Innocent Smoothie - International Marketing Opportunities - Case Study Example

Innocent Drinks – International Marketing Opportunities

• Product and Market Selection

Innocent Smoothie’s are market leaders in the UK controlling almost 77.5% of the market in the UK. They have a rich product range with 30 different recipes to cater to diverse consumers. Their smoothies are made from natural fruits sourced from high quality suppliers. Their ethical concern is high as they use 100% recycled bottles and 25% recycles paper for their labels. Their corporate social responsibility is evident from the funding of rural development projects in countries they source the fruits from. They use light-humored communication in line with their brand values which communicates their brand image, thereby demonstrating unique brand identity.

Smoothies belong to the high-end premium-product range in the NCSD (non-carbonated soft drinks) sector. Smoothies are basically fresh fruit juice with milk, yoghurt or sherbet. Rising health consciousness, convenience, portability and taste have made the smoothies market very promising (PRWeb, 2010). In fact, the United States dominates the global smoothies market, which is projected to witness health growth rate in the years to come. However, one of the downsides is the product price. Apart from the price, other factors that impede fast adoption include limited product choice, high sugar and fat content in smoothies. Consumers today are well-informed, health-conscious and time-starved. They demand more from products and therefore changing consumer preferences is one of the major challenges faced by smoothie manufacturers.

The new market that Innocent seeks to enter is the United States niche market in the East Coast because of growing health consciousness and changing consumer attitude

• Decision to Internationalize

The decision to internationalize has arisen to due to high competition in the UK market and health consciousness in the niche US market. Thus it is a combination of push and pull factors. Innocent has unique advantages such as ethical sourcing, supporting of rural development programs and recycling of packaging materials. Innocent may consider appointing local franchisees as that would enable easy access to the market. Since innocent is also a reputed brand, positioning itself would not be difficult. However, market penetration would be easier with local franchisees. It should position itself as a health and wellness brand offering high nutrition value as this is what the consumers seek today.

Besides, Innocent takes responsibility for the impact their business makes on the society and the environment (Innocent, 2016). They constantly strive to make these impacts from negative to neutral. This could give them comparative and competitive advantage as consumer consciousness towards ethical trading is high. They have also teamed up with Sustainable Agriculture Initiative and developed a common standard for sustainable farming systems that everyone can adapt to.

However, competition is high in the juice and smoothies sector in the US. Bolthouse Farms, the premium juice manufacturer, are the market leaders in the US offering juice fruit smoothies with a market share of 22.6 percent based on generated sales (Statista, 2015).

• Justification for selection of the US market

The US smoothie market has been growing steadily over the past years mainly because of changes in the consumption habit of Americans. Health consciousness has made them skip meals and depend upon snack food as a substitute (Research & Markets, 2007). Smoothies offer healthier treat than other snack items, is tastier, and offers other benefits such as convenience and portability. Jamba Juice is the market leader in the US market and the barriers to entry are low due to low capital investment required. However, product quality and brand awareness are critical to the success of any brand. Many restaurants and snack outlets now offer smoothies. Sales of soft drinks have been declining in the US market. The five leading players in the US smoothie market include Jamba Juice, TCBY Systems, Smoothie King, Orange Julius and Surf City Squeeze.

Fruits and vegetables consumption is positively correlated with income levels as the per capital supply is highest in high income countries (Regmi, 2001). In the United States, fruits and vegetables consumption as grown American consumers have responded to diverse factors such as convenience, healthy lifestyles and enhanced transportation system. Thus, total meat consumption has been declining and per capita fruits and vegetables consumption has been increasing. The Healthy People 2010 was developed in America with the objective of increasing the percentage of the population that consumes fresh fruits and vegetables every day (Blanck, et al, 2008). This was based on the finding that a diet high in fresh fruits and vegetables reduces the risk of chronic diseases and aids weight management.

Parents find fresh fruit juice a better alternative to bottled soft drinks. Because of health concerns juice blends such as smoothies are becoming increasingly popular. In 2013, the US fruit juice market was valued at US$ 23 billion based on generated revenue (Statista, 2015). Obesity and particularly, child obesity is a growing concern in the US (Ko, 2014).

The growing trend of juice smoothies bars in the US is evident from the chart below:

Source: Ko (2014)

The US Smoothies market stands as follows in proportion to other products in 2014:

Source: IBISWORLD.COM

Health and wellness factor has become vital for juices and smoothies. Big brands such as McDonald’s, Starbucks and Dunkin’ Donuts have also entered the segment pushing down the prices (Bixler, 2014). IBISWorld projects moderate growth in the smoothies sector but the study also emphasizes that cold-pressed juice would drive sales. IBISWorld projects a rise at the rate of 2% in the juice and smoothies bar sector which would amount to an average of on average to $2.4 billion in the next five years up to 2019.

The industry overview at a glance:

Source: Bixler (2014)

• Marketing Objective

To compete effectively in a highly competitive market space, it is important to identify critical success factors and thee should be incorporated into strategic planning (Baker and Cameron 2007). Brand image and brand equity play a vital role in the success. SMART marketing objectives thus would be:

Specific

• To ensure Innocent is what comes to the mind when they think of smoothies. They focus on delivering what tastes good because ‘what tastes good does good’.
• To capture at least 5% of the market share within the first two years and go up to at least 30% within the first five years.

Measurable

Extensive brand building strategy is essential. Allied businesses such as juice bars, fast food outlets should be involved in building the brand.

Achievable

The objectives are achievable because consumers have become health conscious and avoid fruit juices that have high sugar content and other additives. Consumer demand is shifting towards 100% fresh fruit juice or smoothies with milk and yoghurt.

Realistic

The objectives are realistic because this is precisely what the consumer wants. The government too supports such products because of high obesity in the society.

Timed

The objectives are intended to be achieved over a period of three years.

• Target Selection and Market Segmentation

According to a study conducted by Agriculture and Agri-Food Canada (2012) on American Eating Trends, the consumption of fruit juices is 20% above average among the under 25s and over 65s. The under 30s face a hard time adhering to a healthy regime as they constantly face time-constraints, temptations for unhealthy food, peer pressure and sedentary lifestyles.

The ‘millennial generation’ consumers (between the ages 15-34) present the most attractive consumers because of higher spending power (Euromonitor Research, 2014). The older generation has restrained spending because of the high costs of raising family, mortgage expenditure and savings for retirement. The millennial generation is also known as the ‘selfish generation; as they prefer to spend on themselves rather than save for the future. Due to instability in jobs and career has also led to delayed desires to start to a family. Thus, this generation has higher discretionary income which then can spend on themselves.

Based on the above findings, Innocent should focus on the millennial generation in the US niche East Coast. Segmentation based on customer expectations is an effective marketing tool (Diaz-Martin et al., 2000). The target segment would comprise of the high-income, niche, urban population of both sexes between the ages of 16 and 34 years in the East Coast. Segmentation should be based on the aggressive attitude that consumers have towards their goals in life because such people would be equally aggressive in achieving their targets - maintaining a regular exercise regime, cutting down on sugars and remaining healthy. Such trend setters would be easily able to influence followers.

• Product Positioning

Because of the focus on sugar and calorie count, competition has enhanced in the smoothies sector in the US because of substitutes such as ready-to-drink and flavored water. A study by Mintel (2014) suggests that adults (41%) seek added nutrition while 40% look for good taste. Promotions should thus focus on expanding usage occasions. Products should be positioned with a focus on functional benefits such as nutrition and satiety; it should also position as offering enhanced freshness. Fruit juice consumption in the US is very high but the nutrition content in juices is much lower than fresh fruits. As such Innocent can promote its smoothies as having high nutrition value because they contain no additives and are low on sugar.

The product and the brand have to be completely in sync with each other. They have been communicating the brand value to their employees with clarity of purpose clearly defined. They donate 10% of their profits to charity. The company continues to assess its carbon footprint and their ultimate aim is to become an FMSG – fast moving sustainable goods company (Turner, 2008). If a product is from the heart, good image is sure to follow. eCRM plays a major role in their maintaining regular contact with their suppliers.

Innocent has overhauled its marketing strategy and now focus on charity and emotional messaging than on the product (Eleftheriou-Smith, 2013). They use the tagline ‘tastes good does good’ and also keep claiming that they donate 10% of their profits to charity. They have new recipes for children. This should be the target segment as obesity and soft drinks are linked together. So if smoothies from fresh fruits are targeted at children it is sure to attract people.

• Brand Positioning

Branding helps establish competitive advantage. Brand positioning sets the direction for marketing activities and other programs.

The best strategy that any brand owner can have, in any category in the world, is to be best at whatever it does and actually mean it (Cliffton, 2008). Their actions should speak more than words because this is what the consumer believes. People define themselves with what they buy (Holt, 2003). If the product is good, the customer should experience it as such. This is the value proposition that the brand should seek to build.

One of the methods that brands use to convince their customers of the brand quality is through the use of brand personalities. Celebrity endorsements help marketers position their brand and even attract customers who identify themselves with these stars. Celebrity endorsement gives meaning to the brand in the eyes of the consumers. Brand personality points to those human traits that can be attributed to the brand. Brand personality traits fall into five main clusters, according to Aaker (1197 cited in Keller & Lehmann, 2006). These include sincerity, excitement, competence, sophistication and ruggedness. However, different brand personalities affect different people in different consumption settings. These five factors highlight the characteristics that Innocent Smoothies must demonstrate – they must speak the promise, be wholesome, satiating, must be imaginative, reliable and up-to-date. Competence has been given importance in brand literature as it pertains to the ability of the brand to carry out its promise well.

• Market entry strategies

There are several modes of entry in international expansion with the four commonly used modes being export, licensing, joint ventures and wholly-owned subsidiaries. Each of these modes offers varying degrees of control and investment. Decision to enter a market is based on these two factors. In the case of the food and beverages industry, franchising has been used by players such as McDonald’s, Pizza Hut and others. When domestic saturation forces firms to look beyond their national boundaries, franchising is used as a mode of entry and a growth strategy for firms (Inma, 2005).

Franchising is a business relationship offering a vertical contractual arrangement between the franchisor and its one or more franchisees (Grunhagen & Dorsch, 2003). In this arrangement the franchisees have to operate under the terms and conditions specified by the franchisor. Investments for Innocent are minimal as they would receive franchisee fee from every franchisor in exchange of lending technical, marketing and administrative support. In franchising, Innocent would get immediate access to local market knowledge. In additiob, Innocent would be able to monitor and control the activities of the franchisees.

Franchising works well in developed countries as it provides the franchisees with the motivation and support they would not receive otherwise (Hoffman & Preble, 2004). While being a source of competitive advantage, franchising would enable Innocent to adapt to different cultures and regulations in the US. Besides, this mode of entry works well throughout the business cycle including downturn.

Thus, if Innocent appoints franchisees in the East Coast, it could raise capital by way of franchisee fee; with minimum investment it could plan its growth banking on the knowledge of the franchisees. This would enable rapid market penetration. Innocent should consider appointing franchisees that are already in allied services such as juice bars, fast food outlets, or even athletic clubs where smoothies would be a favored drink because of low sugar and high nutrient value.

• Design, implementation and control of marketing programmes

The marketing strategy has to take into consideration that the east coast has a large number of immigration population from different cultures. Culture impacts how a product is perceived and accepted. Culture also impacts the satisfaction levels. Consumer psychology suggests how memory and judgment affect consumers' decision making (Tybot & Artz, 1994) an example being that consumers like to feel different (Lea-Greenwood, 2006). Informational and emotional impact can be achieved through celebrity advertising (Gu, 2005).

Initial awareness advertising should start at six weeks before the actual launch of the product. A fortnight before the launch advertising campaigns should start which would include media coverage, television sponsorship and so on.

It is important to highlight the benefits of Innocent smoothies upon the minds of the people. This requires reputation and brand image. This brand image depends upon the product quality, the promised benefits and the price. This requires excellent public relations as a part of the marketing strategy.

• The Marketing Mix

The marketing mix is based on the assumption that the different elements should be mixed in the right proportion to gain the desired market share. Thus, the product should be tailored to maximize customer benefit; the price should be within the customer’s budget; it should be conveniently available to the customer (place) and it should be promoted in a way that customer awareness is created (promotion).

10.1 Product

Because of the pervasive consumer aversion to sugar and other additives used in juices, the sale of juice and juice drinks have declined in 2015 (Euromonitor, 2016). Thus, unnecessary and unhealthy added sugar is likely to adversely affect the juices market. This implies that any new healthy product to be introduced in the US market should not contain sugar or any other form of additives. Juices that are not 100% juice and are more likely to have added sugars, expect a decline in sales. The concern for sugars and additives among consumers has urged juice suppliers to introduce value-added products such as juice smoothies that are perceived to be healthier that simple juice (Lee, 2015). Green smoothies have gained popularity in the US with the use of vegetables such as kale and wheatgrass.

The company aims to produce a fruit smoothie with natural and pure fruits, with no additives and concentrates (Turner, 2008). When they first started they were the only ones but over the years very intense competition has come up. Hence, they can sustain in the market only with continuous product development. As far as the product is concerned, Innocent Smoothies fulfill the needs of the customers in the US and hence n further adaptation is essential. However, the product must fulfill the promises claimed in the media.

10.2 Pricing

Adaptation in pricing may be essential. Innocent aims to capture the niche 16-34 segment in the US East Coast. Prices in this sector are expected to keep rising. Because of high cost of sourcing Innocent is categorized under premium pricing and hence is not accessible by a large population. This is an extensive competitive market as several small and large players exist in the US niche market. Due to the economic slowdown strategic pricing strategy should be adopted by Innocent to make a smooth entry into the US market. Initially pricing should be competitive but after a market share has been captured, premium pricing can be charged against some unique product characteristics.

10.3 Place

Sale of smoothies has increased through different channels such as retail and foodservice channels (Lee, 2015). Innocent should contract with franchisees already in the allied industry, having outlets at strategic locations. Innocent must, directly or through its franchisees, have outlets at the gyms, which is frequented by the sophisticated class, willing to pay the premium price of the product. Besides, sophistication is one of the traits of brand personalities and hence the consumers would be able to identify themselves with the product on offer. Innocent should also be available at all retail stores, hyper marts and food service channels.

10.4 Promotion

The purpose of marketing mix communication is to inform, to remind and to persuade. This may require integrating marketing communications with business functions (Holm, 2006). Promotion can be done through different means such as advertising, direct selling, public relations and publicity, all of which together is known as marketing communications mix.

10.4.1 Advertising

Advertising has to be adapted to the market to be captured. Advertising campaigns must have a strong message to attract the customers. It must be adapted to the niche consumers it seeks to attract. Thus, the message must be able to capture the imagination of the customer and highlight the unique product attributes. Advertising should also reflect the changing needs of the society, in this case, being the need for low-sugar, high-nutrition value. Once the advertisements convey the benefits of the product, the demand for the product has been created. Advertisements should highlight the importance of a healthy body, of body image and how these influence the mind.

Thus advertising should include pre-launch teaser campaign (long – 6 weeks), launch campaign (shorter – 2 weeks), while post-launch should be ongoing. Print and television media should be extensively used and prime time television serials and shows should be sponsored. Advertisements should also urge consumers to purchase trial packs to test for themselves. However, the trial packs should be able to convey the product attributes so strongly that the trial pack should result in brand loyalty.

10.4.2 Personal Selling

Relationship marketing makes sales happen. The direct customers before the end consumer are the franchisees, the owner/directors of food service channels, the retail stores and the directors at gyms. They need to be convinced of the product quality, its nutrition value and the benefits. While some of the franchisees can be flown into the UK for a first-hand experience, Innocent may have to send trained personnel to personally meet the directors/owners, and convince them of the product. Their support is needed even to display the product. This activity may have to be undertaken before the official launch of the product.

Direct marketing such as this, is an effective method of creating awareness of a new product. Face-to-face interaction has more impact than distributing flyers or advertising over the Internet. Giving out trial packs during such personal interaction gives them an opportunity to assess the product themselves. Once they are convinced, it becomes fairly easy for them to promote the product. Personal interaction is also an opportunity to understand the customer, which is an important part of marketing (Olorunniwo, Hsu & Udo, 2006).

10.4.3 Sales Promotion

Innovation is essential at every stage of the marketing process. Product display at the franchisee and other stores should be innovative to catch the immediate attention of the customers. A sales promotion strategy is successful if it can deliver value more than customer expectations, enhance the brand image and value, and raise the standard of living of the people.

According to a study conducted by Euromonitor International (2012), the health and wellness industry can benefit immensely if a high level of health awareness can be created among this population. Innocent can use this as an opportunity to discharge its CSR by educating the youth. Thus, a contest can be floated where in health-related questions could be posed. Along with this, questions on what exactly smoothie is and its composition could be queried which could bring awareness that it contains no or low sugar, the major concern among the health conscious. The winners could be given a hamper full of health food or coupons for Innocent Smoothies to be used for an extended period of time.

Another sales promotion strategy that could be applied is to collect coupons against every sales. Each purchase should carry a coupon and against a certain number of coupons some offer is granted. Smoothies can also go in for co-branding with other health products once established. To keep sustained interest among consumers, scratch card with some offers should be provided.

10.4.4 Public Relations

Public Relations have to be maintained at regular intervals so that the brand impression remains fresh in the minds of the consumers. This can be done through regular campaigns such as Why Fresh Fruits? The campaign should showcase the importance of fruits, their nutrient contents, how they are ethically grown, stir curiosity, generate and engage customers. This should be an audio and video campaign for three months.

Environment sustainability is a global concern and the US consumers too prefer such brands. Recycling and use of renewable resources places Innocent at an advantageous position. This should be effectively communicated.

Innocent can distribute free smoothies on a hot summer day at some Charity.

• Implementation

Resources required are trained franchisees, advertising budget and a marketing agency. Dealing with direct clients and dealing with franchisees requires different skill sets. Innocent should get their franchises for a familiarization tour to the UK to see the manufacturing process so that they are convinced of the authenticity of the product. This would help them convince the end consumers that are health-conscious.

• Marketing Budget and Control System

The products will be shipped from the UK to ensure product quality. Besides, it is not known how the market will accept the product and it may not be cost effective to prepare the smoothies in the US.

Marketing budgets should be spread over three years. Online social media is the least expensive form of marketing while television advertising is the most expensive. In the first year 50% of the total marketing budget for three years should be used up. Of this 50%, fifty percent should be spent on promotion through the television. Most of it should be consumed at the time of the initial launch and then during peak seasons when consumer purchasing is high. The rest of the budget earmarked for the first year should be spent on other promotions such as campaigns, offers, print media and getting the franchisees into the UK. In the second and the third year, spending on print media should increase and television spending should decrease. Twenty five percent of the budget should be spent in each of the next two years.

This marketing budget would come from the franchisee fees received as it is meant to extend support to them. All of this can be controlled by an executive sent from the UK headquarters. A few personnel may need to be employed under him to keep regular communication with the franchisees and to oversee the promotional programs. One director based in the UK would be responsible for the entire US operations and should be appointed much ahead of the actual launch.