Good Example Of Organizational Structure, Ownership AND Growth: Report
INNOCENT DRINKS CASE STUDY
Innocent Drinks is a UK based favorite fruit smoothies’ producer and fastest emerging company. Company sale its products through different outlets. Company was started by 3 founders in 1999. Company has made several innovations and recognized for its uniqueness and quality products.
This report aims to analyze the organization structure, ownership growth, reasons of growth, and changes in strategies of Innocent Drinks. The strategic importance for Coca-Cola of acquiring the stakes of Innocent Drinks and influence of Coca-Cola on decision making of Innocent Drinks has been discussed. In order to gain the objective paper has been divided into 4 major sections. First section discusses the structure, growth, and ownership of the organization. Second section explores the reason of growth of the company up to 2005; third section caters the information regarding the changes in strategies have been made from 2006 to present. Fourth section consists of strategic reasons for Coca-Cola to acquire the innocent and its influence on Innocent Drinks decision making.
Innocent drink was found in 1999 by Richard Reed with his two friends named Jon Wright and Adam Balon. The company started up a business through the production of fruit smoothies as a privately held business based on partnership (BBC News, 2010). In 2007, Innocent Drinks signed an agreement with McDonald, according to which McDonald used innocent started utilizing innocent smoothies - on five year trial – as an element of their “Happy Meals”, in 2008, due to financial crisis company had to bead loss of £8.6 million and company announced made a deal with Coca-Cola in same year. In 2010, Coca-Cola Company acquired 58 percent of stakes of company and innocent accomplished its target to reach at £ 210 (Ruthven, 2014). Currently, more that 90% of stakes have been acquired by Coca-Cola, due to which three founders have been remained with little ownership of the company (Neate, 2013). Company’s organizational structure is made up of four main teams and each team is combination of several teams. At initial stages, innocent business delivery department, supply chain and demand department was liable to report board; S&OP, DRP, and MS&P were liable to report business delivery department. However, the new structure of the organization is based on one number business (Innocent, 2015). The organizational structure of the organization is unique; company provides bonuses to its staff on having snowboarding holiday and children.
(J&W Associates, 2015)
The company is constantly growing after its foundation. In 2003, the turnover of Innocent Drinks was £15 million that increased up to £35 million in 2004. In 2008, Innocent Drinks had to face decline in sales due to financial crisis of 2008, but after the year company again started growing; the turnover of Innocent Drinks in 2008 was £105 million that had been doubled in 2012 by £ 209 million the business grew by 23 percent in 2012.
Reason of growth of the company up to 2005
Any firm that wants to grow requires innovation, differentiation from competitors, unique offerings, and smart marketing strategies (McLeish, 2010). An innocent drink is an innovative company; the beverage market is highly competitive and survival of weak companies is difficult, but due to innovations, innocent company gained constant growth (Falguera and Ibarz, 2014). Company has made several innovations from its foundation that separates company from its competitors and serves it with competitive advantage. Company enjoyed huge success by making innovation in products such as in 2008 company introduced veg pots; in 2009, company launched “squeezies” made up of pure fruits for lunchboxes of kids. Company unlike its competitors did not used any additive; Innocent Drinks used pure healthy ingredients that attracted customers and gave them perception that innocent is the only that use pure ingredients. The reasons behind the growth of the company was its differentiated products from its competitors; company was serving customers with pure and fresh fruits’ products with 8 day shelf life that put the perception in consumers mined that innocent is the only producer who sell fresh and pure fruits. In 2003, company launched nine diverse formulas in three dissimilar categories. Innocent has unique strategy to keep customers; company knows that differentiation attracts customers and create competitive advantage. Company used such tactics that just not have reduced the cost of production, but also posed the positive picture in front of consumer of being socially responsible. In the year of 2003, company also started utilizing 25 percent of post-consumer recycle plastic (PRC) in its packaging; company recognized the importance of distribution channels and made innovations in its sales and distribution (Innocent Drinks, 2015). Innocent acquired the strategy to provide retailers with eight-days shelf life (it was a sort of unique guarantee) and company also provide service to retailers to forecast the demand and place the order on their basis; such strategies allowed innocent to enhance the availability of the products and reduce the waste and in result through the reduction of waste company gave retailers guarantee of 0 percent waste that was a unique offer again. Through the tight operations, Innocent Drinks was able to attain the 98 percent of successful delivery rate that was exceptional in the market of chilled drink. The creative marketing strategies of Innocent Drinks also put the company at growth. Innocent Drinks acquired 32 different sorts of labels that are circulated after every three months. Company also acquired innovative sampling technique through the customization of two vans that covered in daisies and Astroturf; these vans distributed samples up to 1 million customers of United Kingdom in 2003 (Datamonitor, 2004). Innocent knows to utilize media; company used innovative push strategy (See Appendix)
Strategic change from 2006 to present:
Business strategy helps organizations to observe that where and how – in order to make the business successful – change is required or needed. Business strategy allows managers to realize the most profitable way to develop the business on constant basis such as by cutting costs, reviewing resources, or expanding business (Kourdi, 2010). Strategic thinking and transformation is an important process to keep organizations alive in such a squeezed market place filled with large number of competitors. Organizations make changes in their strategies with time in order to revitalize themselves and it did by Innocent Drinks as well.
Innocent from 2006, started diversifying its business and put its concern on sustainability features. Rather to be constant, Innocent Drinks started expanding its range of smoothies and introduced cartons by eliminating the use of bottles; company introduced yoghurt thickies, juicy waters, wedged shaped cartons (fitting tidily into lunchboxes) and kid drinks and this strategy put the company at top 100 brand of grocery. Innocent Drinks preferred to introduce the new products for kids rather to target the time poor cash rich customers. Company acquired the market development strategy by introducing yoghurt thickies and tries to introduce new flavors, and moreover, company expanded its business through making entrance in fresh vegetable sector; company introduced Veg pots. Innocent transferred its focus from benefit and time, metrics of cost, to the strategic business values (NAO, 2012). Due to the launch of juicy water, company’s sales went up to £ 30 million from £ 8 million in 2007. As company had to faced decline in growth in 2008, company decided to sell its stakes to Coca-Cola. Company decided to be a global one by selling its stakes to Coca-Cola and got huge amount for expansion (O’Neill, 2009). Company also transformed it system of production and made it one number that has been agreed by everyone; through the application of this strategy company, business rose from 97.5 percent to 99 percent and decline in waste by 0.2 percent. Company in order to be sustainable company reinforced the engagement strategy. Innocent started sharing finance updates to its employees on monthly basis in term of performance, company in order to enhance the responsibility started sharing failures with employees as well, so they could learn from their mistakes. Company enhanced the visibility of senior management through which employees were insured that their ideas, suggestions, and feedback could be approached regardless of time. Company also started performing motivational survey that allowed company to capture de-motivated employees, engage them, and motivate them.
Strategic reason for Coca-Cola to take over the company and its impact over innocent’s decision making:
It has been determined that Coca-Cola has major focus on its main brand cola that is not up to the health standard; Coca-Cola company does not have focus on healthy drinks due to which its image has hurt and company had to face negative publicity. However, the acquisition of Innocent Drinks will turn the Coca Cola’s negative image into positive and enables Company to enhance its profit by entering in healthy drink market. In such way, Innocent Drinks has huge importance for Coca-Cola. Coca-Cola will be able to get the competitive advantage in fruit drink market through already established brand; the competitor of Coca-Cola called Pepsi has advantage over coke due to its diversification strategy; through the acquisition of innocent company will have competitive advantage over its major competitor. Innocent company has experience of servicing customers with exactly what they want.
However, if comes to innocent so innocent may have to face difficulties in maintaining its sustainability image that would put the negative impact over innocent. Coca-Cola is currently holding more than 90 percent of shares of innocent; therefore, there is a great possibility that company try to influence the culture of the company and therefore decision making. Innocent has gained immense benefits from Coca-Cola; company has increased in market presentation, profits, and image in market. Innocent took full advantage of vast distribution channels of Coca-Cola. According to the Richard Reed, he decided to never compromise on the culture, management, and social responsibilities but after being left with such a small share of ownership it is not possible to rule out the decisions alone. Coca-Cola toward business has very diverse and formal approach and as compare to Coca-Cola, innocent has laid back approach. The overall profit that has been attained by innocent is only because of its smart decisions, strategies, and ethical approach. However, Coca-Cola must take this thing into consideration that if Coca-Cola will make any influence on the efficiency of the decision making of core founders then it may have to lose the competitive advantage that can turn the acquisition in to disadvantage for both innocent and Coca-Cola. Therefore, it is better not to interfere in decision making of innocent and let the company run its operations in its way that will be beneficial for both (Global Experts, 2015).
It has been determined that innocent has been an innovative company with transformational organization structure; company ownership was in hand of 3 founders of the company, but lather the ownership was transferred to Coca-Cola up to 58 percent and currently Coca-Cola holds 90 percent stakes of innocent drinks that left founders of innocent drinks with little ownership. Company structure was hierarchical based but later it changed into one number business system in order to reduce the complexity of structure and smoothen the operations’ flow. Innocent rather to target the time conscious and cash rich people acquired the strategy to develop the product and market. Even company entered in vegetable market by targeting. Company transformed its structure, operations, and strategies that strengthen the company and enhanced its strategic worth. The strategy of the company to make deal with Coca-Cola is beneficial for innocent in many ways and has strategic importance for both companies.
List of References
BBC News. (2010). Richard Reed, Innocent Drinks. Available from http://www.bbc.co.uk/news/business-11551271 [Accessed 21 April 2015]
Datamonitor. (2004). Innocent drinks case study – making use of alternative marketing strategies. Available from http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CBsQFjAA&url=http%3A%2F%2Fmoodle.calderdale.ac.uk%2Fpluginfile.php%2F124454%2Fmod_folder%2Fcontent%2F0%2Fcscm0057_Inocent_drinks_case_study.pdf%3Fforcedownload%3D1&ei=gW81VdCbOMPMygOB54DIAw&usg=AFQjCNFQTHP0D12HAjWLZHO8QwFjSOM5Rw&bvm=bv.91071109,d.bGQ [Accessed 21 April 2015]
Falguera, V and Ibarz, A. (2014). Juice Processing: Quality, Safety and Value-Added Opportunities, USA: CRC Press.
Global Experts. (2015). Coca-Cola buying innocent. Available from http://global-kw.com/index.php?option=com_content&view=article&id=43&Itemid=61&lang=en [Accessed 21 April 2015]
Innocent Drinks. (2015). Our packaging strategy. Available from http://www.innocentdrinks.co.uk/us/being-sustainable/packaging [Accessed 21 April 2015]
Innocent. (2015). An Innocent S&OP Journey. Available from https://ieondemand.com/divisions/supply-chain/presentations/an-innocent-s-op-journey [Accessed 21 April 2015]
J&W Associates. (2015). Total working capital performance depends on getting whole company on side. Available from https://ctmfile.com/story/total-working-capital-performance-depends-on-getting-whole-company-on-side#.VTSMTvA3kqF [Accessed 21 April 2015]
Kourdi, J. (2010). The Economist: Business Strategy: A Guide to Effective Decision-making. Great Britain: Profile Books.
McLeish, B. J. (2010). Successful marketing strategies for nonprofit organizations: Winning in the age of the elusive donor. John Wiley & Sons.
NAO. (2012). Governance for Agile delivery. Available from https://courses.cs.ut.ee/MTAT.03.243/2014_spring/uploads/Main/agile-governance.pdf [Accessed 21 April 2015]
Neate, R. (2013). Coca-Cola takes full control of Innocent, The Guardian. Available from http://www.theguardian.com/business/2013/feb/22/coca-cola-full-control-innocent [Accessed 21 April 2015]
O’Neill, R. (2009). Quitting day jobs to make smoothies, Financial Times. Available from http://www.ft.com/intl/cms/s/0/a6b255be-25e7-11de-be57-00144feabdc0.html#axzz3XpbVa1f9 [Accessed 21 April 2015]
Ruthven, H. (2014). Innocent Drink’s Richard Reed on life after a $500 million company. Available from http://www.growthbusiness.co.uk/the-entrepreneur/business-leaders/2460787/innocent-drinks-richard-reed-on-life-after-a-500-million-company.thtml [Accessed 21 April 2015]