Case study notes

Case study notes

Case study questions

There are clear benefits in trying to portray a devil-may-care approach to life, the so-called hippie style; this appeals to the target audience. However, the evidence available suggests something different. The background of the three is one of privilege (one of the three founders attended Winchester college). This may not be the rags to riches story they like to imply. Furthermore, while the founders like to portray themselves as alternative and outrageous they all benefited from conventional excellent university education at Cambridge University. This was followed by successful careers in banking and management consultancy in the City of London. Finally, the decision to take a few months unpaid leave from their employment while trying to establish the business suggests a risk-averse style that differs considerably from the one they like to portray.

‘innocent’ place emphasis on communication with retailers rather than consumers. It is their view that it is retailers who buy their products and who will display and stock them. ‘innocent’ try to keep retailers happy; they give lots of promotional materials to retailers and invite them all for entertainment days.

You could discuss the role of suppliers and their relationship with retailers/consumers.

3. What type of financing did ‘innocent’ secure? Does it matter?

Viewers of the BBC series Dragons Den will recognise this issue. For all start-up businesses leveraging in finance to pay for manufacturing, distribution or promotion costs a lot of money. Very often, entrepreneurs have to sell a significant stake of the business 20–60 per cent to get £100,000 of investment. This is usually because the business idea has yet to be fully tested and a large injection of cash is a risk that may result in all that money being lost.

In the case of ‘innocent’, Maurice Pinto, a wealthy American businessman invested £2,50,000 and became the fourth shareholder in the group, retaining a 20 per cent stake. The money provided salaries for the three entrepreneurs, office space, cash to buy production capacity at bottling plants, promotional material and labelling for the bottles.

4. Would you sell out to Coca-Cola for £400 million? As one of the three shareholders you could pocket £100 million. If not, why not?

Students will like discussing this. Getting their hands on a lot of money is usually too tempting. But even bigger riches are available if you look at Bill Gates or Dyson. Despite receiving many offers, both these entrepreneurs did not sell out during the growth stages of their businesses. Both are now billionaires (50 and 1, respectively).

The entrepreneurs were all members of the target market. They were young, wealthy and worked in a large city. The target market was 20/30 somethings who wanted to try something different, something healthy. It was an expensive beverage at £2. A can of coke is 60p!

The product development process involved trying out and testing ideas, packaging, flavours, pricing, etc. Sometimes, firms get the marketing of a product or service wrong. In this case, the decision-makers were part of the target market, hence they were able to draw on their own experience when making the decision regarding the bundling of the offer.

6. How is ‘innocent’ ‘virtual’ and how is this different from traditional food and drink manufacturers? What advantages and disadvantages does this provide?

‘innocent’ do not own any manufacturing or packaging resources. Hence, all production, bottling and packaging of the beverage are undertaken by contract bottling plants. This is a weakness in terms of level of control but offers advantages in terms of flexibility, capital investment, etc.

Other considerations:

delivery, reliability, quality, leakage of intellectual property from contractors to other manufacturers, control of the brand and its value is less secure if there is too much reliance on others.

Many innovations are applications of existing technology; in such cases, this part of the framework may not be used. In this case, there is no new science. This is such a case. Indeed, there is limited technical innovation in this case.

As with so many innovations, this is where most of the technical effort takes place. In this case, there was little new technology. There was a certain amount of new manufacturing techniques required because of the high fruit content and improving the shelf life without adding additional chemicals. But mostly this case was about branding and launching a new product.

During this phase, the technology is adapted to meet the specific needs of customers. In this case, emphasis was placed on the creation of a brand image is crucial here, and especially so for products in FMCG markets. For all new entrants into an existing market, the aim is to try to get existing users to change to your brand of fruit smoothie and to try to attract new buyers who currently purchase bottled water or Coca-Cola, for example. The brand image developed and carefully nurtured by ‘innocent’ is one based on fun, and an almost hippie approach to life. This is reflected in the packaging, promotion and logo used for the product.

Design has played a big role in the product’s success, from the logo and shape of the bottles to the delivery vans. Careful consideration of design and packaging has contributed to the success of the business. The brand was totally unknown, so ‘innocent’ had to rely on people being intrigued enough to try the product. It is not a cheap drink, so it had to appeal to the consumer and it had to stand out and look like something you would want to pick up. Finally, like all beverage producers, ‘innocent’ relied on the taste to be sufficiently good to ensure a repeat purchase.

Social sciences cycle

This cycle can often involve negotiations with regulators or governments.

‘Innocent’ has not spent large sums of money on television, press or radio promotion. Emphasis is placed on packaging design and retailers who stock and shelf the product. Advertising copy tends to be witty and straightforward, as does other communications material. The relationship with retailers has been built up through regular communication, including a newsletter, which combines product information and fun stories.

Entrepreneur

Sometimes this can be a single individual; in this case, it was the three friends – the owners of the business. They have grown the business from small beginnings in London and created an international brand. The firm owns little equipment such as manufacturing sites. Its business model is similar to that of Coca-Cola, whereby it sells the licence to produce around the world.

In the early days of the business, raising money to finance the business development was crucial and this was a key part of the business’ success.

Large sums of money are now required to position the brand in the minds of the consumer. This is something brands like Coca-Cola have spent over 100 years doing.