Organizational Structure of Innocent Drinks - Assignment Example

Business Contents Contents 2 Introduction 3 Organizational Structure of Innocent Drinks 3 Growth of Company 3 Strategy from 2006 6 Joining Coca-Cola 6 Reference List 9 Introduction Innocent Drinks, launched in 1999, is a juice company based in United Kingdom. The primary business of the company is producing smoothies, fruit juices and flavoured spring water. The products that are manufactured are sold over various coffee shops and other retail outlets. Presently, the business is based in countries of the European Union. Since its inception, the company had witnessed massive growth in revenue along with the proportional growth of smoothies market. The company represents the highest market share in the smoothie market in London (Abbing, 2010). The purpose of this paper is to analyze the strategies that had been adopted by Innocent Drinks to become one of the most popular brands in the fruit smoothies market. The aim is to evaluate ways in which a company had implemented its strategies to rise from a humble beginning and becoming a major market player. One of the most interesting facts about this company is that its organizational structure has gone through massive changes that had impacted overall business. Organizational Structure of Innocent Drinks The organizational structure of a company refers to its shape or hierarchical structure. The organizational structure describes allocation of tasks, supervision and coordination that helps in achieving desired goals. In case of Innocent Drinks, the company was set up by Richard Reed, Adam Balon and Jon Wrigh and was initially funded by Maurice Pinto (a wealthy businessman). The company had a little more than hundred staff while commencing the operations. There was minimal hierarchy in the organization. The unique feature about Innocent Drinks is that it does not own any of the juicing facilities. The company simply contracts the work of manufacturing smoothies to different sites. Growth of Company The growth of the company in first six years of its establishment is nothing less than a success story. By 2005, the company became the fastest growing smoothie company in U.K. Constant product innovation has been one of the most important factors that had contributed to growth of the company. The reason behind growth of the smoothie market in U.K. can be assessed with the help of PESTLE factors. Political: The political environment in the U.K. is stable that had enabled fast growth of the fruit smoothie industry. The U.K. government required a smoothie manufacturing company to state whether the products that is being produced is either concentrated fruit juice or pure fruit juice. Also, the government had been promoting anti-obesity campaigns and promoting development of health drinks (Rao, 2004). Economic: The economic growth of the U.K. had been quite stable in the early 2000s and continued to remain so till 2007, after which the global financial crisis had affected the growth rate adversely. The smoothies market was particularly affected by the recession. As health drinks like, smoothies, are relatively priced higher than soft-drinks, there has been a tendency among customers to switch to relatively lower priced drinks. This condition was worsened by growing level of unemployment in the market (Richter, 2012). Social: There has been a growing concern among people of U.K. towards consumption of healthy food products with low-calorie content. The aspiration of healthy lifestyle has been one of the most important factors that had contributed to growth of this industry. However, one of the major disadvantages of faced by the industry is rising proportion of ageing population in the country. Majority of the population belongs to the age group of 45-54 years, but the smoothies market primarily targets customers within 16-34 years. This acts as a dampening factor on growth of the industry (Rao, 2004). Technological: Use of technological innovation is one of the most effective ways in which a business reduces its operational cost. This helps organizations to earn higher revenue and enhance profit levels. The beverages industry has also updated its existing technology to suit demand in the market (Richter, 2012). Legal: It has already been discussed that the U.K. government had passed a legislation regarding quality of smoothies. Additionally, labour laws of the country have also been revised and the government had passed a legislation regarding minimum wage for the labourers, which effectively raised cost of production for the industry. Environmental: The government had committed itself towards reducing the toxic emissions from production processes and reduce the carbon footprint. The government legislations regarding the beverages industry had focused on recyclable packaging and reducing wastage in the process of production. In short, there has been a growing emphasis on environmental friendly production technologies. Based on analysis of the external environment, chief factors that had contributed to growth of Innocent Drinks till 2005 can be summarized by using a SWOT framework (Mennillo, Schlenzig and Friedrich, 2011). Strength: The ability to introduce innovative products according to taste and preference of customers has been one of the most important reasons for success of the company. The company had introduced 17 drinks from its initial offering of 3 drinks in order to capture higher market share (Spitzeck and Hansen, 2010). Customers were highly satisfied with the products as well as their eco-friendly image. The company had employed latest packing technology o give its products maximum shelf life. Also, all products launched by the company were in their growth phase of the life-cycle. Effective distribution channel of the company has also been one of the strongest factors contributing to its growth. The company had followed a unique advertising strategy by writing on back of the products. This had greatly minimized the advertising expenses. Weakness: The major weakness of Innocent Drinks from its initial days was high costs of production and logistics supply. The company had always charged premium pricing for its products, which had constrained the market to some extent. Opportunities: One of the major factors that had attributed to growth of the company in its initial years was high market opportunity in the fruit smoothies market. The support of the government regarding promotion of healthy fruit drinks had also enhanced opportunities of the business. Threats: The biggest rival of Innocent Drinks till 2005 was P&J Smoothies. There were about fourteen companies operating in the market when Innocent Drinks was established. The competition was fierce as all brands were competing with one another so as to gain maximum market share. Strategy from 2006 The year 2005 had been very critical for Innocent Drinks because this was when PepsiCo had decided to enter the smoothies market by purchasing the second largest market player, P&J Smoothies. Since then, competition for Innocent Drinks had become very tough as PepsiCo provided P&J with operational advantages owing to its global scale of operation. Porter’s Generic Strategies can be a useful guide to understand the business strategy that had been adopted by organization to gain competitive advantage over its rivals. Among three generic strategies, namely cost leadership, product differentiation and focus or segmentation, the strategy adopted by Innocent Drinks can be classified as product differentiation (Porter, 2011)). This is because the company had constantly introduced product innovation and formulated new products (Jones, 2008). The company had introduced products to target the adult population when they had realized that this population constitute a potential market. Introduction of Veg Pots had also been one of the moves made by the company in order to increase market share. The company had expected that introduction of new products for customers will help to enhance its market share (Schmidt, 2010). Joining Coca-Cola The chief reason for the company to join Coca-Cola was scarcity of funds. The company had initially sold 10% of its stake to Coca-Cola in order to obtain funds so that it can continue its expansion into the European market. The company had declared back then that it would continue to offer the same range of products. The initial reaction to this by the U.K. customers was largely negative as Coca-Cola was believed to be at the top of cynical globalism and have a tarnished image in U.K. (The Independent, 2013) With the passage of time, Coca-Cola had persistently increased its share in Innocent Drinks and presently owns 90% stake of the company. There have been extensive discussions in the marketing literature, which points out that this attempt made by Coca-Cola was one of the ways to improve its image in the U.K. (OBrien, 2011). The brand image of Innocent Drinks was very high in the U.K. market as they had established their credential in the market as an eco-friendly supplier of health drinks. However, after its full acquisition, the management team of Innocent Drinks feels that joining Coca-Cola has helped the company to achieve its vision. Though Coca-Cola has full ownership of the company, yet it manages to effectively promote Innocent Drinks as a standalone brand (Neate, 2013). Coca-Cola had realized that in order to ensure survival of Innocent Drinks, the latter had to be established as a global brand. Coca-Cola had assured Innocent Drinks that with a fragmented control, it was not possible for the latter to capitalize upon the former’s marketing and buying behaviour. Coca-Cola had regarded that it would be better if full ownership of the company is taken, so that it could provide full security and opportunity to the business. Most importantly, it was not possible for Coca-Cola to make a fully committed investment for global growth of Innocent Drinks with the limited control (Lucas, 2013). It has been assured that ethical culture of Innocent Drinks would not be altered even under full ownership of Coca-Cola. Coca-Cola had also committed itself towards maintaining ethical deals of Innocent Drinks along with charitable goals. Under Coca-Cola’s control, the company is successfully expanding in the European market. The biggest success of working with Coca-Cola has been to earn the honour of providing smoothies in 2012 Olympics. Innocent Drinks has also doubled its sales since joining Coca-Cola. Conclusion This paper has analyzed in details the case of Innocent Drinks, a smoothie-based beverage company in the United Kingdom. The company has had a non-uniform growth story. It had emerged as market leader in 2005 by surpassing the then biggest rival, P&J Smoothies. However, entry of PepsiCo in the smoothie market had jeopardized the market position of Innocent Drinks. Post-2006, the company had mainly followed product differentiation strategy to increase market share. The company had then planned on expansion, but suffered from inadequate funds. In order to establish a global presence, the company had signed a deal with Coca-Cola so as to use its market buying and distribution power. The deal had been criticized by customers of Innocent Drinks due to scepticism regarding Coca-Cola’s market image. Over time, Coca-Cola had taken full ownership of Innocent Drinks. The company had grown under Coca-Cola and also been selected as the official smoothie provider for 2012 Olympics. Reference List Abbing, E. R., 2010. Brand driven innovation: Strategies for development and design. Switzerland: AVA Publishing. Jones, A. M., 2008. The innovation acid test: Growth through design and differentiation. New Jersey: Triarchy Press Limited. Lucas, L., 2013. Coca-Cola swallows most of Innocent. Financial Times, [online] 22 February. Available at: [Accessed 21 May 2014]. Mennillo, G., Schlenzig, T. and Friedrich, E., 2011. Balanced growth: Finding strategies for sustainable development. Berlin: Springer. Neate, R., 2013. Coca-Cola takes full control of Innocent. [online] Available at: [Accessed 21 May 2014]. OBrien, F. (2011). Supporting the strategy process: A survey of UK OR/MS practitioners. Journal of the Operational Research Society, 62(5), pp. 900-920. Porter, M. E. (2011). Competitive advantage of nations: creating and sustaining superior performance. London: Simon and Schuster. Rao, K. R. M., 2004. Services marketing. New Delhi: Pearson Education India. Richter, T., 2012. International marketing mix management: theoretical framework, contingency factors and empirical findings from world-markets. Berlin: Logos Verlag Berlin Gmbh. Schmidt, C., 2010. Report for venture investors: on the emerging market: personalised nutrition. Munich: GRIN Verlag. Spitzeck, H. and Hansen, E. G. (2010). Stakeholder governance: how stakeholders influence corporate decision making. Corporate Governance, 10(4), pp. 378-391. The Independent, 2013. Slaughter of the Innocent? Or is Coke the real deal? 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