Innocent Drinks Case Study

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Three friends, Richard Reed, Jon Wright, and Adam Balon, who all graduated from Cambridge University, joined forces in 1998 to establish innocent drinks. Despite pursuing different careers in advertising and management consulting, Reed, Balon, and Wright always shared a common aspiration of starting their own company. Through thorough market research and product testing, they managed to turn their idea into reality by creating the successful brand known as innocent drinks.

Reed, Balon, and Wright, who used to organize events in Cambridge, such as the Jazz on the Green music festival in 1997-1998, now wanted to start their own business in London. Despite working in different firms and careers, they were always determined to be entrepreneurs. They explored various ideas but ultimately focused on their own lifestyles. It proved to be a successful decision, as they quickly realized that offering healthier food and drink options for busy individuals like themselves could be a lucrative business opportunity. After agreeing on this venture, the three decided to conduct further market research.

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Jon Wright, who studied manufacturing engineering, was responsible for operations. Reed, with advertising experience, handled marketing. Balon, who had experience selling Virgin Cola, managed sales. In June 1998, Jon visited a facility near Nottingham where PJs bottling was done. He discovered a small factory operated by a local farmer, which included a small fruit processing unit. Jonathan Wright and his team worked with the farmer to create test beverages in his plant. The test results were highly promising, and the plant successfully pasteurized the juice without altering its taste.

Following their preparations for a market test, Balon, Reed, and Wright were all inclined to take sabbaticals from their current occupations due to the potential they identified in their smoothies project. They opted to utilize Jazz on The Green, 1998 as a platform for conducting this test. By setting up a stall at the event, they retailed 250ml bottles of juice for £1.89 while simultaneously presenting a placard next to it with the inquiry: “Should we relinquish our current employments in order to establish a smoothie enterprise?” Adjacent to the placard stood two bins labeled as “YES” and “NO”.

The bin labeled “Yes” was full to the brim, while the bin labeled “No” had a scarcity of bottles. The main focus of the action plan revolved around pricing. A competitor named PJ offered their 330ml smoothies made from concentrate at a lower price compared to Innocent’s 250ml smoothies. One of the designers proposed a potential solution: although using a 250ml bottle might be risky, labeling it as INNOCENT could be sustainable. Initially, they marketed the beverage as Fast Tractor in order to honor their farming partner. Another hurdle they faced was securing funding from traditional sources that were hesitant to invest.

Despite the business angels’ enthusiasm and impressive CVs, they were discouraged by the lack of experience in this market sector. However, they managed to arrange a meeting with Maurice Pinto, a private investor, who agreed to invest ?235,000 for a 20 percent stake in the company. This investment took place in January 1991 and three months later, Nottingham delivered its first batch of smoothies.

In order to cover operational losses and costs for a period of 12 months, an additional ?235,000 was needed along with their own investment of ?45,000. If successful, they projected that by the fifth year there could be a profit of ?1 million.

The brand name “Innocent” was chosen by the company founders to represent their belief in the purity of their product and set it apart from other brands. The parent company, Fresh Trading, also emphasized a dedication to freshness. In 1999, Dan Germain, a close friend of the founders, joined the company and they collectively decided to enhance the packaging by incorporating unique messages on labels as a distinguishing characteristic. As the company expanded, it incorporated conventional marketing strategies to facilitate further growth.

COMPANY GROWTH. The company experienced rapid sales growth after adopting a highly successful formula. Pinto suggested expanding the company in Europe or diversifying the brand with other products in the UK. However, the company decided to focus on expanding its core range of products in Europe while maintaining its central business idea. Sales increased significantly in 2003 and beyond as innocent became available in numerous retail outlets. By 2005, sales reached ?37 million, resulting in a 60% market share for innocent’s smoothies in the UK.

This placed Innocent well ahead of many other smoothie brands such as PJs and Coca Cola’s Minute Maid. In the meantime, 11 other brands entered and left the market, and PJ was acquired by PepsiCo. Despite their laid-back management image, the three founders of Innocent run the business with a firm hand and do not hesitate to terminate employees who are not performing effectively. As the company has grown, they have brought in professional managers from established companies to enhance their skills. Additionally, they ensure that the resources they use have the company’s approval.

The expansion of the company in Europe may hinder its rapid growth due to challenges in finding suitable staff and necessary resources. INNOCENT ETHICS In 2005, Innocent established a formal set of company values: being natural, entrepreneurial, commercial, generous, and responsible. These values were incorporated into the evaluation of job applicants and were also utilized in company decision-making processes and staff appraisals. Innocent consistently prioritized the company’s commitment to social responsibility and sustainability.

The company developed detailed strategies for various aspects such as procurement, packaging, emissions, and the head office. Specific managers were assigned to champion each strategy. Innocent also committed to sustainability and responsibility in its work environments. Furthermore, a variety of profit-sharing schemes were implemented for all staff members. Innocent offered competitive compensation packages, fostered a positive working environment, and encouraged employee involvement in the company’s sustainability efforts.

An experienced management observer noted that consumers are seeking a trustworthy business and are eager to reward such trust. Innocent serves as an exemplary model for all other businesses to aspire to. References: Sources: Bases on the material from ‘Innocent Drinks’, a case prepared by William Sahlman (2004), Harvard Business School, Case No. 9-805-031; Based on the case written by Robert Brown and Professor David Grayson, Cranfield University, School of Management (2008), Ref No 708-041-1; Sunday Times, 24 September 2006; company website.

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