Case Study Analysis 3:

Innocent Drinks

1. What factors have made Innocent Drinks successful so far? Be specific, please.

The factors that have made Innocent Drinks such a successful company are the founder’s
cohesive working relationship, the effective pricing, the equity funding received for start-up, and the
innovative marketing campaigns. The three founders have a cohesive relationship in which they balance
each other’s strengths and weaknesses, work cooperatively together, and solve problems with ease. Each
team member contributes to different roles for example Reed manages marketing, Balon focuses on sales,
and Wright handles the operations. Together they serve jointly as leaders of the company (p. 4). The
pricing strategy that was determined for the beverages was another factor that allowed Innocent Drinks to
be competitive. The price selected was £.51over its competition PJ smoothies and the amount was 80 mL
less. Fortunately for Innocent Drinks the pricing strategy helped to make their drinks stand out as a
higher quality product because of its all natural ingredients that are fresher compared to the competition.
This price point allowed the company to differentiate its product and while maintaining a reasonable
profit margin. Through equity funding the founder’s raised £235,000 for a 20% stake in the business.

m
They sought out various capital options and from networking came in contact with a man named Maurice

er as
Pinto who provided financial support needed to help to pay off debt and produce drinks. The funding was

co
a necessary factor for the company to get started because when they ran the projections it was determined

eH w
that it would be impossible to grow the company organically (p. 6). The company’s innovative marketing
strategies reached out to their targeted customers. Innocent created fun labels on the packaging that

o.
identified its brand with messages that were offbeat, honest, and self-deprecating. The labels contained
rs e
product information and started out as an effective guerilla marketing tactic that created a buzz, attracted
ou urc
press, and created loyalty (p. 7). The company had interestingly designed delivery vans for example one
covered in fake grass and another resembling a cow. Innocent Drinks worked on developing its public
relations through successful events such as its hats for bottles charity that donated 20% per hat to keep the
o

elderly warm and by sponsoring Fruitstock a free festival held in a London park with food, vendors, and
aC s

live music. In addition to all the factors above Innocent Drinks provides a high quality product that is
vi y re

100% pure fruit. The product is made with fresh rather than concentrated juice and doesn’t contain any
additives (p. 8). Innocent Drinks is successful because its products are differentiated from the
competition for many reasons, but primarily because it produces premium quality beverages with healthy
ingredients. The team tested its smoothies early on at the Jazz on the Green Festival and it was
ed d

determined by people who tasted samples that they should quit their jobs and start a smoothie company.
ar stu

2. Innocent Drinks are considering a few growth options. How do Innocent Drinks’s growth options
fit with the course materials on managing growth? This should be a substantial part of your entire
assignment. Please make sure to show your understanding of the class materials (both readings and
is

lecture).
Th

The options the founders are considering for growth are primarily taking the Innocent product
line to Europe or extending the Innocent brand to other products in the U.K. (p. 8). The company already
tried developing ice cream, opening markets in Europe, and expanding the market in the UK, but needs to
focus by choosing one option for growth (p. 1). Other less appealing options are to expand into the US,
sh

sell the company or allow the company to increase its cash flow organically without putting efforts into
growth (p. 2). The partners have a difference of opinion on which direction is best which in the past has
led to hour long debates (p. 11). Wright wanted to pursue expansion into Europe and Balon thought they
should be patient and continue in both directions. An early experiment conducted in 2004 in Europe
returned sales of 7% with only a couple of employees working in the country. From this they estimated
low costs to expand into Europe and over £10,000,000 in revenue by the third year (p. 9). The challenges

This study source was downloaded by 100000815861924 from CourseHero.com on 09-02-2021 13:20:35 GMT -05:00

https://www.coursehero.com/file/29654930/Case-Study-Analysis-3docx/
 anticipated in Europe involve difficulty penetrating the market, challenges targeting customers in a
collection of different markets, and uncertainty competing against non-refrigerated juices that have a
longer shelf life. If the brand line gets extended into other categories in the UK the plan is to promote the
products as a "natural brand for healthy lifestyles." Ice cream and frozen yogurt would be introduced first
and later possibly soup, nutrition, and bottled water later (p. 10). It was predicted that with this option
after three years from the launch there was a potential to grow by £8 million. The founders brainstormed
whether to focus on expanding its brand or product line. When the team analyzed its growth from a
financial perspective both options were forecasted to cost about £500,000. Ultimately they needed to take
a closer look at comparing the pricing, market sizes, and the likelihood of success to determine which
direction the co-CEO’s would take the business.
Our course material covers numerous topics on managing growth that relates to the discussion the
founders of Innocent Drinks is having to decide the next direction for the company. From the reading it
seems obvious that the two top choices for growth are to either extend the product line in the UK or to
expand customer reach into Europe. Fortunately the co-CEO’s Balon, Reed, and Wright have a unique
ability to analyze and talk out issues exhaustively which is a process that has helped the company
achieve its success (p. 11). As they consider options for growth they are analyzing the dynamics of the
market which we have learned includes the industry size, trends, historical growth rates, geographic data,

m
and socioeconomic information. This research will translate into a feasibility study to look more closely

er as
at the competition, the consumption chain, market segmentation, and the targeted customer(s) to help

co
make a confident decision regarding growth (Unit 3.6). In an effort to grow the founders are taking into

eH w
consideration primary and secondary research gathered about the different options for example they
estimated growth projections for each route, conducted a small experiment in Ireland, worked on a market

o.
analysis, and tested product recipes. The company was successful in the past with surveying its
rs e
customers for answers, sampling products for feedback, and networking with experts to formulate a plan
ou urc
going forward. Additionally they have determined the barriers for entry such as switching costs for
buyers, supply chain challenges to overcome, uncertainty with establishing a smoothie market category in
Europe, capital requirements, and competing with the “ambient” juice producers in Germany and Italy.
o

The partners are having difficulty coming to a mutual agreement because Balon wants to strategically
aC s

grow the business, Wright wants the company to organically grow, and Reed is undecided. Innocent is an
vi y re

established company known for being the “UK’s best smoothie” and grew at a compounded rate of 63%
over its first four years (p.1). The decision to grow involves risk, an increased workload, transitioning
time, and a large capital outlay, but the company has a resourceful team to assist with positioning the
company for success. All of the co-CEO’s have to be supportive going forward because the effort to
ed d

enhance revenue and profits will impact all aspects of the business.
ar stu

3. What three or four factors should they consider when choosing among these options? Why these?

Three major factors that should be considered when selecting an option for growth are as follows:
is

how the industry market in the UK and Europe is underserved and ripe for innovation, the marketing
strategies Innocent will use to position products, and they should also determine the amount of capital
Th

required and the return on investment for each option. In the UK Innocent drinks developed a
competitive advantage earning a 30% share in the smoothie market. There are many factors that
contributed to their previous success allowing the company to become an industry leader in the smoothie
market, but it helped that PJ Smoothies was the only other competitor at the time. The co-CEO’s will
sh

need to compare the market analysis done for each option to get a more accurate insight of which option
to pursue. In Europe Innocent drinks will be introducing fresh juices and smoothies to the market for the
first time in areas so they need to know if there is a demand for the product and how potential customers
will respond to it. The experiment that took place in Ireland provided very useful data, however given the
various markets throughout Europe they should continue gathering feedback from potential customers by
collecting samples and questionnaires. The same goes for the option of extending the product line in the

This study source was downloaded by 100000815861924 from CourseHero.com on 09-02-2021 13:20:35 GMT -05:00

https://www.coursehero.com/file/29654930/Case-Study-Analysis-3docx/
 UK to ice cream and frozen yogurt. Taking research time to determine if the market is underserved and
ripe for innovation will give the company a competitive advantage moving forward.

marketing research can tell companies whether they are meeting their
customers' needs and expectations. By researching the answers to
specific questions, small-business owners can learn whether they need
to change their package design or tweak their delivery methods--and
even whether they should consider offering additional services. A good
market research plan indicates where and who your customers are. It
will also tell you when they are most likely and willing to purchase your
goods or use your services."

Choosing a Good Industry (p. 3.4)

m
er as
co
 Understand the differences between temporary or cyclical changes and structural ones.

eH w
o.
 Understand the relationship of competition to profit.
rs e
ou urc
 Remember that industry structure defines the gap between revenues and costs.

o For example, commodity industry, where competitors' goods/services are very

o

similar, e.g., gasoline industry

aC s
vi y re

 Market sets the price in a highly competitive environment.

 Profits come as a result of cost control

ed d

Questions
ar stu

 Do niches exist?
is

 Is the industry accessible?

Th

 Are there areas that are immune from industry challenges?

 What barriers can we erect behind us?

sh

Questions for Your Business

 How will you position your company?

 How will you exploit industry change?

This study source was downloaded by 100000815861924 from CourseHero.com on 09-02-2021 13:20:35 GMT -05:00

https://www.coursehero.com/file/29654930/Case-Study-Analysis-3docx/
  What is the marketplace potential for your business?

 Do you deliver innovation that is creatively destructive?

 Always cash-short (growth generates cash to serve growth)

 Stress
 New customers with new needs and different marketing
 New employees with new perspectives
 New systems and methods for growing the business.
 Management becomes more professional.
 Concern becomes about growing the value of the business rather than just the profits.

m
er as
co
eH w
4. Which growth option do you suggest they pursue? Why?

o.
rs e
Supportive stakeholders
ou urc


 Supportive family
o

 Adequate funding
aC s
vi y re

 Unfair advantage in the marketplace

 Expanding market
ed d
ar stu

 Engagement in your industry

 Complementary skill set among staff and management

is
Th

5. Slightly unrelated—what is your view on the leadership model and the

potential for differing roles as Innocent Drinks grows? Connect to class
material from the entire course.
sh

The debate continued in the Acorn Room. The three founders were very
comfortable debating each other, with relative civility and rationality, for hours on
end. They believed that this inclination to analyze an issue, to talk it out
exhaustively, had been a key to Innocent's success. As Maurice Pinto said of the

This study source was downloaded by 100000815861924 from CourseHero.com on 09-02-2021 13:20:35 GMT -05:00

https://www.coursehero.com/file/29654930/Case-Study-Analysis-3docx/
 founders, "They tend to worry an issue to death. Their decision-making takes ages
to accomplish—grinding through it, talking through it, trying to reach consensus.
But their hit rate of good decisions versus bad decisions is absolutely
extraordinary."
This

they should consider the level of commitment of each of the founder’s willingness to grow
Having agreed on a company concept in March 1998, the three founders spent the
next five months investigating the idea and developing the business plan. Early on,
they divided up roles. Reed, with his ad agency experience, took charge of
marketing. Balon, with recent experience marketing Virgin Cola, wanted to take
over sales. Wright, the manufacturing engineer, handled operations. They agreed
that, rather than select one of them to serve as CEO, the three of them would
jointly serve as leaders of the company (p. 4)

m
er as
co
eH w
o.
rs e
ou urc
o
aC s
vi y re
ed d
ar stu
is
Th
sh

This study source was downloaded by 100000815861924 from CourseHero.com on 09-02-2021 13:20:35 GMT -05:00

https://www.coursehero.com/file/29654930/Case-Study-Analysis-3docx/
Powered by TCPDF (www.tcpdf.org)