Is Innocent being innocent in selling out to Coke?
Coca-Cola is a mature product, if a sprightly one, but its purchase of a stake in Innocent suggests the UK smoothie business realises it is reaching maturity too.
Innocent’s strength is its perceived innocence. It was started by three students on a shoestring, launched at a music festival, sold as healthy and socially acceptable, uses environmentally-friendly packaging and donates money to charities.
There is nothing in the fruit drink that Coca-Cola could not copy. What Coke wants is not Innocent’s receipt but it’s image. Coke is regarded as the teeth-rotting, fat-inducing market leader in profit-led sugar-based products and while it could launch a smoothie brand, launching an ethical brand would be beyond even the wiliest ad men. Remember its attempt to sell bottled water?
But for how long will Innocent revive Coke’s image before the US corporation’s image damages its new investment? And while Coke has bought just 10 to 20 per cent of Innocent for its £30m, the damage will be to the whole UK company.
Innocent’s founders say they hope to influence Coke with their alternative business model. Coke may pay lip service to that, but it will also demand that the business in which it has a minority stake subscribes to its code if the US company is to offer its world distribution.
The smoothie company is following a long line of alternative businesses that have created a market position based on opposing the mainstream corporate thinking, only to sell out to large companies. Ben & Jerry sold their ice cream operation to Unilever, Anita Roddick sold Body Shop to L’Oreal, Prêt a Manger sold a stake to McDonalds as a preliminary to selling to private equity.
If Green & Black retains its pure image after selling out to Cadbury it is because the name of its new parent – still recovering from its salmonella scare – does not appear on G&B’s organic chocolate.
Innocent survived the supply deal it agreed with McDonalds two years ago but it has still seen sales fall as others move into the smoothie market. Recession and competition may yet mean the smoothie fad has made this a mature company – and made its owners mature enough to accept cash from a corporate giant.
Coke’s £30m price means it has paid either three-times sales or 1.5-times, depending on its stake. That’s a fancy price but compared with its marketing budget it is nothing. Coke may see that as a cheap option. Four years ago the rival Pepsi paid £20m for PJ Smoothie in the US – then closed the brand. What will Coca-Cola do with Innocent when its purchase has lost its innocence and is just another drinks product?
