Analysing Innocent Drink - Case Study Example

Name Class Unit Introduction Organisation structure, ownership and growth of innocent drinks from its beginning to the present state Innocent drink was started in 1999 by Adam Balon, Richard Reed and Jonathan Wright. Since inception, the company have been among the fastest growing companies in the food and drink sector. The company growth can be attributed to quality product, market positioning, brand image and marketing communications (Innocent drinks, 2015). The company have been able to grow beyond Europe from its humble beginning. The entrepreneurship culture played a major part for the organisation expansion. In 2009, Coca-Cola acquired 58% of the company which led to an increase in sales (Innocent Drinks Typepad, 2009). Coca-Cola has continued increasing their stake to 90% taking full control (Innocent drinks, 2013). The company is run on a flat organisation structure. SWOT analysis Strengths Large market share- Innocent drinks controls more than 80% of the market share of “Smoothie” market. This gives the company a lead in the industry. Ethical and strong brand image- innocent drinks have been able to enhance their brand image globally. The company is globally known and respected. This is due to healthy drinks which have minimal environmental impact. The strong and ethical brand has been one of the major strengths of the company (Innocent Drinks Typepad, 2009). The industry is at growth stage of its life cycle-this gives the company a good scope for growth in the future. The company have high chances of success in extending their line of products. Weakness High production costs- the industry faces high logistics and production costs which make it hard to reduce prices. The company use pure natural products whose costs are higher. The company sale to Coca-Cola may lead to innocent drink moving away from their principal values which includes ethical and healthy drinks. The company brand ethics are at stake since Coca-Cola is not perceived to have ethical values as innocent drinks (Sweney, 2009). The company may lose originality after buyout by Coca-Cola. Opportunities The company is in a growing market. This gives them an opportunity to continue expanding their presence in other countries. The company can expand to the emerging economies such as China and India to enhance their market share. With the governments promoting healthy lifestyle, the company is in a better position to increase their sales. Governments have been setting up polices aimed at directing consumers to healthy lifestyles. This is a major opportunity for the company. Threats There has been an increase in market competition since the inception of the company. This was evidenced by the entry of companies such as Tesco and Asda with their own Smoothie labels. The new brands in the market have been able to position themselves as a low cost alternative which makes them a major threat to innocent drink premium positioning in the market. Changes in economy are a major challenge to the company. With economic crisis, the level of disposable income reduces and consumers are less willing to spend. This leads to the company sales declining. PESTLE analysis Political As the company expands to different countries, they are affected by the political environments. The company have to keep updated on political environment. There are tax rules on food products which have an impact on company profitability. The governments are responsible for raising awareness on healthy lifestyle which may enhance innocent drink market share. With the company acquisition by Coca-Cola, it’s set to expand at a fast rate (Innocent drinks, 2013). This will lead to more political interactions globally. Economic The economic condition has a direct effect on company profitability. This was evidenced during the 2008 economic downturn that led to reduction in revenues. The company is supposed to ensure that they have a marketing communication strategy capable of helping the industry in event of economic downturn. Innocence products are premium priced but offers high quality and health benefits. Despite this, a fall in disposable income leads to little expenditure on premium products. This leads to less expenditure on innocent drink products as consumer turns to cheaper products such as juice. Social The society is more concerned on environmental health and healthy lifestyles. Innocent drinks contribution to environmental healthy through use of degradable and recyclable packaging has enabled them to benefit from increased sales. Consumers are more likely to purchase products that have minimal impacts on the environment. The environmental awareness concept has acted as a sales promotion strategy. The society is more concerned with company ethics. This was evidenced when the company conducted trials at McDonalds. Their consumers did not like the company products to be sold through McDonalds due to ethical concerns (Innocent Drinks Typepad, 2009). The society move towards healthy lifestyles is a major opening for the company. Technological Through technology, innocent drinks have been able to prove to consumers that their products are healthy. With increased access to internet, consumers’ lifestyle is changing. The company have an interactive website where consumers can post their feedback. Innocent drinks have been using technology to promote their products (Innocent drinks, 2015). Environmental Innocent drinks have to address issues related to environment. Since inception, innocent drinks had been very concerned with environment (Innocent Drinks, 2015). This has been through sustainable packaging and reduction of carbon foot print. The company works with enhanced sustainability. With the world increase on pressure towards environmental sustainability, innocent drinks will have to feel the impacts. Legal The company has to operate within legal framework. Despite the high costs of production, the company faces an increase in tax. Legal environments play a major role in business. Porter analysis Buyers bargaining powers The market has high number of buyers. The buyers’ powers are high based on their product awareness and level of competition. The buyers can force the company to set prices based on their demand. Suppliers bargaining powers Suppliers in the industry have high bargaining powers. There are few suppliers in the fruit industry which makes the costs of supplies high. Threat of substitutes Threat of substitute is moderate. Innocent drinks products are positioned as healthy and of high quality. This makes the customers to continue purchasing them despite being sold at premium prices. There are many types of refreshments in the market which can be used as substitute. Differentiation has enabled innocent drink to reduce this threat (Abbing, 2010). New entrants Of late, there has been large number of new entrants. Large companies such as Tesco and Asda have entered the market. The barriers to entry are few in the industry. Market rivalry The industry is highly competitive with high competitive rivalry. There are major players such as PJ Smoothies and Feel-good who have been major competitors. Reasons for growth for innocent drink Innocent drink growth can be attributed to the fact that the company introduced their products into uncontested market. There were few players in the healthy Smoothies industry. The company founders were entrepreneurial and were able to convince others to take risk. Innocent drink ensures that their Smoothie was fresh and of high quality while maintaining friendly prices. Innocent drink focused on creating value to the consumers. The company was able to establish themselves as a company that cares for the community. The company focuses on creativity and innovation enhanced their growth (Innocent drinks, 2015). Business strategies from 2006 to the present day In 2006, the company strategy was based on growth. Sales increased by 29% from 2007 to 2009. The strategies used were pricing, maintaining a point of difference, positioning, branding, market communication, innovation and consumer targeting (Drinks, 2011). The company slashed their prices which led to an increase in sales. By selling quality products at fair prices, the company was able to grow. Through maintaining a point of difference, the company was able to differentiate their products. This was through making sure that they maintain their healthy drinks quality (Innocent drinks, 2015). Marketing campaigns which include videos, posters and internet help a lot in the company marketing strategy (Fill, 2005). Innocent Drinks have been able to maintain their position as a healthy drink. All their products are made from 100% crushed and pure fruits. The company continued adding new products to the list of healthy drinks they had in the market. The company launched a three year program in 2007 which was aimed at getting the right results for the consumers and staff. Through their packaging strategy, the company was the first to launch a 100% recyclable package. This made the company to reduce their carbon footprint (Brown & Grayson, 2008). The company was able to position themselves as ethical with their innovative packaging. The company focused on creating a relationship with their consumers. This led to eCRM which ensured that the consumers were well treated (Donnelly, 2009). The growth strategy led to an increase in assets. Through the sex strategies, Innocent drink has attained high growth. In 2009, the company sold 58% of their shares to Coca-Cola. Coca-Cola gained full control in 2013 by having over 90 % of the shares (Innocent drinks, 2013). Strategic reason for Coca-Cola to finally take control of innocent drinks and key influence on decision making process by Coca-Cola Industries in food sector have been under a lot of criticism on the unhealthy lifestyle. Coca-Cola has been under a lot of criticism due to sugar level in their drinks. The company have been under pressure to convince the public that their products are healthy and of required standards (Gray, 2008). The decision to take full control of innocent drinks is based on the company strategy towards healthy drinks market. Coca-Cola strategic reason to acquire innocent drink is to help them enhance their brand image as a healthy drink company. The company have been working on reducing the sugar levels in their drinks. Despite the company efforts in making their products more health conscious, they still face criticism. Coca-Cola is aware of the growing health market which can help the company expand its brand portfolio. This is a major step towards addressing the health concerns by consumers on their products. Consumers have perception that Coca-Cola practices are unethical and acquisition of ethical company have a positive impact on their image. The external factors such as pressure to healthy drinks and growing health food market made Coca-Cola make the decision to acquire Innocent Drinks (Gray, 2008). The decision made by Innocent Drink to be acquired by Coca-Cola was based on economies of scale and gaining a competitive advantage. Coca-Cola is a multinational with global brand recognition. The company have been able to establish themselves as the market leaders. Innocent drinks made decision to sell their stake to Coca-Cola in order to benefit from economies of scale. Being a large company, Coca-Cola will be able to expand innocent drink facilities and increase production. This will enhance the company output and make it benefit from economies of scale. After Coca-Cola takeover, sales have been rising (Sweney, 2009). With their large market reach, Coca-Cola will be able to distribute the company products into wider market. Coca-Cola has well established market share and distribution channels. This makes it easy to distribute the innocent brand products. This was another reason Innocent Drink made the decision. Coca-Cola will contribute to innocent drinks international brand recognition. Since the first deal with Coca-Cola in 2009, the company have flourished (Innocent drinks, 2013). The company had almost doubled this made the decision to allow a takeover easier. Coca-Cola had proved to be a worthy investment partner. Conclusion Innocent drinks have been able to grow from their humble beginnings to become market leaders in healthy Smoothies. Despite take-over by Coca-Cola, the company have to work hard to maintain their ethics. There is need to ensure that the company is able to address consumer concerned on the takeover. Most of the critics of the takeover by Coca-Cola are concerned with ethics. Innocent drink should ensure that they engage their consumers to address their grievances. The company should work in taking advantage of economies of scale and reduce their prices. This will enable them to reach consumers in low income markets. The decision to sell stake to Coca-Cola is great as it will give the company an international reach and global awareness. References Abbing, E. R. 2010, Brand Driven Innovation: Strategies for Development and Design. Ava Publishing. Brown, R., & Grayson, D. 2008, “innocent: Values and Value.” Journal of Business Ethics Education, Vol. 5, no, .1, p.171-192. Donnelly, R. 2009, The marketing planning process: CIM coursebook 2009-10. Oxford: Butterworth Heinemann. Drinks, I. 2011, Success Design Story of Innocent Drinks. Design, Vol.2, p.31. Fill, C. 2005, Marketing communications; engagement, strategies and practice. Harlow: Financial Times Prentice Hall. Gray, S. J. 2008, “Healthcare marketing has five'P's.” Journal of Management & Marketing in Healthcare, Vol.1, no.3, p.306-313. Innocent drinks, 2015, Innocent -Smoothie makers, Innocent Drinks, Viewed 22nd April 2015 from, http://portal.ukwon.eu/innocent-smoothie-makers Innocent drinks, 2013, some news about our investors, innocent Drinks, Viewed 22nd April 2015 from, http://www.innocentdrinks.co.uk/us/our-investor Innocent Drinks Typepad, 2009, innocent and investment, Innocent Drinks Typepad, Viewed 22nd April 2015 from, http://innocentdrinks.typepad.com/innocent_drinks/2009/04/innocent-and- investment.html Sweney, M. 2009, “Innocent drinks sell stake to coca cola.” Guardian. co. uk: Viewed 22nd April 2015 from, http://www.guardian.co.uk/business/2009/apr/06/innocent-drinks-sell Read More