An innocent (and logical) decision

  • Last week we learned that Innocent Drinks has agreed to sell a 20% stake in the business to Coca-Cola for £30m.

    The news has parallels with the sale of Ben & Jerry's to Unilever in 2000 and the more recent sale of Green & Black's to Cadbury. Loyal fans say the spirit of the brand will die and many say they will desert.

    So, is the investment a mistake by the owners and a misjudgment by Coca-Cola? Of course not.

    Innocent is an excellent case study in why a business should build a brand: it is precisely because Innocent has built such an extensive and loyal following that the owners have attracted a business the size of Coca-Cola to take a minority stake for such a huge sum.

    Why else does anybody try to build a business if it is not at some point to reap the rewards? (And the rewards here are said to be a platform for further growth, not yachts for the founders). This might be anathema to the hippies to whom profit is a dirty word, but this is the real world in which somebody has to do the work and create the wealth.

     

    Those that accuse Messrs Reed, Balon and Wright of selling out overlook the fact that Innocent had probably gone as far as it could with its existing resources. The investment has brought vast increases in marketing capability and buying power: it has also secured jobs. Innocent was facing having to make 20% of its workforce redundant in response to falling sales and can now avoid this. No doubt more jobs will be created in time. What can be more socially responsible than saving and creating jobs at a time of economic slow-down?

    The question for many is whether the spirit of the brand can be maintained and, if it can't, will it have a net detrimental effect on the performance of the product.

     

    While business values can't be manufactured, a brand personality can. A brand is an inanimate object that can be made into whatever the owner wants it to be. There is no reason why the personality of the brand can't be maintained with its quirky packaging, jolly blogs and grass liveried vehicles. This will require some careful and dedicated brand management, but it is feasible. McDonalds has achieved it with Pret-a-Manger and we should credit Coke with the intelligence to achieve it with Innocent.

     

    The brand is likely to lose some of its cottage-industry feel, as the earlier examples have, but it will still appeal to a mass audience and the stronger control of the 5 marketing forces will make it a better and more profitable business overall.

     

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