Innocent co-founder Richard Reed tells Director Magazine how his company kept control after breaking corporate tradition by selling a £30m stake to Coca-Cola in 2009. Innocent has maintained its position as arguably the most successful UK brand of the new millennium, and Speakers Corner proudly presents a host of Innocent speakers, all ideally placed to motivate and entertain on the corporate circuit. Joe McEwan, Dan Germain and Jessica Sansom, as well as Reed himself are all in high demand for corporate events.
"Our biggest year ever was 2007," says Reed. "In revenue growth we'd gone from 16 million [pounds] to 36 to 76 to 100 million. It felt incredible – we had targets and kept smashing them."
But the following year, everything went wrong. "Everything did a 180 degrees: a competitor, Tropicana, launched against us. They did a proper FMCG launch at scale and overnight got the same distribution that it had taken us seven years to build. We lost a lot of market share. At the same time the market itself retracted with the credit crunch. Smoothie sales were like the canary in the mine for the state of the economy – they were one of the first things that people cut back on, so there was a big contraction in revenue.
"Added to that the price of fruit reached a long-term global high and then with the economic crisis the exchange rate collapsed – we buy all our fruit in dollars. It was just this perfect storm of less revenue, higher costs and the market contracting. We lost a lot of money and had to make people redundant. We also started getting negative press, which had never happened before – we were so pleased we got smoothies into McDonald's and one article said it was like 'finding out your uncle is a paedophile'. It truly was our annus horribilis."
"We (Reed and his partners) could retract the business, which would mean making half the UK team redundant and cancelling international [operations], and we probably would have limped our way through. Or we could go for investment and put it into growth. That's what we did.
"We fundamentally always believed this was a short-term crisis. We're in the business of making tasty, natural, healthy, ethical food and drink – and people weren't suddenly going to not want that but there was an economic reality we had to confront."
Innocent sent out its pitches on the day Lehman Brothers collapsed. Reed laughs: "Our funding manager rang and said, 'Congratulations, you've started fundraising on the worst ever day in finance'. And we were going out with a business that was losing money and the revenue was going down."
Innocent went the biggest drinks manufacturer in the world, Coca Cola. “We did the deal with Coke for a variety of reasons. One was that we really liked them. They were decent, honest, straight-talking guys. They said, 'we love the brand, we love the philosophy, we would like to invest, let's talk about how we can make that the best possible relationship'.
"We'd had VCs smelling blood and putting in incredibly punitive terms; some companies wanted to stop us giving 10 per cent of profits to charity and others were looking for majority control of the board. Coke's view was that they valued the business based on what we had done and the potential. And they were the only company completely supportive of 10 per cent going to charity."
"They think we're slightly strange, eccentric Brits and, yes, it does feel slightly different going round Fruit Towers than it does going round Coke HQ but we have little to do with them. We have board meetings for two hours four times a year and that is it. They have never once sought to exert influence over us but they fall over themselves to help us."
"The most nebulous but coolest thing about them is they walk into any commercial situation and, instead of thinking, 'How can I get the biggest slice of the pie?' they think 'How can we make the pie bigger for everyone?' They try to do that before worrying about their slice. Secondly they, like us, believe in the principle that trust is sufficient rather than legislate for everything and then try to catch everything in legal documents. They do business on a handshake.
"And I think they have learnt from us, too. Where we contribute the most is our thinking on sustainable agriculture. We have invested heavily in a team of agronomists and sustainability experts who have worked with our partners to find a better way for farmers to grow crops. It protects the local bio-diversity, protects workers' rights and gives the country the ability to trade its way out of poverty. We're pretty good at that and have done more, in proportion to our size, than any other company in the world. So it's exciting when Coke come to us and say 'we'd love to share your thinking'."
“The UK is an amazing place to do business – you don't need to ask anyone's permission, you don't have to get a licence, you can just get on with it. Entrepreneurialism transforms society and all you really need as an entrepreneur is a stable economic environment and to be left alone.
"The economy is in a dodgy place. We're in this situation because the banking industry lobbied aggressively for derivative trading to be unregulated. It's the insane industry of derivative trading and the credit fault swaps that caused the collapse. This tiny bit of the industry created a global recession and to not then fix it would be insanity. We could possibly do more to incentivise people to invest in start-up companies. EIS relief was transformational – without it we wouldn't have got our funding and we wouldn't have invested in other companies. An entrepreneur shouldn't expect things to be easy – the whole point of being an entrepreneur is that you hear yes when everyone else hears no – but not getting access to funds is an annoying reason to not get going if you have a great idea."
“I'm optimistic about 2012 – we've got new products launching and also, because we'll see some profit next year, 10 per cent can go into our foundation, which can then start upscaling what it does. Once you're up and running as a charity, there are EU grants you can apply for but if you're new they won't put money in first. If we spot a new charity that we think will do the work, we'll provide the money. It's like seed capital and means that £1.4m [committed to Innocent's foundation to date] has allowed another £5.6m to be raised. The foundation has helped over 500,000 people in the countries that the fruit comes from and we're very proud of that."