CONTEMPORARY BUSINESS ECONOMICS

AN ANALYSIS OF ECONOMIC
THEORIES OF INNOCENT DRINKS

Lecturer Name: Mrs. Smita Sisodia

Submission Date: 27/01/2027

Marius Bogdan Vartic Student ID: H2109760

Bucks ID:22101856
Table of Contents

Table of Contents......................................................................................................................1
1. Introduction.......................................................................................................................2
2. Analysis and Discussion....................................................................................................2
2.1. Analyse the unconventional business practices of Innocent Drink critically......................2
2.2. Decision-making within the business...................................................................................3
2.3. Pricing their smoothies..........................................................................................................4
3. Determine whether Innocent Drink's choice to sell a portion of its company to Coca-Cola
was a wise one by applying behavioural economic theory. Justify your position...........................5
4. Make a SWOT and PESTLE analysis for Innocent Drinks..........................................................7
4.1. SWOT Analysis of Innocent Drinks........................................................................................7
4.2. PESTEL Analysis of Innocent Drinks......................................................................................8
5. Point out the main opportunities and hazards for them and provide evidence to support
your position that these are the most important concerns..............................................................9
6. Recommendations and Conclusions.................................................................................9
References...............................................................................................................................11

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 1. Introduction

This report analyses with the help of several economic theories the business situation over
the years of the Innocent Drinks company which is known for its brand image of being
natural through its fruit smoothies. It was founded by three of Richard Reed's best friends,
Adam Balon and Jon Wright in 1998. Initially, the report evaluated the non-traditional
methods but also the benefits and disadvantages brought by using the method in making
decisions for the business and how it establishes its product pricing policy. Also, the report
will analyse using a behavioural economic theory the decision of the Innocent Drinks
company to sell for 30 million pounds 10-20% of the business of the Coca-Cola company in
2009, which until 2013 ended up owning 90% of the Innocent Drinks company. The report
will also carry out a Swot and Pestel analysis of the Innocent Drinks company that will
provide additional information about the company where the personal point of view is
justified in justifying the key issues by identifying the key risks and opportunities. The
recommendation of the next steps that Innocent Drinks must take and the conclusion of the
analysis will be presented in the final part of the report.

2. Analysis and Discussion

Analyse the unconventional business practices of Innocent Drink critically. Analyse the pros
and cons of employing these techniques. Let us know what you think about innocent drinks.

2.1. Analyse the unconventional business practices of Innocent Drink critically.

In the UK, Innocent Drinks is an organization with the motivation to make customers feel healthier
by selling fresh juice smoothies.
Through the actions they have taken over the years in the United Kingdom, the Company has
managed to capture over 30% of the market share. A marketing approach that can improve business
accuracy focuses on engaging customers with humour and storytelling content, (Fafa, 2022).

(Source: Mintel Group, 2009).United Kingdom imaginative and re-forecast retail sales of
smoothies, by value, 2003-2013.

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 2.2. Decision-making within the business

The sustainability they wanted to achieve is the basis of the Decisions made in the business over the
years. The feedback in the yes or no baskets taken from the customers after buying a drink was the
initiation of business on a positive note. An effective CSR strategy that has a positive impact on the
brand image is the fact that the company donates 10% to charitable organizations from each
purchase made. In the last three years in terms of recycling, the company managed to save 2,500
tons of plastic because they focused on the manufacture of lighter bottles, (Larsson, 2011).
Attracting more customers was enabled by using recycled and planted plastic in their bottles. Also
revised was the process by which the smoothies were made, by reducing the water used in
agriculture and the carbon. In the manufacturing process and when using the 3Rs there are certain
disadvantages despite its benefits, (Watkinson, 2017). Due to the high cost of production innocent
drinks cannot increase their profit margin more, (Brown, 2008).

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The decision-purchasing processes are shown in the figure below.

2.3. Pricing their smoothies

With an emphasis on high quality, the company has been able to focus on a lower price ensuring
that for the smoothies they buy customers who are aligned with the organization feel they are
getting some value. Innocent Drinks focused on launching bottles at less than £2 for 250ml to
counter its main competition with a product offered at £1.99 for 330ml. The company focuses on
using customer-based pricing and value-based pricing, ensuring they get the right taste for the price
target customers pay for their smoothies. The demographics of the target market involving young,
loyal, ethical, pop culture savvy and informed customers strongly influence the pricing of smoothies.
However, it may not be sustainable in the long run and the company may be forced to switch to a
more competitive pricing strategy if more companies start entering the market, ( Falzani, 2023).

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If I must express my point of view, I think that Improving the brand image is done by engaging
customers with sustainability-based measures a right approach initiated by the Innocent Drinks
company which while selling the smoothies and other products helps the customers to understand
the purpose of the organization. I believe that to make it more competitive, the company should
make some changes in their pricing strategy considering that they have already been successful in
creating a loyal customer base.

3. Determine whether Innocent Drink's choice to sell a portion of its company to Coca-
Cola was a wise one by applying behavioural economic theory. Justify your position.

To retain control of the operation with three core founders in 2006 Innocent Drink
announced that for £30m it would sell 10-20% of its stake to Coca-Cola. By 2013, Coca-Cola had
developed its ownership to 90% of the Innocent drink, (Fisher, 2010). Economically According to
many studies Innocent Drinks made good decisions, (Nazarkina, 2011).

Nudge is a concept in decision-making, consumer behaviour, behavioural science, behavioural

economics, and social psychology, (Hansen, 2019). It is the behavioural science concept that
proposes how it can be affected by small changes in more predictable ways in how people's
preferences and choices and behaviour and decisions are presented. From the perspective of the

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Nudge theory, by selling the stake Innocent Drink made the right decision because its decision was
influenced by the desire to make the business more ethical and sustainable and by the factor of
reaching global customers Innocent Drink suggests that Coca-Cola can help for this purpose because
their drinks are consumed by most people in the world and it is a famous company, (Vallaster, 2022).

Their decision to sell the stake to Coca-Cola was influenced by elements of the Nudge theory, such
as maintaining long-term sustainability and success. Because Coca-Cola has a strong reputation, the
level of impact brought to the company Innocent Drink can help in the buying behaviour of
consumers having a positive perception towards the brand, (Solomon, 2012). This decision to raise
funds is driven by Innocent Drink to further expand its market in Europe and Coca-Cola will allow
Innocent Drink to expand its reach through its global reach. The business in improving productivity
and employee culture and in increasing the customer base is supported by these factors. One of the
positive factors that can stimulate the employee's productivity towards the organization, work ethics
and understanding can also be the cultural exchange which can lead to positive results. It was crucial
for Innocent Drink in this decision to monitor the influence of the decision-making process on the
business, the various factors in terms of understanding the consequences of decision-making and
sustainable and long-term products and services, (Le, 2017).

Because the effects of behaviour and decision-making can lead to opposite results and the results
are mostly unexpected according to the criticism of the theory, (Beach, 2017).
However, this decision is seen with a positive result by the Innocent Drink theory suggesting that it
can be used in a positive aspect that can encourage people and leaders to achieve their desired goals
and objectives. Increasing people's motivation to collaborate with them or to work with or use
Innocent Drink's products is a global research and cultural exchange because this decision made by
the company can have a positive impact on the business. Performance can be stimulated by
changing perceptions and behaviour to make it a global brand and achieve its goal of driving ethical
values and promoting a more collaborative environment.
Because it positively influenced people's behaviour and perception according to the results and
findings of the nudge theory and the Innocent drinking situation, the business was considered to
have done the right thing from an economic perspective. It also shows that to reach global
customers Coca-Cola can support the business to boost its brand impact and drive its ethical values,
(Tierney,2016).

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 4. Make a SWOT and PESTLE analysis for Innocent Drinks.
4.1. SWOT Analysis of Innocent Drinks

Factors in the international environment that may raise the level of threat or could represent an
opportunity for the company within their operations in the UK market are explained through SWOT
analysis.

Strength’s analysis
Thanks to the strategies they have adapted over time-based on CSR, the company has a strong brand
image. Also, with an annual sale of 130 million pounds, it is the market leader in Great Britain. From
packaging cartoons with sustainable products to manufacturing bottles, the company has focused on
using various sustainable measures.

Weakness analysis
A weakness could be the fact that innocent drinks are limited to only healthy juices and smoothies.
Due to high operating costs, the company focuses on premium pricing which restricts more
customers from buying smoothies. Another weakness that the company must overcome is the lack
of global presence.

Analysis of opportunities

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A new customer base can be brought in if Innocent Drinks focuses on expanding the business
outside the UK. Also, in the long term, it can be useful to introduce new products in the company's
portfolio. For the organization to focus on targeting a certain customer base, the use of promotional
campaigns can be effective.

Threat Analysis
An important threat to the company that poses problems in sustaining its business in the market is
the increase in the price of raw materials. The organization is forced to bring some changes in its
pricing strategies due to the strong competition in the market, (Liu,2021).

4.2. PESTEL Analysis of Innocent Drinks

Pestle analysis helps to understand the external environment in which Innocent Drinks operates in
the UK.

The political factor

a gap was created within the drinks industry in the labour market by people living in the UK who had
to return to their nations affected by Brexit which posed a threat to the production of Innocent
Drinks in the UK market as they were not gaining strength cheap labour.

The economic factor

Regarding the purchase of sustainable products that were used for packaging, the increase in
inflation in the UK affected organizations in the drinks industry. The cost of raw materials required
for Innocent Drinks increased because the inflation rate increased by 3%.

The social factor

For organizations in the beverage industry, the opportunity has increased due to the social trend of
people who are more health conscious helping Innocent Drink to introduce its smoothies and fruit
juices that have been favoured by customers. The operations the company focused on were also
based on various sustainable measures.
The implementation of CSR is shown by the company that donates even 10%. From profits to charity.

The technological factor

A common factor that in the beverage industry has increased the productivity of companies has
become the use of technology. jQuery, Google Analytics and HTML5 are prominent technologies
among the 21 services and products used by the Innocent Drinks Company for which it is famous. To
achieve better customer coverage and to improve the scope of its operations, the company uses
these technologies which can also help the company increase the speed of its general operations to
make smoothies accessible to customers.

The legal factor

They were able to focus on the Human Rights Working Group (HRWG) helping the organization to
ban drinks companies from employing anyone under the age of 15. Certified as a corporation that
helps people and the planet Innocent Drinks furthers its purpose of operating to produce natural,
delicious food and beverages that help people and the planet.

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The environmental factor
To reduce their impact on the environment through business operations UK organizations in the
drinks industry are currently engaged in implementing various environmental measures. A significant
boost to their focus and performance on sustainability has been the implementation of Innocent
Drinks' 3Rs. A contribution to sustainability was brought by the fact that 2,500 tons of plastic were
removed from the packaging. It is evident from the usage of the FSC-certified card that the cartoons
on the package are created entirely from the FSC-certified card. Because Innocent Beverages is
concerned about the environment with the results of their operations by using renewable electricity,
their brand image is enhanced, (Baines, 2013).

5. Point out the main opportunities and hazards for them and provide evidence to
support your position that these are the most important concerns.

The company has key risks and opportunities that are essential in determining its sustainability in the
market. The market competition that the company faces forces it to diversify its product portfolio to
different products which can be beneficial because it can attract customers who due to the menu
being limited to smoothies and fruit juices were not interested.
Certain changes in its pricing strategy must be made by the organization because the long-term
premium strategy may become a problem. Their ability to maintain the premium pricing strategy for
a long time is affected by the impact of inflation on operational costs.

Several opportunities can be effective apart from these threats, in terms of ensuring that the
company can increase its sales and gain a greater share of the global market can be effective.
Focusing on business expansion in the international market is the company's opportunity where
more customers will be invested not only for the taste in purchasing smoothies and fruit juices but
also for the sustainability that the organization has managed to achieve. The product portfolio of
Innocent Drinks should be diversified to ensure that they can introduce food products and certain
snacks that can be consumed with the help of fruit juices and smoothies.

6. Recommendations and Conclusions

In conclusion, Innocent Drinks 2023 will present both dangers and opportunities.
Its partnership with Coca-Cola offers advantages that must be exploited but at the same time, it is
imperative for Innocent Drinks to maintain its competitive advantage. Innocent Drinks can maintain
its position in the market if it responds efficiently to regulatory changes, to the evolution of
consumer preferences and to maintain a competitive advantage. Innocent Drinks must take the
following actions to achieve this:

 To adapt to evolving consumer inclinations Implement new and inventive product offerings.
 To observe fluctuations in the environmental, political, and economic climate.
 To increase its clientele, it must use the distribution network of Coca-Cola.
 Proactively reacts and monitors competition in the international market.

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  To reduce their carbon emissions, they must implement environmentally sustainable
production methods.
 From the premium pricing strategy, the organization must move to the competitive pricing
strategy. By targeting a wider section of customers this will increase their ability to make a
profit.
 Increasing inflation has an impact on their production cost and can be addressed by
diversifying the supplier base for different sustainable products they use.
 The company currently has a limited global presence, but it can be planned by expanding the
business on the international market.

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Hansen, P.G., 2019. The concepts of nudge and nudging in behavioural public policy. Handbook of
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Fafa, K., 2022. Social Marketing campaigns and User Experience: A case study of Innocent Juice
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