Coke investment may force Innocent to grow up

By Shane Starling

- Last updated on GMT

Related tags Marketing functional beverage beverage

Coca Cola has upped its stake in healthy smoothie maker, Innocent, to 58 per cent in a non-disclosed move one analyst said followed the gradual erosion of Innocent’s once vibrant and booming business plan.

“Access to Coca-Cola’s more cost-effective raw material buying, distribution and marketing muscle may be the only thing that can turn around Innocent’s fortunes,”​ said marketing expert and editor, Julian Mellentin.

He said the novelty of Innocent’s 12-year-old business plan had been chipped away at as its all-natural, antioxidant-laden promises became diluted beyond a core of health-conscious consumers as more products offered the same all-natural promise.

Coca-Cola bought 18 per cent of Innocent in March last year – a move Innocent was heavily criticised for at the time for selling out its supposed green credentials. It defended the move saying it required investment to develop international markets and new lines.

Innocent co-founder Richard Reed said Coke’s latest investment did not change the company’s management structure or independence. Coke would continue to be a “hands off”​ investor, he said, something that had been formalised in the new deal.

Reed said: "I genuinely believe that this is not a selling out but a continuation of our work. There will be no change in the commitment to natural healthy food, to sustainability and to giving 10 per cent of our profits to charity.

"We remain in full operational control of the business and we should be able to proceed towards our goal of taking Innocent to every country in the world.”

Coke’s fresh 40 per cent investment is believed to be worth about €85m, most of which goes into the hands of retiring 76-year-old original investor, Maurice Pinto.

Crack the US?

Gary Roethenbaugh, the market intelligence director from beverage market analyst, Zenith International, said the move could pave the way for a major launch of Innocent into the US.

“I don’t think the investment will compromise the ethos of the brand too much and Innocent in the US could be a very interesting proposition,” ​he said. “In theory it is the same business with better distribution. But whether it can retain its independence will remain to be seen.”

Is quirky marketing enough?

Mellentin said the need for a business plan revamp led to Innocent accepting further investment from Coke’s US Atlanta, Georgia headquarters, as sales fell from a high of €152m in 2007 to €107m in 2009, according to Nielsen figures.

He said the company’s quirky marketing remained its last remaining unique selling point.

The underlying problem is that although Innocent’s strategy, branding and products were innovative and new when the company started, it has failed to evolve and Innocent’s points of difference have been eroded,”​ he said.

“The economic downturn is not the cause of Innocent’s problems, rather it has exposed the many flaws in the company’s strategy.”

He said a once relatively unique “get one of your five fruit and vegetable servings per day in each smoothie” ​marketing message had become widespread since the company’s origin in 1999.

He also said the brand struggled when it sought to expand beyond core health consumers as the mainstream was less interested in paying the price premiums of Innocent products.

Feel the benefit

But he said the main problem for Innocent may have been the fact that its functional health benefits were not tangible enough, compared to products that are more directly linked with, say, digestive health or cholesterol reduction.

“That these premium-priced brands have done well in the recession seems counter-intuitive,”​ he said. “But given that many of today’s over-50s, and in particular over 65s, have little or no debt, have often accumulated significant assets and have more disposable income to spend on their health than any previous generation, we should not be surprised that the boomers are now driving the growth of brands that address their main health concerns.”

“Benefits based in proven science will become an even more important competitive advantage for anyone targeting these mature consumers. Innocent’s promise and its quirky marketing holds little appeal for these people – and so it’s hard to see how the company can maintain its independence.”

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