September 21, 2012

Big means bad or big impact?

This post is a follow-up to my previous piece comparing innocent drinks and method. As part of my research on corporate behaviour, I found – to put it crudely – that it is no longer clear that small companies such as innocent can be thought of as ‘the goodies’ and big companies as ‘the badies’.

As highlighted in the earlier post, innocent set out to do things differently, and this included their approach to giving back. A couple of years after the business got going, innocent decided to give 46% of all profits to charity and nearly bankrupted the business. After that, they decided to set up a proper, organised charity – the innocent foundation. So far so good.

Things are a little more messy in terms of their record on sustainability. To be fair, a lot of this is due to the nature of the product – their smoothies are fresh which means they need to be kept chilled, adding to their carbon footprint, and are more perishable (and thus risk creating more waste) than their less tasty pasteurised peers. In addition, innocent prioritises the quality of the drink and the new tastes they offer, which has important implications for their sourcing policy as they themselves recognise:

Purchasing flexibility is important, we need to make sure we can buy the variety and quality and quantity of fruit that we need, and this is not always possible if we align ourselves to just one certification programme.

If we turn now to a very different company, Coca Cola, and look at what is happening there, it is clear that being big can mean useful scale. This is not to claim that Coca Cola is a beacon of virtue – it has had issues with how it treats workers in Colombia and how it uses water in India – but it is worth looking at the other ways in which how it operates can impact.

A good example is the rather ambitious five by twenty project, whose goal is to ‘empower the economic enablement of 5 million women entrepreneurs across our value chain by 2020.’ It’s about investing in women to get their business going – they are a critical part of Coca Cola’s micro-distribution strategy. They are getting training, support with important capital equipment such as solar panels, and mentoring.

In contrast to innocent, which is currently obliged to work with different suppliers, Coca Cola can also invest in supporting the farmers whose fruit they will use in their juices. This is what is happening in several places – for example in Haiti with Project Hope, and Uganda and Kenya with Project Nurture – projects which will involve many thousands of farmers. Again, it’s important to be clear these projects are not acts of charity – they make business sense for Coca Cola, as well as for the farmers involved. The aim is to improve the productivity of these farms through training, education and better access to financial support.

My final point is obvious – that Coca Cola and innocent are not at loggerheads – but all part of the same family. In April 2010, Coca Cola bought a share in innocent which has now increased to 58%, and without this investment, the company would have probably gone under. As Richard Reed, one the founders explains:

We say at the moment that we aren’t a business, we are a fruit distribution charity. It costs us more to run than we get from doing it. We lost money in 2008; we lost money in 2009; we lost money in 2010 and we are going to lose money again in 2011. Fact.’

Let’s see what happens next….


August 29, 2012

Compare and contrast: innocent vs method

Filed under: Business,Innovation,Marketing,Sustainability — by xrematon @ 4:00 pm
Tags: , ,

I have been doing some work looking at big businesses and thinking about which don’t really fit the corporate mould. It didn’t take long for innocent drinks and method cleaning products to come to mind. It’s interesting to compare the two organisations as they are, in some senses, similar, but in some fundamental aspects, very different.

Let’s start with what brings them together:

  • They were both started around the same time (approximately turn of the millennium).
  • Their founders were close friends; and middle class young men who weren’t that into their ‘proper jobs’ and had a passion to do something else.
  • Both companies had a clear vision that they wanted to do it their way and to challenge the status quo in their respective areas.
  • They started small but quickly grew, not only in terms of sales numbers, but also markets, staff and product range.
  • Both are now well established and well loved by their customers and the business world. They have developed consciously fun and quirky brands. They are more than simply a company that makes juices or cleaning products. Innocent has run fruitstock and method promotes happy cleaning and the people against dirty campaign.
  • They are shining examples to emulate – both have published business books on their principles and philosophies.
  • And obviously, they themselves are aware of the parallels and have connected on a number of occasions.

But what about the differences?

  • In a way, innocent has been a victim of its own success. It was so good that others in the sector have cottoned on and also had a go at producing lovely little drinks that are delightful and fresh.
  • Method products, however, still look very different to most of the offerings you would also find on the shelves at a general supermarket. And the only bit of language these products seem have picked up from method is the importance of smelling nice; but they don’t do non-toxic.
  • When you look into it, innocent’s business model and operations seem very challenging. Making fruit juices involves farming – which is a contested area with increasing concerns about land use, chemicals, and water scarcity – without forgetting transportation. The latter is a particular issue given that innocent products need to be chilled. These factors affect the bottom line: innocent recently described itself as a fruit transportation charity as it has been losing money for the past four years. It is no longer a private company – Coca Cola now has a majority stake in the business.
  • Method does not face these issues. It is still a private company with private investors.
  • And finally, you will find that we stay stocked up on method products in this household, but not innocent smoothies. Sorry, Fruit Towers doesn’t do it for me.

Blog at WordPress.com.