Innocent Drink and Their Activities on the Market - Case Study Example

Table of Contents Introduction 02 Organisational Structure, Ownership and Growth 03 Internal and External Analysis 03 SWOT Analysis 04 PESTEL Analysis 06 Change in Business Strategy since 2006 08 Strategic Reasons for Coca-Cola to Take Control of Innocent Drinks 09 Conclusion 09 References 11 Introduction Every new product has the equal changes of being a hit or a flop and Innocent Drinks was no different. It gained huge success in the initial years and later turned out to be a big brand in the UK. It achieved several landmarks in its initial 5-7 years of business and out to be a major player in the annual smoothies and real fruit based drinks in the country. The initial marketing strategy of the company to collect market feedback for yes and no in two different bins provided them with superb opportunity to understand the liking and disliking towards the product. In this assignment we come across the organisational structure, initial and later ownership, the growth years and the rapid growth till 2005. We also study the SWOT Analysis and the PESTEL Analysis of the company which helps up to analyse the reasons for their growth keeping in mind both the internal and external factors that influenced the business of the company. We also come across the later stages when Coca-Cola Company took over 10-20% shares and then about 90% shares of the company to reckon it as a global brand. Organisational Structure, Ownership and Growth Innocent Drinks is a UK based company which was founded in 1999 by three friends Richad Reed, Adam Balon and Jon Wright (Turner, 2008). Their primary focus in this business was to produce ‘smoothie’ and ‘flavoured spring water.’ The company grew over the years from a mere business of three partners to a unit of the biggest private company of UK. They started the company as a stall with just 500 pounds. The company attained some steady growth with a consistent increase in the market share with revenue of over 13.5 million pound as of 2012 (Andersen, 2012). The drinks were all made from pure, fresh and naturally grown fruits and did not contain any artificial or genetically modified ingredients making the product a super hit. The products of the group attained some great success till 2005 and the following were the major reason behind the same. Every bottle of the drink provided daily fruit requirements and 25% of the daily vital requirements. It was suitable for all age types including children and the fast life style of today’s young generation. Availability in three pack sizes of 250ml, 500ml and 1 litre made it convenient for the buyers. The products were tested by The British Soft Drinks Association and Food Standard Agency. Availability all round the year and the concern of the people regarding their health and diet added to the same. Fruit juices accounted for about 60% of the total sales till 2004. Internal and External Analysis There are other various internal and external factors that added to the advantages of the company in its initial business years and they can be studied with the use of SWOT Analysis and the PESTEL Analysis of the company. SWOT Analysis This analysis highlights the strengths and weaknesses of Innocent Drinks and the opportunities available including the potential threats it could face. STRENGTHS The products of the company are highly competitive and are in no way less than its competitors. They are potential enough to fulfil the requirements of the modern day consumers (Cummings, 2005). The company follows a very strong pricing strategy of low price but high quality. This gives the company a substantial competitive advantage in the market. The financial position of the company is strong as it fully solvent and has the fluent capital for investment thus benefiting the company from falling into any unexpected debt or burden. Distribution strategy of the company is backed by a strong range of distributors and the availability is at all major areas with maximum foot-fall. The company is enriched in efficient workforce who is motivated and skilled enough for dedicated performance to the company. Although new to the market but the management staff are highly knowledgeable through previous market experiences (Donnelly, 2009). The company is keen to build some strong community relations across the country to improve its public relation. WEAKNESSES The brand reputation of the company is relatively less in comparison to the competitors. The distribution channel although strong but is smaller in size as compared to the competitors. The brand is not all that famous and well known and so lacks a loyal group of customers. The lower pricing policy of the company shall result in lower profit margins. The concentration of the company is basically in the urban markets and so it is losing on a potential sale to a large pool of consumers from the rural markets. The company is a fruit smoothie selling company and this restricts it from selling various kinds of products like chilled fruit juice and concentrated fruit juice. OPPORTUNITIES With the fruit juice and smoothie market growing rapidly is providing them to cater the un-served market and reap opportunities for growth. Along with the fruit juice and other health drinks the nutrition market is also gaining popularity makes it an emerging sector. People have started identifying fruit drinks above being just a mere children drink. With a busy lifestyle people have changed their social attitude towards good source of healthy diet. Big players of the market, like PepsiCo, have been often accused of too sweet and high calorie products. This has created opportunity to turn the unsatisfied customers towards this product. The advancing technology is adding to the growth of agricultural products and maintenance of smooth operations. This could assist in production, distribution and the operational process. Strong government co-operation in making the people educated towards the benefits of healthy diet and drinks shall help in gaining their own objectives. THREARTS Competitors are always a big threat for the operations of the company and with them looking towards entering into ventures with other big renowned brands shall add to the same. Rapid increase in the change in weather has affected the growth of fruits and thus their availability. The existing political situations and increasing oil process may significantly affect the entire economic structure. PESTEL Analysis The PESTEL analysis is a framework that helps in analysing the macro environment in which the company operates and helps to understand and adapt to the relevant external factors which may otherwise impact the strategies and activities of the organisation. POLITICAL The ruling and guidelines of the Department of Health, Advertising Standards Authority, Trading Standards and the Office of Fair Trading affect the business of the organisation. They are the major political factors and even the minor details of such bodies affect the business of the company. ECONOMIC There are many economic factors that influence innocent drinks. The tax policies, market and industry factors on the UK play an important role in operations of the company. The economic factors had made the company to suffer significantly in 2008 and 2009 with the sale of smoothies falling by 29%. The uncertainty of oil prices, housing market situation nd consumer spending are further more economic factors. SOCIAL The concern of the people towards more healthy and fit products is changing the attitude and buying pattern of the consumers (Case Study, 2009). The growing concern for supporting the environment, paying notice to the ageing population and change in lifestyle of the people are such social factors that the company needs to consider. TECHNOLOGICAL The advancing technology is a very big factor as the inclusion of the same in the production process and new products, packaging, recycling and other trends and advances in manufacturing are very deciding factors (Brassington and Pettitt, 2006). ENVIRONMENTAL The environmental laws of UK and the world are becoming very tough especially the carbon impact of the packaging components. Innocent Drinks has always focused on ways through which it can reduce wastage and carbon impact on the environment, in terms of packaging, transportation of goods, etc. LEGAL Innocent Drinks is required to comply with many laws which include consumer protection laws, industry regulations, etc. there are many legal issues like the completion laws which the company requires following like in the case of mergers and acquisitions of the company with Coca-Cola. These are very crucial factors that the company requires to consider in the process of decision making and a clear analysis of the same shall result in the successful running of the company. Change in Business Strategy Since 2006 The markets of UK experienced a 30% downturn which directly affected the smoothies market leading to a decline in the market share of Innocent Drinks. This decline in the economy had resulted in more unemployment and shift of the customer to other cheaper brands as alternatives (Dodds, 2009). The marketing strategy of the company changes and it started targeting overseas market for profit earning. The biggest targeted market focus shifted towards Australia. The increasing competition from the other small and big companies made it necessary for the company to change its marketing strategies. The changing tastes and the increasing age of the consumers also forced many changes in the product and decisions (Johnson, Whittington and Scholes, 2012). The changing decisions and strategies resulted in the company to become the world’s first company to achieve 100% recyclable and renewable packaging (Fill, 2005). The company even went into partnership with world’s big brands like Coca-Cola after this stage. In December 2007, a drink editorial stated that the sale of smoothies in Sweden and other parts of Europe shall be handled by Coca-Cola. The company started to look for more partnerships as a part of their marketing strategy in the future. This was just done to arrange funds to explore more of the European markets. This resulted, for the consumers to think as the non-corporate maker of fruit smoothies to lose its innocence after selling the stake to Coca-Cola. But the success rate was extremely high as the profits spur high under the control of Coca-Cola. Strategic Reasons for Coca-Cola to Take Control of Innocent Drinks Prior to the partnership with Coca-Cola, Innocent Drinks had attained about 75- 80% of the UK’s market. Post partnership, the company became number one in the European markets, by 2010. There lied a huge risk of the consumers losing faith upon Innocent Drinks as Coca-Cola is genuinely known as ‘sugar daddy’ and that the company may lose its ethics, for ethics it gained success and turn out to be like Coca-Cola. Coca-Cola initially invested for 10 -20% of the share in Innocent drinks for 30m pounds and after the beginning partnership being a hit the company looked forward to buy more shares and own the brand for more innovations and international expansions. Coca-Cola adapted a very strong strategy as it owns 90% shares of the company but still the founders are able to rule the company (Neate, 2013). This step allowed for the smoothie to grow under the name it previously has but the profits were attained due to the huge distribution system owned by Coca-Cola. The strategy stated that Coca-Cola promised not to intervene in the business activities of Innocent Drinks. Coca-Cola gained substantial say in the decision making process of the company as the acquiring of share provided the opportunities to grow and operate in different markets and establish itself as a global brand under the name of Coca-Cola. As a result Innocent Drinks was exposed to a wider base of customers and was able to attain advantage from the marketing and buying power of the Coca-Cola Company. Conclusion Innocent Drinks is not an unfamiliar name in UK and the rest of Europe with its roots seeded in London. Starting from a small store to a multi pound company has been achieved in no time. Following specified ethics and grabbing opportunities for growth has been well depicted in the assignment presenting a clear study of the reasons for success from beginning till date. The willingness of the people to pay more in comparison to related brands shows the social conscience of the company and also the loyalty of the customers (Griseri, 2010). References Andersen, E. 2012. Innocent Drinks founder: Exporting pushed us into the red. Management Today. Retrieved on 11-4-15 http://www.managementtoday.co.uk/news/1156817/Innocent-Drinks-founder-Exporting-pushed-us-red/ Brassington, F. and Pettitt, S. 2006. Principles of Marketing. Pearson Education Limited. Cummings, L. 2005. Just an Innocent business? BBC News Online: business, August 23. Case Study. 2009. The fruit juice revolution case study 2009. Wolverhampton: University of Wolverhampton. Dodds, A. 2009. Recessionary Strategies for Food and Drinks Companies. Business Insights. Donnelly, R. 2009. The marketing planning process: CIM coursebook 2009-10. Oxford: Butterworth Heinemann. Fill, C. 2005. Marketing communications; engagement, strategies and practice. 4th ed., Harlow: Financial Times Prentice Hall. Griseri, P. 2010. Business Ethics and Corporate Social Responsibility ‘Cengage Learning EMEA Johnson, G., Whittington, R. and Scholes, K. 2012. Fundamentals of Strategy. Second edition. Essex: Pearson Education Limited Neate, R. 2013. Coca-Cola takes full control of Innocent.The Guardian. Retrieved on 11/4/15 http://www.theguardian.com/business/2013/feb/22/coca-cola-full-control-innocent Turner, C. 2008. The marketing secrets behind Innocent Drinks. Retrieved 12/4/15 http://www.utalkmarketing.com/Pages/Article.aspx?ArticleID=4113&Title=The_marketing_secrets_behind_Innocent_Drinks Read More