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Innocent (UK)

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Innocent Drinks first established a leading position in UK supermarkets with its range of lovingly prepared fruit smoothies. Assisted by quirky and offbeat marketing, Innocent was one of the country's fastest growing food and drink products during the first decade of the 2000s, earning a position among the UK's top 50 supermarket brands. Growth began to slow in 2007, encouraging the company to broaden its footprint. Vegetable-based ready meals were a modest success, but the company has enjoyed its most spectacular success with traditional freshly squeezed orange juice, cutting deeply into the sales of existing market leader Tropicana. It has also launched a presence in continental Europe. Inevitably that growth attracted the attention of larger groups and in 2009, Innocent agreed to sell a minority shareholding to Coca-Cola to raise expansion capital. The soft drinks giant acquired full control in 2013.

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Competitors

Innocent's main direct competitor is PepsiCo, owner of the Tropicana and Copella juice brands. That group relaunched its PJ Smoothies range under the Tropicana brand in 2008, positioned as a direct rival to Innocent in the smoothie segment. Innocent orange juice has eaten significantly into Tropicana's lead in traditional chilled juice. See Non-Alcoholic Beverages Sector for other companies

Brands & Activities

Innocent is best known for its range of blended chilled drinks. Its original core business comprised fruit-based smoothies, made entirely from fresh juice and pulped fruit, and containing no added sugar or other additive "nasties". These are available either in single-serve bottles or full-size cartons, and come in a wide variety of enticing blends. There are two slightly more specialised lines, more smoothly blended Smoothies for Kids and premium Superfoods Smoothies, featuring blends of more exotic fruits with especially high natural vitamin content or other properties. A line of more filling probiotic yogurt-based Innocent Thickies were launched in 2007 but didn't last and were phased out in 2011.

Another new direction came from a range of microwave vegetable-based ready meals under the name Innocent Veg Pots. Launched in 2008, these retained a modest presence in the ready-meal sector, and were later joined by noodle pots. However, they were seen as a distraction from the main beverage business and were finally shelved in 2015 after a 25% decline in year-on-year sales.

In 2007 Innocent relaunched a separate line of blended fruit juice and mineral waters under the brandname This Water. They had previously been marketed as Innocent Juicy Water. In 2013, they were relaunched again under their original name of Juicy Water, but are marketed entirely separately from the rest of the Innocent range and don't carry the corporate brand. Instead Innocent has its own line of single-serve Fruity Water cartons for kids.

In 2008, Innocent entered the main juice segment for the first time, introducing Innocent Orange Juice - priced well below its smoothie products - in direct competition with Tropicana and supermarket own-brands. After a slow start, this line suddenly enjoyed rapid growth during 2011 following a switch from old-style waxed cartons to see-through plastic bottles (similar to Coke's US Simply Orange design). Other juices have followed, going head to head with Tropicana and its sister brand Copella.

The next strategy to reverse a steady decline in smoothie sales was the introduction of new line of Super Smoothies in 2014 with added vitamins, antioxidants and other healthful ingredients. These were followed in 2015 by a coconut water as well as a range of Innocent Bubbles fruit-flavoured sparkling water drinks. Growing concerns among consumers about the levels of sugar in even unsweetened juice, also prompted the introduction of a reduced -sugar version, Innocent Light & Juicy.

Innocent's quirky and unconventional marketing has added considerably to its popularity over the years. This is most evident in the light-hearted humorous small-print on all cartons, although the flippant tone of the on-pack copy has occasionally got the company into trouble. In 2005 it joked that one line of smoothies contained apples, strawberries, bananas "and plump nuns". The UK's Trading Standards Authority promptly ordered the company either to remove that line or start including plump nuns in the recipe. In 2008, the company was criticised by the UK's advertising Standards Authority for claims that its Superfoods products had natural detoxifying qualities. The ASA said Innocent had not proved that the drink removed toxins from the body, or that it contained more antioxidants than the government's recommended daily intake of five portions of fruit and vegetables. (Those claims were removed by the company as a result). However the ASA supported Innocent's statement that its products were "more nutritionally beneficial'' than ordinary fruit juice, despite complaints from PepsiCo.

Each Innocent carton also includes an "enjoy by" date as well as an open invitation to satisfied customers to drop in to its London offices and say hello. Most also have a label on the underside of the carton which reads "Stop looking at my bottom". Past straplines have also include "Innocent Smoothies. From the makers of trees and stuff" and "If you've enjoyed your smoothie, why not try our other products like sand, rainbows or perhaps plankton". For several years, Innocent also ran a small but noteworthy fleet of customised delivery vans, some designed to resemble cows, others covered in artificial grass.

Behind the perky image is a serious commitment to using the highest quality fruit, ethically sourced wherever possible. Each year, 10% of the company's profits go to charity, primarily to a dedicated foundation which helps to build sustainable futures for poor global fruit farming communities. A proportion of the profits from the This Water line go to WaterAid in Ethiopia. The company also supports an environmental tree-planting campaign organised by the charity Carbon Clear, vowing to plant a tree in India for every carton sold and registered by consumers. Until recently, the company also paid homage to its roots (it was launched at a music festival) by organising a free music event and fair in London's Regent's Park. Known initially as Fruitstock, this became immensely popular, attracting more than 150,000 visitors in 2006. It was reformulated in 2007 under the name of the Innocent Village Fete to emphasize its family appeal, and a small entry charge was levied to reduce overcrowding. However the project was cancelled in 2009 in favour of more traditional marketing.

In 2007, the company also embarked on a trial arrangement to supply Smoothies for Kids as part of a regular Happy Meal in selected UK outlets of McDonald's. This provoked an outcry in some parts of the media and among some customers as a result of traditionally negative perceptions of the fast-feeding giant. There was a similar response in Spring 2009 when the group agreed to sell an 18% equity stake to Coca-Cola for £30m (valuing the company at around £1.67bn). The two companies worked closely together to expand Innocent's presence in Continental Europe, primarily France and Scandinavia. In April 2010, Coca-Cola increased its shareholding to 58% by buying out the company's financial investors, as well as some of the founders' shares. It paid £65m for the additional 40% holding, indicating a valuation of £1.63bn. The holding had risen to 60% by the end of 2011, held by Coca-Cola subsidiary European Refreshments Ltd. In 2013 Coca-Cola acquired the three founders' remaining shares to take 100% control of the business. However the business still operates independently from Coca-Cola's other UK operations.

In retrospect, the relationship with Coca-Cola has proved vital, not least because it helped to protect Innocent from a sharp downturn in performance as the recession bit in 2007 and 2008. In less than a decade since its launch, Innocent had built a substantial profile in the UK, with national distribution through all the major supermarkets as well as more specialised retailers. It had a dominant 70% share of the UK's fruit smoothie segment in 2007. However after several years of booming growth, sales came under considerable pressure for the first time during 2008, as nervous or cash-strapped consumers cut back on premium-priced products in favour of cheaper brands. According to figures from Britvic/Nielsen, Innocent's UK volumes plunged by 23% during the course of that year, and financial accounts for the year revealed a decline in sales from £112m in 2007 to just under £99m in 2008, and the company slipped from a £12m pretax profit to an £11m loss. According to Britvic's annual Soft Drinks Report, sales of smoothies continued to decline sharply during 2009. That pressure has been maintained, persuading Innocent to relax its premium positioning to stabilise and then rebuild volumes. The sector as a whole has seen a decline since its peak in 2006 and 2007, but Innocent continues to dominate with around 80% market share.

The company's most aggressive response to the decline of the smoothie sector was the push into traditional chilled orange juice. This allowed Innocent to recover much of the ground lost in 2008. Sales were back up at £112m for 2009, while net losses narrowed to £3m. For 2010, revenues rose to almost £130m, although net loss also increased to £6m.

However, the most significant development appears to have come from the introduction of clear plastic bottles for its juice during 2011. According to Nielsen figures, Innocent's juice volumes leapt by almost 500% during the course of the year, propelling the company into second place by value in the chilled juice sector behind Tropicana, and #3 by volume in the overall chilled and shelf-stable juice market (after Tropicana and Princes). During 2012 alone, IRI estimated a 240% increase in sales of Innocent orange juice, followed by another 8% rise in the year to Jan 2014 to 67m litres, with combined sales of £116m. (Tropicana was still in the lead, but with volumes slipping to 137m litres, supported by sister brand Coppella). Coca-Cola also has local distribution of Ocean Spray, the local #4 branded juice at £37m. Innocent continued to dominate the smaller (and shrinking) smoothie market with 30m litres, and sales of £95m.

Combined sales of Innocent juice and smoothies have declined since their 2013 highs. The market as a whole has suffered from growing concerns about levels of sugar in drinks, especially those consumed by children. However volumes of even no-added-sugar juices have declined since 2014. IRI estimated a near 10% slide in value for Innocent for year to Nov 2014 to £199m (compared to £275m for Tropicana), and combined volumes of 89m litres (against 134m litres for Tropicana). Nielsen estimated sales of £196m for Innocent the year ending Oct 2015 (and £231m for Tropicana).

Financials

The relaunch of orange juice contributed to a sharp rise in corporate revenues. Group turnover of Fresh Trading Ltd jumped by 25% in 2011, then by another 27% in 2012 to £206.6m. The same year the group reported its biggest ever pretax profit, of £27.5m, after a string of losses. However growth slowed significantly in 2013, with revenues for that year rising by only 4% to £215.5m. UK sales actually slipped back by 2% to £160m, offset by increases in Europe. A huge increase in distribution costs (which more than doubled) caused pretax profits to plunge to just £0.9m.

For 2014, revenues at Fresh Trading edged up to £219m. However a sharp rise in distribution costs led to a plunge in performance, and a pretax loss of £14m. The directors' report noted that "in the UK, the chilled juice category has been challenging and this has impacted our ability to grow the business". UK revenues fell a further 8% to £147m, but that was offset by a 29% jump in sales in Europe to £72m. Although the majority of Innocent's sales are in the UK, the company also distributes its products in several European markets, including France, Scandinavia and Germany.

Revenues for Fresh Trading Ltd for 2015 rose 13% to £247m, on the back of a sharp rise in international sales, up 59% year-on-year to £145m. The company reported a group net loss £2m, compared to a £4m profit the year before. This includes the local operations of the group's various European subsidiaries. Main UK arm Innocent Ltd reported revenues up 11% to £224m, but a 15% decline in net profit to £10.6m. "In the UK, the chilled juice category has remained challenging". Domestic sales slipped 3% to £143m.

Background

Innocent Drinks got its start in the summer of 1998 when university friends Jon Wright, Adam Balon and Richard Reed devised their own formula for making 100% natural fruit smoothies. Famously, they spent £500 on fresh fruit, turned it into smoothies, and then took a stall at a small music festival in London to sell their drinks. Above the stall they posted a large sign asking "Do you think we should give up our day jobs to make these smoothies?". Customers were requested to vote by depositing their empty bottles in one or other of two bins marked Yes and No. The resounding response was Yes, and they quit their jobs the following day. (Reed was previously an account director at DDB London on the Volkswagen account; Balon and Wright were management consultants, at McKinsey and Bain & Co respectively). Start-up capital was provided by American venture capitalist Maurice Pinto, who injected £250,000 for a 20% stake. Ad agency Fallon London assisted with marketing executions, usually for payment in kind in the form of fridgefuls of product rather than cash.

Despite a rash of rival launches, Innocent not just survived but prospered. The company won its first national distribution slot through smaller supermarket chain Waitrose, before being accepted nationally by Sainsbury in 2002, by Asda in 2003 and by Tesco in 2004. The first annual Fruitstock free music festival was launched in 2003. By 2005, most of Innocent's rivals had fallen by the wayside, or been acquired. The last remaining significant independent, Pete & Johnny's, was acquired by PepsiCo in 2005, becoming PJ Smoothies. That year Innocent also began to establish small export operations in Europe.

During 2007 and 2008, the group became notorious in the London marketing community for calling pitches for its advertising account only to maintain it inhouse. It called and then cancelled formal pitches on three occasions over a 15-month period.

Last full revision 11th March 2016

* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *


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