Spotlight

NNB: Innocent needs Coca-Cola after becoming one of the health brands that suffered most in the recession

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.”

 

Interested to read more analysis by NNB (New Nutrition Business)? Order your reports via our webshop.

New report says: Boomers fuel fortunes of functional foods

Baby boomers’ lust for a healthy life is fuelling the fortunes of foods and drinks with health benefits, even in the teeth of recession, according to Julian Mellentin’s new report 10 Key Trends in Food, Nutrition and Health 2010.

While consumers are willing to cut back in many areas – consumer electronics, cars and luxuries – they see products that provide a benefit that they need as good value-for-money, even when they are sold at super-premium prices.

“From the age of 40, maintaining good digestive health; from 50, looking after your heart; from 60, keeping your joints free from discomfort are increasingly the top concerns of mature consumers around the world,” says Mellentin, “and brands that address these issues have recorded growth rates of 20% or more during the economic recession, despite premium pricing.”  

Consider the following growth figures for 2009:  

Digestive health

In the US, General Mills’ Fiber One breakfast cereal brand increased its sales by 20%, to over $225 million (€150 million). In the US Yakult increased its sales by 44%. In Italy, although the economy shrank by 6%, sales of Danone’s premium-priced Activia digestive health brand actually grew by an impressive 19.5%, to €222.5 million ($325 million), according to IRI. In the UK, the economy shrank by 5.2% and the overall yoghurt market was static (Nielsen), yet sales of the Activia brand grew 32% to over €270 million ($314 million).  

Cholesterol-lowering  

Italians embrace food as a way of maintaining health, even in the teeth of economic gales. Danone’s Danacol cholesterol-lowering brand, which is based on plant sterols, earned €72.7 million ($106 million) in retail sales in 2009, a 28.8% increase (IRI data). For a brand that sells at a 100%+ premium, to achieve this growth even while the Italian economy contracted by 6% is quite some achievement. Pro rata Danacol’s performance to a market the size of the US and it would be a $500 million brand. 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).

Joint Health

In the US, Elations juice drinks with added glucosamine were on track for sales of $55 million (€37 million) in 2009 and on a path to reach $85 million (€57 million) in 2010. In 2008, Elations’ sales were just $15 million (€10 million).

“That these premium-priced brands have done well in the recession seems counter-intuitive,” continues 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.”  

Benecol, for example, is one brand that has already benefited from being able to say its health claim has been “approved by the European Commission”. Sirco juice’s claim that it helps “maintain a healthy blood flow and benefits circulation” is another one of the few signed off by EU regulators. In test markets Sirco found that its buyers were overwhelmingly aged over 60 and formed a loyal hardcore with a high repeat purchase pattern.  

Of Europe’s 500 million people 20% are over the age of 65 and the average age of the population is 41. By 2030 30% will be over the age of 65. With figures like these in prospect, the market faces a new era of growth.

About the report

Each year since 1995, industry expert Julian Mellentin has forecast and analysed trends in food, nutrition and health. These are the important trends which will shape the business of food and health not only in the next 12 months but for many years beyond – trends every company must take into account in developing a food and nutrition strategy.  This 98-page report includes a short bullet-point summary of each trend and of the key factors Mellentin believes can contribute to enduring success. Analyses are supported by detailed brand sales data, comparisons of product pricing and advertising messages and claims, and more than 90 illustrations and charts.  

Mellentin’s 10 Key Trends for 2010 are:

Digestive health – a mega-trend moves beyond the tipping point

An intrinsic health benefit that’s also convenient

Feel the benefit – the most powerful marketing message

Energy – a world of untapped opportunities

Fruit and superfruit – the future of food and health

Antioxidants – big in America, dead in Europe?

Weight management

Healthy snacking

Packaging and premiumisation

Bones and movement

NNB on health claims: The outcome of Europe’s misplaced love of regulation

Since 1995 many in the food industry in Europe have been calling long and loud for an overhaul to health claim regulations and the introduction of a uniform, Europe-wide health claim system. Their argument has been that this was needed to allow products to communicate their benefits and that without it the European industry could not innovate.  

It’s a point of view that we have long disagreed with at New Nutrition Business (NNB), given the evidence that European companies have in fact created a wealth of successful, innovative brands (see every issue of NNB for the last 15 years) despite the lack of any EU-wide health claim system. Rather, the health claims-as-a-problem argument has been used by many companies as an excuse for their failures of strategy and marketing.  

Well, Europe now has a health claim system in place which is highly restrictive in nature and looks increasingly as if what it will most probably do is reduce – or even end – food and health innovation in Europe.

The outcome of the EU health claims regulation process will be that:

1. Small companies will flee from using health messages of any kind – hardly a benefit to Europe’s consumers – rather than entangle themselves in the nightmare of the health claims system.  
2. This will leaving only a few large companies to innovate in health. Only they have the financial muscle to create the science at the pharmaceutical level that EFSA is looking for.
3. The main winners from the EU’s new health claims regulation will be PR companies, who food manufacturers will turn to to help them find ways of getting their message into the media without using an overt claim.
4. Europe will slide from being a leader in health innovation to an also-ran.
5. Sooner or later the food industry will be forced to mount a legal challenge to the regulation. But given the agonisingly slow processes of the EU, that challenge could spend years in the courts.

Europe has become a place of contradictions – and the lobbyists who want to stop health claims of any kind have succeeded. It will be a place where a face cream can claim that it makes your skin healthier, with almost no science to support it, but a yoghurt can’t tell you that it contains bacteria to support your digestive system, even though the science is a hundred-fold that of a face-cream.  

It will be a place where fast-food chains can spend hundred of millions on advertising for products that contain higher levels of saturated fats and salt than are good for you, but you can’t tell someone that cranberry juice contains anthocyanins and what the specific benefits of cranberry juice are.  

The recent launch of Danone Densia bone health yoghurt in Spain  is a clue as to the direction that innovation in Europe might have to take: Densia meets a growing consumer need for products that support bone health, but it is an example of how in future brands might be forced to offer only simple generic benefits. Success will become a matter of providing the benefits in a more concentrated or convenient way than other brands, coupled with marketing and distribution muscle.

Julian Mellentin

Editor

New Nutrition Business