Innocent Drinks Success - Case Study Example

The paper "Innocent Drinks’ Success " is a great example of a case study on business.
1. Innocent Drinks’ success can be attributed to a number of factors. One of the most important factors was the use of innovative marketing strategies right from market tests to branding through product labels. As a result of these strategies, Innocent was considered a hip and trendy brand by the customers. The second significant factor was the quality and freshness of Innocent’s smoothies and juices as compared to the existing competition at that time. Because of this factor, they were able to march ahead of the market leader PJ.
The third important factor was an effective, informal and unconventional leadership team. As there was no hierarchy between the three founders, they could share honest opinions with each other and criticize each other. No wonder the hit to miss ratio of their decisions was so good. The fourth big factor was its pricing strategy. Innocent priced its products close to the competitors’ but with a reduced quantity. By doing so, it conveyed a message of better quality at a premium but still kept a unit of the product affordable for the customers. 

2. The innocent should extend firstly into Europe and postpone the expansion into the U.S. The current size of the company and its business model don’t allow it to venture into such a big territory as the U.S. at this stage. Expansion into the U.S. would require the creation of supply chain and distribution networks from scratch and huge capital investment is required for the same. Innocent has already started nibbling into various countries in Europe and most prominently Ireland. It must not leave these markets in the middle. Also, it makes sense for Innocent to expand into new product lines such as ice-creams and yogurts. The response to these products till now has been great, the brand has already been built and it is the perfect time for expanding vertically. However, the expansion should firstly be done in the U.K. and then replicated elsewhere.
3. While the numbers required to value the companies at present are not available, we could still come up with an approximate value. The sales revenue at the time of the case (November 2004) can be calculated by interpolation as 10.6 + (16-10.6) * 11/12 (assuming financial year ends in December) which comes out as £ 15.55 million. Assuming a decent price-earnings ratio of 2, the value comes out as £ 31.10 million (Damodaran 2012).
The company should not aim to purchase other companies at present since it is still in a growth stage and organic growth would be the best way to grow. Acquisitions may lead to a number of cultural issues that Innocent may be wary of.
4. The entrepreneurs should go for expansion into Europe and Other product lines simultaneously with preference to the former. This would ensure that Innocent gains significant market shares in other countries in Europe to become a truly global player. 3-4 years down the line, Innocent can think of venturing into the U.S. market. Then, it would be in a better position to tackle the market competitors such as Odwalla. Acquisitions and mergers may hurt the innovative culture of Innocent at this stage. The harvest options are simply out of the question unless the entrepreneurs want to forego their own creation, reap profits and start a new venture which doesn’t seem to be the case. Read More