Innocent Drinks

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Entfin II: Case Analysis – Innocent Drinks (9-805-031)

Case Analysis: Innocent Drinks

Entfin II: Case Analysis – Innocent Drinks (9-805-031)

TABLE OF CONTENTS

Table of contents ............................................................................................................. II

1 2 3 4

Background information about Innocent Drinks .....................................................1 Background information about the beverage industry ............................................2 Innocent Drinks’ success factors .............................................................................5 The possible options for the company founders......................................................7 4.1 4.2 Sell the company ............................................................................................7 Growth options ...............................................................................................8 4.2.1 4.2.2 Enter new markets ..............................................................................8 Expand the product portfolio..............................................................8

5

Recommendation ...................................................................................................10

Bibliography ...................................................................................................................11 Appendix ........................................................................................................................13

List of figures Figure 1: Porter’s Five Forces. ...................................................................................................5 Figure 2: SWOT analysis of Innocent Drinks. ...........................................................................6 Figure 3: BCG Matrix. ...............................................................................................................9 Figure 4: Revenue vs. number of beards (year on year growth 1999-2007). ...........................13 Figure 5: Smoothies in context, West Europe FJNFD Market (volume). ................................13 Figure 6: Smoothie market in West Europe, Smoothie consumption. .....................................14

List of tables Table 1: Benchmark companies. ................................................................................................7 Table 2: Soft Drink Sales – Historical Data & Forecasts. ........................................................15

Entfin II: Case Analysis – Innocent Drinks (9-805-031)

1 Background information about Innocent Drinks

In 1993 the three college friends Richard Reed, Jon Wright and Adam Balon founded the company Innocent Drinks after a pilot test at a music festival. They received such a positive feedback that they quitted their previous jobs and started with great success Innocent Drinks, a smoothie company which is based in Great Britain.

As the only company Innocent Drinks was ranked among the fastest growing companies in the UK for five years in a row between 2004 and 2008.1 With revenues of just ₤ 0.2 million in 1999, the three founders increased revenues to ₤ 10 million until 2003 years, ₤ 24 million in 2005 up to over ₤ 100 million from 2007.2 Looking at the growth of revenues, the Average Annual Growth Rate (AAGR) is 168%3 and the Compound Annual Growth Rate (CAGR) is 122%4 between 1999 and 2007. These figures clearly support Innocent Drinks to be in the growth stage of the Business Life Cycle.

Innocent Drinks started as a niche player in the juice market producing premium smoothies, drinks that are thicker and fresher than regular juices and does not contain water or added sugar. Between 2002 and 2004 the smoothie market had been growing annually between 3040%, leading to a total value of the UK’s smoothie market of ₤ 50 million in 2004. From this, Innocent Drinks, having already passed its main competitor PJ Smoothies, had a market...
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