UK-based Innocent Drinks was founded with just £250,000
($509,000/€369,000) of start-up capital in 1999. It grew from zero to
profitable retail sales in excess of £134.1 million ($209.8 million/€152
million) in the UK in 2007 (Nielsen). But then, as the recession took hold, it
has suffered a dramatic fall from grace, sales of its smoothies plunged by 29%
in the years 2008 and 2009, to £94.3
million ($148 million/€107 million) (Nielsen).
The company’s highly individual and quirky marketing – from the
wording of its product labels to leaflets and advertising – sets it apart from
any of its competitors. However, industry expert Julian Mellentin
argues that its quirky marketing has become the only advantage the brand has,
following the erosion of its other points of difference. As a result, allowing
Coca-Cola to become the majority shareholder makes sense if Innocent is to turn
around its fortunes.
Innocent’s
recent decline cannot be blamed solely on the economic downturn. 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. The economic downturn is not
the cause of Innocent’s problems, rather it has exposed the many flaws in the
company’s strategy, believes Mellentin.
·
Innocent began by making “no added
anything” the cornerstone of its business. Back in 1998, that was a point of
difference – today it’s the promise that every brand aims to make.
·
The promise of one or more of your
5-a-day that is the core proposition of the Innocent brand was also once
unique. Today it is the most common marketing message in the supermarket.
·
In addition, Innocent
products – for all the great branding and skilful communications – don’t offer
a tangible benefit, unlike products that improve digestion or lower
cholesterol.
·
Finally, the brand tried to widen its
appeal beyond the core market of health-conscious consumers who make up only
20%-25% of the population (Health Focus Research) to the mass-market – the
place where price matters as much as health benefits. It was these mass-market
consumers who turned away from the brand in the recession.
Innocent’s health
benefits just aren’t compelling enough for many health-conscious consumers,
particularly the baby boomers, whose lust for a healthy life has fuelled the
fortunes of many foods and drinks with health benefits, even in the teeth of
recession.
Premium
pricing not the problem
Although
the Innocent brand was premium-priced, so are many other health brands, many of
which have grown by 20% per annum or more during the same period in which Innocent’s
sales fell.
Consider the following growth figures for these
premium-priced health brands in the UK market in 2009. Unlike Innocent, their
sales went up, not down.
·
In the UK, the economy shrank by 5.2% and the
overall yoghurt market was static (Nielsen), yet sales of the Activia digestive
health yoghurt grew 32% to over £235 million (€270 million/$314 million).
·
Benecol cholesterol-lowering drink – the most
expensive dairy product in the UK supermarket – actually increased its sales in
2009 by 18.8% to £39.2 million ($61 million/€44.6 million).
·
Like Innocent smoothies, soy milk is a premium-priced
item, normally selling at a 65% premium to cow’s milk, but soy milk didn’t
experience any of the decline that smoothies felt. Unlike smoothies, soy milk
provides a tangible benefit – and hence consumers who want to reduce the amount
of lactose in their diet or lower their cholesterol have remained loyal to soy
milk brands.
“That these
premium-priced brands have done well in the recession seems counter-intuitive,”
says Julian Mellentin. “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.”
“What these brands have in common and what the boomers want is that they
actually work,” Mellentin concludes. “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. 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.”
