Innocent Drinks Case Study
Three friends from the Cambridge University, Richard Reed, Jon Wright and Adam Balon founded the innocent drinks in 1998. All the three were in their respective fields of work and working for different companies after they graduated in 1994. Reed worked for an advertising agency, while Balon and Wright worked for different management consultants. The three friends always had an idea about starting a company of their own and in 1998 they founded the innocent drinks after an intense market research and testing their product.
THE EARLY INNOCENT. Reed, Balon and Wright organised events in London like the used to organise in Cambridge such as a music festival called Jazz on the Green in 1997-1998. Though they were in different firms and careers, they always wanted to start a business of their own. They considered several ideas and they switched to think about their own lifestyles. This has paid off. They soon identified healthier food and drink for people like themselves, with too much work and a very little time, could be a very good business. The three after agreeing for the venture, decide to take a further market research.
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Jon Wright who had studied manufacturing engineering was in charge of operation, Reed with advertising experience took marketing and Balon, who had an experience of selling Virgin Cola, took on sales. In June 1998, Jon visited a facility near the Nottingham where PJs bottling was done. He found a small factory run by a local farmer, which in addition to bottling also contained a small fruit processing unit(Jonathan Wright). The team of three worked with that farmer to produce test drinks in his plant. The test results were very positive and the plant pasteurised the juice without impacting the taste.
They were then ready for the market test of the juice made at the Nottingham factory and Balon, Reed and Wright agreed that they can take sabbaticals from their present jobs as they got enough potential in their smoothies project. They used their Jazz on The Green,1998 to do market test of their product. They set up a stall and sold a 250ml of bottle for ?1. 89. A placard by the stall read “Should we give up our jobs to start a smoothie company? ” and beside it, they put two bins with the labels “YES” or “NO”.
The bin with label “Yes” overflowed and the bin with lable “No” with a negligible count of bottles. THE ACTION PLAN Everything was set but main concern was pricing. PJ which was then a main competitor, sold their 330ml smoothies made of concentrate for a lesser price when compared to innocent’s 250ml. The solution came when a designer suggested that a 250ml bottle can be risky but marking as INNOCENT can be sustainable. Initially the branded the drink as Fast Tractor in honour of their farming collaborator. Another issue was the finance from the conventional sources which were reluctant to invest.
They would need at least ?235,000 to add to their own invest of ?45,000 to cover the costs and operational losses for 12 months period. But, if it works out, then they would at ?1 million profit by year five. Despite their enthusiasm and impressive CVs, the business angels deterred by their lack of experience in this market sector. However, they managed to get an appointment with Maurice Pinto, a private investor, who agreed to invest ?235,000 for a 20 percent share in the company. The investment was made in January 1991 and three months later, the first stock of smoothies was delivered from Nottingham.
The brand name was “Innocent” reflecting the founders’ belief in the purity of the their product, the main point differentiation from all the competitive offerings and the holding company was called Fresh Trading. Dan Germain, an old friend of founders joined the business in summer 1999 and they came up with an idea of changing the packaging and printing off beat messages on the labels which became the hallmark of the product. As the company grew, it used many traditional marketing strategies to grow the company much more bigger.
COMPANY GROWTH. The company adopted a very highly successful formula and sales grew rapidly. Pinto then advised the founders to expand the company in Europe or to extend the brand to other products in the UK. The company decided not to diversify their central idea of business but were interested in expanding the core range of products in the Europe. Sales were significantly high during 2003 and later as innocent was spread into a wide range of retail outlets, reaching ?37 million by 2005 and giving innocent a 60% market share in UK market for smoothies.
This placed innocent well ahead of many other brands of smoothies like PJs and Coca cola’s Minute Maid. During this time, 11 other brands came and went, and PJ was acquired by PepsiCo. Despite their easy going management image, the three run the business very firmly and never stopped themselves from firing the employees who do not work effectively for the company. Growth means that they have brought in professional managers from established companies to compliment their skills and on the other hand the resources which they use have the good-will of the company.
The further growth of the company in Europe can affect the company’s fast growth as finding the right staff and effective resources is always difficult. INNOCENT ETHICS Innocent had in fact developed a formal set of company values during 2005. They are be natural, be entrepreneurial, be commercial, be commercial, be generous, be responsible. These values were the initial assessment of the job applicants and these values were used in company decision making and staff appraisals. Innocent always emphasized on company’s spirit of social responsibility and sustainability.
Detailed company’s strategies were developed for various aspects such as procurement, packaging, emissions and even for the company’s head office. Each was delegated from specific managers to champion. Work places of innocent were also committed to sustainability and responsibility. A wide range of profit-sharing schemes were developed for all staff. Innocent provided competitive compensation packages, created a good working environment and encouraged the staff to involve in sustainability of the company.
An experienced management observer noted : Consumers are looking for a business to trust, and they want to reward that trustworthiness. Innocent is a model of the values all businesses should 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.