International Marketing Management: Innocent Smoothies

International Marketing Management: Innocent Smoothies

Part one: Marketing strategy for innocent drinks

And TOWS Analysis

Innocent Drinks is known for smoothies, veg pots and juice. The company is based in the United Kingdom and has diversified its markets to other parts of the world particularly in Europe. The brands associated with Innocent Drinks are common in coffee shops and supermarkets among other outlets. Surveys have indicated that Innocent Drinks sell more than two million smoothies in a single week. Innocent Drinks were taken over by the Coca-Cola Company with over ninety percent ownership, the company is preparing to enter the Russian market, which is part of the BRICS (Brazil, Russia, India, China and South Africa) markets.  The four nations are considered to be in the same stage of economic development, where they are commonly referred to as the ‘BIG FOUR’ economies, considering that South Africa recently joined the group.

Innocent Drinks were founded in 1999 and operates in the beverage industry. The founders of Innocent Drinks are Adam Balon, Richard Reed and Jon Wright. Smoothies are the primary product for Innocent Drinks (Innocent Drinks, 2013). It has been noted that innocent smoothies are made of crushed juices and fruits (Iuc-edu.eu., 2012). There are drinks with ginger and carrots as part of the ingredients. The products are after originality where chemicals and additives are highly discouraged. Innocent Drinks supports the Innocent Foundation, which is a charity registered in the United Kingdom as a way of bringing together communities and nature together and also as a marketing strategy (Cateora et al., 2012 p. 67).

Marketing strategies focus on ‘super fruits’, ‘good for you’, ‘super foods’ and ‘healthy’ products (New Nutrition Business, 2010 p. 4). Innocent Drinks offer leading smoothies in the United Kingdom market with a 73% market share, and also dominates in the European markets (ProofHQ, 2012). The idea behind the marketing strategy is pegged on fresh juice and fruits with no concentrate (Iuc-edu.eu., 2012). The success of the marketing strategy is attached to the clarity of the purpose concerning the products, with the support of all the stakeholders concerning the values of the company and the brand. Innocent Drinks encourages the direct input of the target customers, in making sure that the product evolves with the changing needs and wants of the target market (Innocent Drinks, 2009 p. 129).

TOWS Analysis

Threats experienced by Innocent Drinks identify with high competition levels from other brands in the world, facing customer tastes that are ever changing, cultural differences particularly with the international markets and brand susceptibility particularly with the connection with the Coca-Cola Company (Innocent Drinks, 2012).

Opportunities associated with Innocent Drinks identify with penetration to healthy foods in curbing foods that are processed (New Nutrition Business, 2010 p. 2), market diversification in the international markets like entry into Russia, tapping emerging markets due to health concerns, joining hands with other organizations offering healthy products through promotional campaigns and diversifying in eco-friendly products.

Weaknesses experienced by Innocent Drinks are based on the negative publicity due to association with unhealthy labels from McDonalds, association with Coca-Cola company that makes drinks with concentrates, restricted to healthy juices, the brand is considered as a premium and low international penetration comparable to Coca-Cola company and PepsiCo (Innocent Drinks, 2009 p. 100).

Strengths of the Innocent Drinks identify with market leadership with annual sales worth more than one hundred and thirty million pounds, the brand is known for 100% fruit juices that are pure with no concentrates, products are sensitive to health concerns of the consumers (New Nutrition Business, 2010 p. 3), Innocent Drinks have wide product ranges in sizes and designed for different consumers, Innocent Drinks have an innovative culture, Innocent Drinks enjoys high brand equity, Innocent Drinks enjoys high Corporate Social Responsibility and that Innocent Drinks is friendly to the environment; corporate Social Responsibility at Innocent Drinks focus of being natural, being entrepreneurial, being responsible, being commercial and being generous (Innocent Drinks, 2012).  Brand image is critical for the sustenance of the Innocent Drinks in the target markets.

Part Two: Value Chain of Innocent Drinks

The value chain of Innocent Drinks is highly influenced by the competitiveness of the organization in the market of operations. Russia is completely different in ways of doing business as compared to Europe (Reddaway & Glinski, 2001 p. 455). Competitive analysis will define the chances of failure and chances of success in the Russian market and how Innocent Drinks will mitigate and exploit factors to its advantage (Innocent Drinks, 2009 p. 164). Competitive analysis will enable Innocent Drinks to prepare a business model that will cover threats expected in the Russian market.

Innocent Drinks value chain competitive analysis will be initiated by reflecting on the Porter’s five forces, Considering TOWS analysis is also critical for Innocent Drinks value chain competitive analysis (Innocent Drinks, 2013). Five forces analysis is critical in defining the value chain analysis in brainstorming possible strategies of effectively managing threats and opportunities both in Russia and in European market.

Threat of new entrants in the European markets has been high since entry barriers in the industry are low. Companies with similar products can easily venture into the fruit drinks market (Iuc-edu.eu., 2012). The challenge would be scaling up on the business since start-ups will face restrictions due to economies of scale. Major competitors are two namely PJ and another company that is home-run. PJ is distributed and marketed poorly, therefore does not present a substantial threat. Possible strategies are focusing at trade secrets where the recipes are kept as confidential as possible, developing operational profit and cost models and diversifying on local and international distributors.

Powers of suppliers is considered very high, considering that Innocent Drinks has a number of outsourced manufacturers who could steal the recipe used by Innocent Drinks and make their own brands, in-house manufacturing and on issues of cost cutting.  Innocent Drinks could form a strategic alliance with PJ, who is the greatest competitor in the region. The two companies would gain a competitive advantage in the European market.

The power of buyers is influenced by the distributor chains, stockists and the end users of the products. The power of buyers in the European markets is influenced by different factors, and the factors could be different in the Russian market (Varese, 2005 p. 71). A possible strategy is by defining target geography and target customers within the region. Product differentiation will be influential in setting the right product quality, brand image and novelty (Stuart, 2013 p. 68). Another possible strategy in European and Russian market would be in creating a communication-based model that will deliver more than the physical product. This will be facilitated by different packaging depending on the target geography and the use of technology like the websites in creating brand awareness to the target customers.  Align with local distributors in Russian market, develop own fleet of distribution vans and in offering products at local events as a way of creating awareness.

Threat of substitutes for the Innocent Drinks is high, considering that the target customer may chose eating fruits, taking water or doing away with the product. Major competitor in European market is PJ, although the brand in poorly developed. Threat of Substitutes in the European and Russian market will be influenced by price factors, competitors, switching costs and the perceived value of the products (Reddaway & Glinski, 2001 p. 234). Possible strategies is facing the competitors head-on basing on effective communications and effective branding of the products and also in exploiting the trends in the European market and in the Russian markets and communicating the value of the products (Bogdanov, 2012 p. 2).

Rivalry in the beverage industry in Europe and in Russia is a reality; value chain of Innocent Drinks is established through product differentiation (Stuart, 2013 p. 39). Innocent Drinks must have a good and effective relationship with the customer service and distributors both in Europe and in the Russian market. Another possible strategy is through focusing on the niche markets and in developing a hybrid between drinks and food in creating a bigger market share in Europe and in Russia.

Transferability of Advantages and Merits

The advantages and strengths with Innocent Drinks are attached to the market leadership in the United Kingdom and also in the European market. The same marketing models could be replicated in the Russian market, which is externalisation. Innocent Drinks must be aware that the Russian market is different from the European market, the business model could differ significantly depending on the tastes and the preferences of the target market (Haines, 2006 p. 99). This is an indication that Innocent Drinks brand is well established in the target market, the same brand loyalty could be replicated in the Russian market. Market differentiation is attached to the fact that the fruits are pure with no additives and concentrates; it is the choice for people concerned about their health (New Nutrition Business, 2010 p. 4). This concept could be replicated in the Russian market; health concerns affect each and everyone in the world. Originality of the drinks can be used in building market differentiation for the products, in a way to build a competitive edge (Stuart, 2013 p. 81).

Another advantage is based on the fact that the brand is offered in different sizes and flavours depending on the target market. This is critical in the Russian target market, in meeting the needs and wants of the target customers. Innocent Drinks has built on innovative cultures depending on the changing tastes and preferences of the customers. An innovative culture in Russia will be critical in adapting to the changing markets in Russia (Reddaway & Glinski, 2001 p. 504); innovativeness will be used in making sure that the products meet the choices and preferences of the target market. Innocent Drinks have been sensitive to the changing global environment, the same concept of adapting to the conservation of the environment could be engaged in the Russian market (Simmons, 2011 p. 135).

Part Three: PMA and Prioritization Process

Innocent Drinks could consider investing in Russia, Russia is well known for economic growth that is dynamic, Russia offers one of the diversified consumer markets, Russia has supportive human capital, Russia has vast natural resources and it is strategically located among the BRICS economies, Russia is technologically advanced, the government of Russia offers an attractive taxation systems especially to investors as a model of encouraging foreign direct investment, the government support to businesses is extensive and sensitive in making sure that the political system and that the social systems are stable.

Innocent Drinks can take advantage of the diversified consumer markets in Russia. Russia is characterized by dynamic growth in retail, trade, service and communications as the incomes of the residents continues to rise, there has been increased consumer lending in the past decade. Russian market constitutes more than one hundred and thirty nine million individuals, and the market is recognized as position nineteenth among the consumer markets in the world. This is according to the surveys done by World Economic Forum and the World Bank.

Russia is strategically positioned in offering growth for diverse retailers with a long term approach to the market. It has been noted that a number of European products and services are channelled to Russian markets due to the ready consumers in the region. Foreign brands are a common phenomenon in the Russian market, Innocent Drinks has high chances of launching its products through Coca-Cola Company that has an already established distributor networks in the Russian market (ProofHQ, 2012).

Potential Market Assessment (PMA) and prioritization process will be critical in analyzing the target market and use the analysis in promoting the product directly to the target market. PMA will be influential in connecting the products to the individuals in the target market, which will alternatively increase the sales. PMA and prioritization process will involve identifying the target market, describing demographically on the target market, describing psycho-graphically on the target market, describing behaviour of the target market and compiling the results in making an all inclusive strategies (Deresky, 2013 p. 229).

PMA can be done through the Walvoord 1980 model, which filters different target markets to remain in the most strategic market. PESTLE analysis and five forces analysis are critical in the Walvoord 1980 model. Filter one focus on Macro level research which focuses on the general market environment, at this stage preliminary options are made. Filter two focuses on macro level research which deal with the general market potential. Filter two targets at growth trends, similar products, market size and state of development among other factors. The possible options are then directed at the filter three that focuses on the micro level research that deal with specific factors affecting the products. At this stage, factors such as potential and existing competition is considered, other factors are cost of entry, projections, sales and the potential products in the target market. Filter four focuses on the target market where the corporate factors are considered, which influence the implementation of the model in the chosen country of investing.

Filter one focus at the general viability of the products to the target market, filter two focus at the market attractiveness of the product, filter three focus at the factors that will affect the product and filter four focuses at the corporate factors that will influence the implementation of the marketing strategies in the target market (Microsoft Advertising Intelligence Tool, 2011 p. 10).

Part Four: PMA process (Part 3) and Recommendations

The Russian beverage market is dominated by Coca-Cola HBC Eurasia, PepsiCo Holdings, Megapak, Ochakovo, Deka, Deneb, United Bottling Group, Borodino, Leda, Eugene Bougele Vine, Niagara, Mark-IV, Multon, Ost-Aqua, Fonte Aqua, Laguna, Tomsk Beer, Zhivaya Voda and Ayan among others. Entry of Innocent Drinks into the Russian market will face stiff competition; hence building a market differentiation will be critical in making influential decisions (Deresky, 2013 p. 109).

Russian soft drink market is categorised into sugary drinks like carbonated water, drinks, smoothies and cocktails and on sugarless drinks like drinking water and mineral water. Russian market is estimated to stand at 10.5%, considering the soft drinks from the Western nations, and the industry is estimated to stand at US$ 12.98 billion; the trend is continuously growing. It is estimated that by 2014, the industry will be valued at US$ 16.94 billion, which is a climb in value. Competitors differentiate themselves through tastes, health benefits, environmental concerns and in giving back to the community among other strategies (Varese, 2005 p. 188).

Filter 1 focuses at the general variability of the market where risk assessment model, PESTLE (Political, Economic, Social-Cultural, Technological, Legal, Environmental) analysis, human capital, GNP per capita are included in the overall decision making processes. Filter 2 focuses at the market attractiveness; where factors such as competencies needed in the Russian market, competitive strength of Innocent Smoothies, distribution channels, size of the Russian market, growth of the Russian market, seasonability of the Russian market, expected profit margins, infrastructures, competitive intensity, customer power and the entry barriers will be useful in the overall decision making processes.

Filter 3 focuses at the factors influencing the product such as the profitability of the product in the Russian market, intensity of the competition and on future market attractiveness of the Russian market. Filter 4 focuses at the corporate factors that will affect the implementation of the project such as the company resources, porter’s five forces, company experience and the company objectives. In overall, Innocent smoothies in partnership with the Coca-Cola Company is prepared to enter the Russian market and make an impact in the target customers in the new market.

Market entry and development will require an influential marketing strategy (Thompson et al., 2011 p. 695). It is important to note that the Russian market is made of regional differences, an indication that a single marketing and entry strategy will not be effective in the Russian market. Entry into the Russian market will be best done through cities and regions. It is worth noting that the business environment in the Russian market is complex, the market is characterized by bureaucracy and few cases of corruption (Varese, 2005 p. 199). It is recommended that Innocent Drinks should partner with reliable distributors in the region; in this case, the Coca-Cola Company will be influential as Innocent Drinks enter into the Russian markets. Maintaining and working closely with the Coca-Cola company will provide the needed global experience in businesses, particularly within the Russian market.

Innocent Drinks is encouraged to perform credit checks and due diligence, it is expected that the processes will be hindered by limited availability of information and lack of transparency issues in the Russian market (Varese, 2005 p. 205). Partnerships in the Russian market perform better than joint ventures basing on the complexity of the Russian beverage market. Innocent Drinks are advised to take advantage of the Coca-Cola Company’s distribution network that is well established in the Russian market, in so doing, the distribution networks will create a competitive edge for the Innocent Drinks products. Multiple distribution channels are encouraged depending on the Russian market, it is encouraged that Innocent Drinks to also develop its own distribution network to complement the existing Coca-Cola networks.

Distribution networks and storage facilities in the Russian market are slightly different as compared to the Western markets. Surveys have indicated that advertising and marketing for the Innocent Drinks products will be influential (Innocent Drinks, 2012). Innocent Drinks will engage the Coca-Cola networks in brand and product promotions. The Coca-Cola Company has vast experience in the Russian market, and exactly knows and understands the choices and the preferences of the target customers (Watson, 2008 p. 176). Innocent Drinks will have to use local advertisements, media agencies in hard and soft systems and also in taking part in product trade events. Examples of influential events identify with the World Food Moscow Exhibition, Peterfood, Ingredients Russia and Prodexpo among others. As an independent international marketing specialist, this paper recommends entry of the Innocent Drinks into the Russian market through the Coca-Cola Company that has a well connected distribution network, source of funds and a global experience in the beverage industry (Simmons, 2011 p. 151).

The Russian market is complex in terms of financial structure, regulatory environment, culture and in market diversity and size. It is wise to do conclusive research before making an entry into the Russian market. There are a number of variables to be reviewed, which are different from other global markets. The brand has built a high brand equity with high levels of corporate social responsibility, the same concept of corporate social responsibility will be critical in the Russian market in making sure that the target customers are involved in building brand equity.

 

List of References

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Haines, L (2006). Innocent Smoothie Recipe Book: 57 and a Half Recipes From Our Kitchen to Yours. London: Fourth Estate. 23-165.

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