MARKETING

Marketing

Marketing

Coca-Cola has become the majority shareholder of UK-based Innocent Drinks, which ran into tough economic times during the recession.

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 million ($210 million/€152 million) in the UK in 2007, according to Nielsen data. However, as the recession took hold, it suffered a dramatic fall from grace, with sales of its smoothies plunging by 29% in the years 2008 and 2009, to £94.3 million ($148 million/€107 million).

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, he said.

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, said Mr. 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 skillful 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 (according to 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.

According to Mr. Mellentin, 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. 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 yogurt market was static, yet sales of the Activia digestive health yogurt grew 32% to more than £235 million (€270 million/$314 ...