The of Innocent Drinks - Case Study Example

Innocent Drinks Name Course Lecture Date 1. Introduction Since Innocent Drinks was founded, the production of smoothie’s drinks from real natural fruits has been exploited by their core competitors in the market. From when they first launched their idea, the company has grown and it currently sells drinks that totals to more than two million in a week with more than 275 employees and a turnover of £100 million with offices in Europe. Innocent is rated as the number one smoothie brand as well as the fastest growing Food and Drink Company in the UK. This report sets out to outline the history of Innocent Drinks since when it started its operations to date. The report will also explore the SWOT, PESTLE and Porter five forces analysis of Innocent Drinks. 2. History Innocent Drink is a company that was founded by three Cambridge University graduates namely Jon Wright, Adam Balon and Richard Reed. By then, they were working in consulting and advertising. In the year 1999, subsequent six months of working on the smoothie's recipes and spending an additional £500 on fruits, they sold their drinks from a stall during a music festival in London. People who drank the drink were asked to place the empty bottles in either a no or yes bin in regard to whether the three ought to leave their current employment and start making smoothies. When the festival ended, the yes bin was full while the no bin had only three cups, and so they decided to resign and make smoothies. The three struggled to find investors, and eventually, they were lucky when Maurice Pinot an American businessman decided to invest, and he made an investment that totaled to £250,000 (Tryhorn 2009). All in all, it took a period of one year and three months from when the idea was generated to when they were able to take the product to the market. In the year 2007, McDonald began a trial to run for five years, and they made use of the smoothies as part of their meals. Unfortunately in 2012, they had to drop the product based on the feedback they received from their customers. In the year 2015, the Chiquita Smoothie was eventually replaced by two other varieties of the brand in Netherlands. Due to financial crisis, the revenue of the company reduced drastically, and this led to a loss that amounted to £8.6m. In the consecutive year, the company announced that it wished to sell a 10-20% share to the coca-cola company, and the three founders were to retain the operational control. Due to the takeover, the ethical consumer rating reduced the moral rating for the company. On April the following year, Coca-cola increased their stake from 18% to 58%. In the year 2013, they increased their stake to 90%; these meant that the founders were left with a 30% stake in the company (Neate, 2013). The primary products of Innocent Drinks are the smoothies. The innocent smoothies are comprised of whole crushed fruits as well as juices, but in some drinks, other ingredients such as ginger, carrots are usually used. Innocent also make smoothies, juice for kids, fruit tubes, veg pots, noodle pots as well as a wide range of ready meals. In March 2014, innocent launched a new range of super smoothies (F & B News 2014). The company, Innocent Drinks has also experienced some controversies in regard to product recall, health claims, and advertising claims just to mention a few. In relation to health, the innocent brands are promoted as being the healthy option. Nevertheless, their 250ml bottle contains 34.3 g of sugar and 171 calories. In 2005, some of the innocent smoothies were reported to be exploding. In 2007, the company had to recall about 100,000 bottles citing natural fermentation as the reason behind the explosions (Metro News 2007). 3. Porters of five forces 3.1 Threats of new entrants As smoothie products become popular in the UK, people tend to be more inclined to purchasing healthier products; and the competition seems to be increasing. Companies such as Ella’s Kitchen and McNeil have been creating issues of sinking, retaliation and switching of costs. 3.2 Threats of substitute products Surprisingly, the threat of substitute products is coming from within the company (Donnelly 2009). Innocent smoothies face a lot of competition from other Innocent products that are manufactured and marketed by innocence drinks. Some of the products are the kids orange and apple juice. These products seem to be switching the younger generation to juices within the brand. 3.3 Bargain power of customers In regard to these, the sensitivity of the consumers to price seems to be a major area of concern (Porter 2008). Innocent can implement loyalty programs for instance they can place adverts of ‘buy 1 get one free' on an occasional basis. 3.4 bargain power of suppliers Suppliers are directly related to the input in the market (Jobber 2007). The distribution channels in the company have a significant reliance on suppliers. Innocent Drinks need to enhance healthy competition among suppliers and the labor unions. 3.5 Competitive rivalry Innocent Drinks needs to be aware of the increasing competition in the industry. The company needs to take note of old competitors and also keep a close look on new entrants in the industry. The company needs to enhance transparency and adopt powerful strategies for them to gain a competitive advantage over their competitors in the market (Porter 2008). 4.0 SWOT analysis 4.1Strengths 4.1.1 Leading smoothie brand Currently innocent brands own about 77.5% stake in the smoothies market. The company has established itself over the years as a premium brand, and it has been able to achieve this by charging premium prices that are above those of its core competitors (Simmons 2011). Innocent Drinks has also developed to be a staunch brand image, and is has achieved these by making use of light humored communication that is cohesive with the brand values. 4.1.2 Product quality Each of the smoothies from the company is made from real natural fruits, and they are sourced from regulated suppliers so as to ensure that they are of premium quality. This acts as an advantageous point against their competitors since consumers are aware of added ingredients in drinks and food (Simmons 2011). 4.1.3 Consistent growth Innocent Drinks has been termed as the fastest growing food and drink business in the UK (Simmons, 2011). This exhibits an excellent and commendable track record for any future investments. Since when it was launched back in 1999, the company has continued to show regular growth and though at the time it made losses, the profits made surpasses the losses. The proceeds are also used for future expansion. 4.1.4 Distribution channels Innocent Drinks distribution channels are superb, and its drinks are currently stocked in a wide range to retails outlets and also in major supermarkets chains (Simmons 2011). This makes the product readily available to the target market. 4.1.5 Environmental company Their environmental track record can be dated back to 2003 when they started using 25% post consumer recycle plastic in their bottles. With time, they have changed and their one liter smoothies is packed in a lighter carton that has no membrane lid and this plays an essential role in saving up to 20 tons of plastic, as well as 400 tones of carton yearly. In addition, it is logically possible to recycle their packaging 100%, furthermore, they make good use of renewable energy in most of their business operations and they only purchase fruits from the plantations that are approved by the Rainforest Alliance (Simmons 2011). 4.2 Weaknesses 4.2.3 Price Innocent charges premium prices for their products and this means that there will always be a market segment that will be reluctant to purchase their products (Simmons 2011). This market segment is likely to buy from their competitors who have lower prices as compared to Innocent drink prices. 4.3 Opportunities 4.3.3 Increase the market share The market in which innocent operates seems to grow with each passing time. This is as a result of more consumer awareness and cautiousness on what they eat and drink. This seems to be clear indicators and opportunity that innocent to take up to capture a greater market share (Simmons 2011). 4.3.4 Emerging markets With the globalization of companies, companies seem to be taking up the opportunity they are provided with to sell their products to global consumers. Innocent need to seek global expansion to increase their customer base, as well as revenues (Simmons 2011). 4.3.5 Increase product range To be more innovative and offer a wide range of product that consumers can choose from, innocent need to expand their product range to include dairy, vegetable, and whole grain products. This will also attract another market segments that prefer these products as opposed to the drinks (Simmons 2011). 4.3.6 Eco-friendly Another opportunity that they need to take up is trying to be eco-friendly. The company can partner with other companies to conduct promotion on eco-friendliness. This will go a long way in improving the belief of the customers in the company and its products (Simmons 2011). 4.4 Threats 4.4.3 Competitors Since the time that innocent entered the UK food and drink market they have been able to become the number one brand in offering smoothies, the high prices have attracted credible competitors to the industry with similar products but offering them at low prices (Simmons 2011). One of the direct competitors of the brand in the UK market is Pepsi co-brand Tropicana. 4.4.4 Economic downturn The Economic downturn in 2008 made the whole smoothie market to have a decline of about 1%, but in regard to innocent their sales decreased by only 20% since people were busy looking for cheap prices products. 5.0 PESTLE Due to the ever changing business environment, innocent need to match the demands with a number of capabilities within their organization and most especially when entering global markets. By the use of the PESTLE analysis, Innocent Drinks can be able to develop a more systematic approach to analyzing the external environment. The analysis segments the environmental factors into categories and assists the organization in planning for and controlling changes in market position, resources, competitors and conditions. 5.1 Political At the government level, a major challenge facing Innocent Drinks relates to the sugar and level of calories in their products. Based on the fact that these are natural juices there is no control over the ingredients, despite this the government still have targets and suit standards. Innocent Drinks have signed a deal with the government to cut the calories and sugar levels in their drinks. Additionally Anna Soubry the public health minister pledged to reduce the sugar and calories levels by 10% in the leading brands such as Innocent Drinks (UK Government 2013). 5.2 Economic Since the 2008 economic downturn, the economic climates were not favorable for a considerable number of companies but the recession did not heavily hit companies such as Innocent Drinks. A major economic challenge that innocent drink seems to be facing relates to the soaring prices of fruits. The prices seem to be increasing with each passing day, and the demand seems to be growing faster than the supply (Simmons 2011). This is a major challenge for the food and drink industry, however, the price gap of natural juices, and soft drinks will increase as times goes by. This will in turn affect the selling prices as well as the number of units sold and turnover in natural juices. 5.3 Social From an environmental and social perspective, innocent brands have a sustainable and strong competitive advantage over it rivals. This lies in the fact that the brand core competencies lounge in the strong social messages that are delivered to the society through the media and marketing campaigns (Fill 2005). The social factors are in favor of Innocent Drinks, and they are a major factor to enhance growth if the company manages to control their prices and be within the affordable limits. 5.4 Technological Getting connected to the consumers through the use of social media is an area that is not fully explored. The company needs to conduct research and get direct and accurate data in the increasing health consciousness among their target consumers (Fill 2005). In terms of advertisements, the company seems to be lagging behind since it is not adding any technology related equipment in their marketing campaigns. 5.5 Environmental Innocent brand have adopted the GCTTF policy that plays an essential role in making sure that the supply chain is ethical and environmental friendly. The company also offers 10% of the income to help in fair trade farming, and this is done through their charity Innocent Foundation and this is a real aspect of improving and sustaining the image of the company. At the same time, the company has been customizing their packaging to be environmental friendly by making them recyclable (Simmons 2011). 5.6 Legal In regard to legal issues, Innocent Drinks are following up on some legal cases that are for and against the company. One such case is a company that had tried to imitate their name and named their company Innocent Vitamins. 6.0 Conclusion Innocent Drinks need to focus more on the strengths and opportunities that they have to be able to expand globally. They should make use of their strengths as competitive edges against their rivalry in the market. At the same time, they can take care of the threats and weaknesses. They should also try to operate legal and within the set standards. Through this, they will evade criticism from the public, and they will also not have legal suits to take care of thus they will be able to concentrate on their business. References Donnelly, R 2009, Delivering customer value through marketing: CIM course book 2009-10, Butterworth-Heinemann, Oxford. F & B News 2014, Innocent launches a New ‘Super, Natural’ Range of Smoothies, F & B News, viewed 26 April 2015, . Fill, C 2005, Marketing Communications; engagement, strategies and practice, Financial Times Prentice Hall, Harlow. Jobber, D 2007, Principles and practice of marketing, McGraw-Hill, Maidenhead. Metro News 2007, 100,000 ‘exploding’ Smoothies recalled, Metro News, viewed 26 April 2015, . Neate, R 2013, Coca-Cola takes full control of Innocent, The Guardian, viewed 26 April 2015, . Porter, M 2008, The Five Competitive Forces that Shape Strategy, Harvard Business Review, Harvard. Simmons, J 2011, Innocent: The Inside Story of Innocent Told from the Outside, Marshall Cavendish International, Asia. Tryhorn, C 2009, Smoothie operators Innocent tread familiar path to a lucrative deal, The Guardian, viewed 26 April 2015, < http://www.theguardian.com/business/2009/apr/07/innocent-smoothies-coca-cola>. UK Government 2013, Sugar and calories cut in soft drink, viewed 26 April 2015, . Read More