this gives the competitors an opportunity to exploit. Innocent Company’s reliance on the UK market renders them susceptible to unique UK market fluctuations. Anderson (2012) estimated that the entry of Innocent Company into European in market in 2008 and 2009 proved to be a costly decision since the company recorded low sales volume hence resulting in substantial losses. Opportunities Bainbridge(2013)& Briggs(2014) observes that consumers increased awareness of the importance of healthy lifestyles emanating directly from eating healthy foods puts the company in pole position to seize the opportunity and translate into massive sale volumes. This is because the company’s products are from vegetables and fruits. A study conducted by Marketing Week shows that the market is ripe and stable. The study revealed that 88 percent of consumers interviewed had taken smoothies or fruit juice within a period extending up to six months (Bainbridge, 2013) .Also, according to Bainbridge (2013) families demographic trends shows that there is increase in population within the age brackets of 16-34 year olds. This group forms the bulk of consumers of natural fruit drinks hence giving an impression of brighter future for natural fruit drinks industry. Threats In his report, Reynolds (2013) notes that the increased prices of raw materials potentially presents unique challenges to the overall natural juice industry. Raw materials used to make fruit juice have suffered from adverse weather conditions brought about by changing patterns of climate as a result of overall global climate change. The global fruit supply has been sporadic and sometimes does not meet the standards. The uneven or no supply of fruits has considerable effect on supply chain of Innocent Company drinks. Occasional absence on the shelves of Innocent Company products has dire consequences in terms of the company ring fencing its customers through constant supply of its products. Mintel(2010)& Hodgekiss(2013) notes that there has been doubts among the general public the natural fruit drinks does no after all guarantee good health therefore healthy living. If the doubts among the consumers are not addressed tactfully, convincingly and conclusively has the power to hurt the company sales volume. 4. PESTEL Innocent Drinks’ Competition Analysis PESTEL acronym for Political, economic, social, technological and legal is a framework of careful scrutiny of the macro-economic environment in which surrounds an entity. The analysis enables an organization to pinpoint, appreciate and adapt to external environmental factors by designing policies to address the same (Johnson, Whittington&Scholes, 2012) Political The guidelines and rulings by food regulatory authorities like Trading Standards and the Office of Fair Trading , Department of Health comprises political factors. According to Gubbay(2011) Innnocent Company had a protracted dispute with Trading Standards on the statement ‘use by’ which innocent maintained to use the statement ‘enjoy by.’ The regulatory bodies therefore presents its unique challenges that the company should factor in their policy formulation and decision-making. Economic Innocent company experiences varied economic conditions in the environment it is operating in. Economic situations that exist in European countries and especially UK where Innocent Company largely operates has profound impact on the performance of the company. The credit crunch of 2011 affected the sales volume of Innocent Company according to Levy (2011). The recession of 2008 which most of the European countries suffered led to the reduction in consumption of smoothies by up to 29 percent as per the report of The and Drinks Innovation Network (2010). Social Consumer’s patterns of buying and attitudes, campaigns for healthy eating and projected growth of the target market all present unique marketing opportunities for Innocent Drinks Company to exploit in UK and extending to Europe. Technological Technological innovation aimed at improving production methods, new and attractive packaging while striving to achieve low-level of gas emissions into the environment. The company aims to achieve this through 100 percent recycling of used plastic. Environmental Innocent Company operates under varied UK and Europe environmental laws, which must adhere. The main aim of these legislations is to reduce environmental pollution through proper transportation, production and packaging. Legal Innocent Company takeover by Coca-Cola should be done under laid down laws .Laws covering competition, consumer protection and a number of legislations aimed at streamlining the industry should be observed by the company. Conclusion Coca-Cola company acquisition of Innocent Drinks Company was a strategic decision .The company was facing stiff competition following the entry of Pepsico into UK market. Coca-Cola Company also had to compete with Pepsico globally and the best way was to acquire a company that was perceived by the public as producing natural drinks as opposed to Coca-Cola products, which considered as refined. The take-over also won coca cola the UK market, which is regarded as an entry point into European market. Though there were claims by Innocent founders that the company would maintain its unique identity the final ultimate decision making process was ceded to the Coca-Cola company board there its development road map took a new twist from the time of acquisition. References 1. Deal, T.E. and Kennedy, A.A. (1999) The new corporate cultures. Cambridge, MA: Basic Books 2. Kotter, J.P. and Heskett, J.L. (1992) Corporate Culture and Performance. New York: The Free Press 3. Mullins, L.J. (2010).Management and Organizational Behaviour. 9th Edition. Harlow: Prentice Hall 4. Reynolds, J. (2013). Innocent sales rocket over 35%, says Britvic Soft Drinks Report. Available at . Retrieved 28th April 7, 2015. Read More