Smoothie operators Innocent tread familiar path to lucrative deal
For a company that strives “to do business in a more enlightened way” - and even has a halo in its logo - to go into business with one of the world’s corporate behemoths, presents a real danger that such a deal could look like a Faustian pact.
The founders of Innocent, the ethically aware smoothie business that yesterday sold a stake of between 10% and 20% to the US drinks group Coca-Cola for 30m, are adamant that their ideals and eco-friendly sentiments will not be crushed as a result of striking a deal with a company best known for its less than healthy fizzy drinks.
“Every promise that Innocent has made, about making only natural healthy products, pioneering the use of better, socially and environmentally aware ingredients, packaging and production techniques, donating money to charity and having a point of view on the world will remain,” co-founder Richard Reed yesterday. “We’ll just get to do them even more. The founders will continue to lead and run the company, we will be the same people in the same offices making the same products in the same way.”
Innocent joins a long line of companies that have started small and built a loyal following on the back of a values-led approach, only to sell up to the kind of businesses against which they might once have defined themselves.
Sell-outs
Ice-cream maker Ben & Jerry’s, once known for its counter-cultural roots, was one of the first to sell up to a corporation, when it was bought for 175m by the consumer goods group Unilever in 2000. Four years later it admitted in its social audit: “We are beginning to look like the rest of corporate America.” British sandwich chain Pret a Manger offloaded a minority stake to the fast food group McDonald’s in 2001 and last year sold the whole business to private equity group Bridgepoint. The Body Shop - whose late founder, Dame Anita Roddick, had often railed against the big corporations running the beauty business - sold to the French cosmetics group L’Oral in 2006.
The reason that these niche operators choose to sell up, apart from making millions from businesses they have created from scratch, is that they need the muscle of the big boys if they want to grow further. Innocent is using Coca-Cola’s investment to grow its presence in Europe.
As long as the business can convince customers that growing in size and befriending the big beasts is not tantamount to selling out, it can thrive.
Sweet returns
Craig Sams, the founder of the organic chocolate company Green & Black’s, said his company had prospered since it sold up to Cadbury in 2005.
“Overall it’s worked fantastically well,” said Sams, who remains in place as president and continues to offer advice to Green & Blacks’ owners. "They have had the resources to really support the brand and take it to places. It’s all very well to say if we spent half a million pounds on marketing we could increase sales by 2m - first you have to have the half a million pounds.
“A company with those kind of resources… if they see spending money will pay back, they don’t have to go to a bank, they just do it. Even though the process of a big company is prolonged and agonising in the detail and boxes that have to be ticked, once a decision gets made it gets implemented… It’s exciting - you see things happening. When you are struggling for cash, you see opportunities slipping away.”
Brand identity
Sams advised Coca-Cola not to stamp its name over the Innocent product range or to combine its acquisition with its US smoothie brand, Odwalla. The US group will also look to learn from the experience of its rival Pepsico, which bought out the PJ Smoothie brand for 20m in 2005 only to retire it last year in the face of intense competition and rising raw material costs.
Reed said there was little danger of Coca-Cola meddling with the Innocent brand. “They absolutely buy into the brand, the people, the system, it’s a minority investment in Innocent, which is staying as a standalone company.”
Innocent had a difficult birth 10 years ago. The three founders - Reed and his Cambridge friends Adam Balon and Jon Wright - had come up with the idea on a snowboarding holiday in February 1998 and tried out their smoothies at a music festival laster that year, using 500 of fruit. They put up a large sign asking if they should give up their jobs to make smoothies and got a vote of confidence from the punters that summer’s day.
But the company only got going thanks to 250,000 start-up capital from US business veteran Maurice Pinto, who came on board after the desperate founders sent an email to all their friends asking, “Does anyone know anyone rich?” Fortunately, one of their friends had done work experience with Pinto.
The company now sells two million smoothies a week and has a turnover predicted to be 105m to 110m this year. Despite Innocent’s remarkable rise over the past 10 years, not everything has been plain sailing. Last year it had to fight off competition from two rival products, Pepsico’s Tropicana and Nestl’s Boost, which caused annual sales to fall for the first time. Although its share of the UK smoothie market fell as low as 50%, it has recovered strongly to reach 83%, Reed said.
We just love the look of your ethics …
Green & Black’s - Cadbury Schweppes
Set up in 1991 by Craig Sams and his wife Josephine Fairley, the company produced organic and, in some cases, Fairtrade chocolate. In 2005 it was bought out by Cadbury Schweppes. Sams defended Cadbury’s commitment to the brand’s values saying: “Cadbury got its people to read the Fairtrade and organic regulations.”
Ben and Jerry’s - Unilever
All-natural ice cream company founded in 1978 by Jerry Greenfield and Ben Cohen. Bought by Unilever in 2000. The co-founders said: “We hope that, as part of Unilever, Ben & Jerry’s will continue to expand its role in society.”
The Body Shop - L’Oral
Founded on an ethical basis by Anita Roddick, the company was sold to L’Oral in 2006. Roddick said at the time: “Having L’Oral come in and say ‘we like you, we like your ethics, we want to be part of you, we want you to teach us things’ - it’s a gift.”
Pret A Manger - McDonald’s
Pret was founded in 1986. It claims to avoid additives, uses recycled packaging and tries to buy organic. A third of the company was sold to McDonald’s in 2001. In defence of the sale, Pret’s commercial director, Simon Hargraves, said: “McDonald’s has never had any day-to-day role in Pret, nor has it had any say over what we do, or how we do it.”
Seeds of Change - Mars
Howard Shapiro set up a small seed company in 1989, later expanding to sell organic foods. In 1997 it was bought by Mars. Shapiro defended the sale, saying: “Mars is interested in providing what consumers want. If that’s organic food, then Mars wants to be able to satisfy that demand.”