The Innocent company has accepted an equity deal with Coca-Cola and risks damaging its valued image as an ethical organization
The story has an appealing simplicity to it. Innocent has built a brand as an ethical company from its UK base with its range of smoothies and a branding message that its products are 100% wholesome and good for you. Its decision to accept a £ 30 million equity investment from Coca-Cola seems to risk that image. It was the theme of a BBC interview with co-founder Richard Reed [7th April 2009]. PM’s Eddie Mair brought a tone of righteous indignation to his interview. He dismissed Coca-Cola as the sort of company that any self-respecting organization should avoid at all costs.
The Wall Street Journal offered a more balanced view of the deal . Journalists Patrick and Bauerlein outlined the financials, suggesting that Coke would own between 10% to 20% of the corporation which places its value around £150 – £300 million sterling. They pointed to the ‘quirkiness’ of Innocent, contrasting it to the staid old lady of Atlanta.
Coca-Cola’s investment in British smoothie maker Innocent not only connects the beverage giant to a fast-growing product but also to a company known for good social and environmental behavior. By giving 10% of its profits to charity and using recycled bottles, Innocent was one of the first consumer brands launched in Britain to develop a big following through ethical marketing. Innocent cuts a quirky public figure. Some of its trucks are covered in fake grass and daisies. Those trucks are mounted on hydraulics that make them appear to dance, with drop-down windows for giving away samples.
The deal’s structure should allow Innocent to keep its funky attitude rather than risk being assimilated into a vast corporate culture whose focus remains carbonated soft drinks. Coca-Cola won’t have any management control over Innocent, but Innocent will share its expertise with the Atlanta-based beverage company, Mr. Reed says. The Coca-Cola money will be used to expand Innocent’s operations in Europe, where only 25% of European supermarkets sell smoothies to pay for distribution, stocking fees, sales staff and advertising.
While Innocent has run TV- and newspaper-ad campaigns, it has also specialized in less-traditional advertising. Some 200,000 people turned up to a Innocent musical concert in London named Fruitstock in 2006. In following years it replaced the event with smaller village fetes. Its Web site features a “Daily Thoughts” blog where employees not only post items about new products, but also offer random tips such as what to feed tadpoles. Next month, [May 2009] Innocent is inviting customers to come to an AGM (A Grown-up Meeting), to solicit feedback.
Innocent’s charitable giving is also interactive. Volunteers knitted more than 506,000 little hats for smoothie bottles last year, which were then sold, raising £250,000 in proceeds to provide meals, blankets and other help for older people during the winter.
To be sure, Coke has been sporting its good deeds, expanding its recycling plants, reducing water consumption and using environmentally friendly coolants in vending machines and coolers. Coke and its foundation made more than $82 million in charitable donations in 2008, in areas ranging from college scholarships to water stewardship and disaster relief. But the 123-year-old company has been known to kill ads that were deemed too edgy and is vastly bigger and more buttoned-up than a closely held newcomer such as Innocent.
Coke appears to be embracing the model of taking a stake rather than buying outright, after previously struggling to integrate niche nonsoda companies. Most notably, Coke bought Planet Java coffee drinks and Mad River Traders teas and juices with great fanfare in 2001, only to phase them out two years later. Coke has had more success with its 2001 purchase of Odwalla Inc., a maker of premium refrigerated fruit and vegetable juices whose product line is closest to Innocent’s line
Janet Street Porter provided an informed view for The Independent drawing on research she had carried out for a channel four film. She pointed out the dangers of treating Innocent as a totally altruistic venture.
Innocent, the company that made its name on two points of difference, ethical credentials and healthy products, has sold a large chunk of the business to Coca-Cola – a predictable move. Coca-Cola makes money flogging sugary drinks that are brilliantly packaged as part of an attractive lifestyle option – and so does Innocent.
What’s the deal?
It’s no big deal for the mighty Coca-Cola which may have reached the conclusion that its evolution lies in responding to increasing agitation against products on like style and health grounds. Innocent epitomizes values that Coke admires, but for all its efforts finds hard to build into its brand.
But this is a big decision for Innocent. Despite the robust defense offered by Reed, the dilemma of leadership was clear. Together with co-founders Adam Balon and Jon Wright, Reed has the strategic goal of building a global corporation with all the ethical values that are captured in Innocent’s products and activities. To do so he has to accept the financial reality of obtaining funding from sponsors. Increasingly, investors are being assessed for their ethical credentials. Would Innocent have preferred investment from a different source? Probably. The contrast with Coke makes for an easy story of lost innocence.
I have likened strategic business decisions to difficult chess moves. Sometimes you make a decision because you want to, sometimes because the opportunity and timing seems right, and sometimes because you have no obvious better alternative.
This seems to fall into the final of the three categories.