Building England's Ethical, Healthy, and Slightly Cheeky Beverage Brand
Once upon a time as students at Cambridge University in the early '90s, Adam Balon, Richard Reed and Jon Wright ran a business organizing club nights. Now the three run Innocent Drinks, the U.K.'s favorite smoothie company (they also sell in more than a dozen European countries), with revenue of more than $150 million a year. The company's mission is as simple as its all-natural ingredients: To make it easy for people to do themselves some good – and that doing so should taste good, too.
Besides its pure-fruit smoothies, the company is nearly as well-known for its cheekiness (one label reads: "separation occurs, but mummy still loves daddy") and its ethical business practices (the partners insist that fruit growers look after workers' rights, and 10 percent of annual profits go to the Innocent Foundation, which funds projects in countries where suppliers are based). But in 2009, the company sold a 20 percent stake to Coca-Cola, raising the equivilant of more than $45 million to fund a global expansion. "We want to be the Earth's favorite healthy food and drink company," says Reed, now 37.
Innocent has also expanded its product line, by offering "veg pots" (three servings of vegetables, plus whole grains and sauce), thickies (yogurt-based drinks), and more. Despite the 12-year-old company's success, Reed says it wasn't until about three years ago that he stopped questioning whether their initial idea would work. "Every time something good happened I still didn't believe – it was just temporary respite from the paranoia that it was destined to fail," he says with a laugh. He told his story to Inc.com's Courtney Rubin. What follows is an edited transcript.
In February 1998 we were three 26-year-old friends living together and working in London, and we'd always wanted to set up a business together and we'd try to think up ideas. We were drinking too much beer and eating too much pizza and we thought we'd solve the riddle of healthy eating – everyone knows the benefits of it, but modern life conspires against it. So we thought totally natural fruit smoothies would be a great little healthy habit and would make it easy for people to do themselves some good.
After about six months we had this orange, banana, and pineapple recipe, and we needed to test it on people other than our friends and family, who of course all said it was good. So we bought £500 of fruit and set up a stall at the Jazz on the Green festival in Parsons Green, which we thought would be full of the type of people who'd buy our product. Originally we had a three-page market research form for people to fill out, but when it's a lovely sunny day you don't want to fill out a form. And it felt too corporate. And so someone said: "Don't you just want to know if people will buy them or not?" So we had a sign that said: "Do you think we should give up our jobs to make these smoothies?” and we had a "yes" bin and a "no" bin, and we committed to each other that if the yes bin was full we'd quit our jobs the next day. And the yes bin was full, but still we weren't sure. So we went back to our house in Barons Court and flipped a coin, and it came up three times in a row tails. So we all went in Monday morning and resigned.
We were innocent in name and innocent in nature because we'd only left with our last paychecks. We had no brand or packaging, we'd only ever made the smoothies in our kitchen, not on a grand scale, and we thought we'd be out to market in three to four weeks!
It turned into nine months, as we applied to 20 different banks and got turned down 20 times. We applied to every venture capital firm, and they all turned us down. One investor told us we scored a zero out of five in the investors' handbook: that we were friends, we'd never set up a business, we had no experience in food and drink, and we were going up against huge companies. And that was representative feedback. We went to one of these events that puts entrepreneurs in front of business angels and we gave it the pitch of our lives, and at the end I said: "If anyone's interested to find out more, could you put your hand up?" And no one did. It was a soul destroying experience.
And we sat on our sofa – this blue Ikea sofa – and it was "Well, that's it, we've got to call it a day because everyone's said no." And a mate of our said: "You will know someone who knows someone who knows someone who's rich – it's like the Kevin Bacon game." So we sent out an email to literally everyone we knew. I nicked a load of addresses from my old workplace and we spammed half of London asking: "Do you know anyone rich?" And we got two e-mails back, one of which was from a friend of Jon's from school who'd done work experience with an American guy called Maurice Pinto who he'd heard sometimes made investments. So we had a meeting with him and he said it was a dumb idea but that he sort of believed in the team. We were trying to raise £250,000, and he said he'd put in £50,000 and committed to raise the rest for us. But the other six investors he usually worked with all said no, so he put in the extra 200 grand himself, entirely out of obligation. It's the single best investment he's ever made, and he loves telling that story.
Equally as hard as trying to raise funds was finding a manufacturing partner, and again, we got our break from meeting someone very senior near the end of his career. We always knew we couldn't build our own factories – that we'd develop the recipes and find someone else to make them. Everyone in manufacturing also said our idea wouldn't work, but they're not as brutal as investors – they'd say no but in a helpful way, suggesting someone who might say yes. So we finally met Mike Lord, who had started by importing fresh oranges to make fresh-squeezed orange juice. It's not a huge leap from there to smoothies, and we told him we'd put in the extra kit required. He said, "I don't think it's going to work, but there's something in your eyes that reminds me of myself when I was your age, so I'll do it."
The minimum run Mike would do was 400 cases, eight bottles in a case. The drinks are natural and without any preservatives, they have to be kept chilled, and we had to make them every day. On the first day, a Thursday, we sold three cases of the 400 to our local sandwich shop. On the second day we sold zero. So we went back to the shop that bought the original three cases and there's only four bottles left of the original 24. Our original business plan was based on the shops selling six bottles a day, but this one had sold 10 a day. That weekend we loaded up the 797 cases we hadn't sold and went into every shop in West London and said, "Hi, we're your new local neighborhood juice company. We'd love to give you some smoothies for free. If you sell them, please give us a call and order some more. If not, you and your staff can have them." And after that weekend literally about 45 of the 50 shops we gave them to called and said, "They sold really well. Can I have some more?" So then we could go to a wholesaler and say, "Here's 45 of your existing customers that want these. Here's a big pallet of 400 cases – you buy the pallet and sell them on." And that's essentially how we've grown the business.
We also looked for ways to communicate and create an impression that didn't cost us anything – for the first five years, we couldn't afford advertising. We did really simple things that were disproportionately effective. On the back of our labels there was space, and we knew that anyone reading it was one of our customers. So we'd write silly things, sometimes delivering a subtle message about how natural the products were but sometimes just delivering a load of nonsense. We worked really hard to get good PR coverage. I remember in the summer of 1999 we got a meeting with a journalist. We went in and dropped off the samples and realized: This whole building is stuffed with journalists, and we've got security passes already and a van outside. So Dan and I just went in and out getting bag after bag, and we started at the top floor and worked our way down, leaving smoothies on every floor. You probably couldn't do that now in the post-September 11 world, but we got a ton of phone calls.
Ten years in, we never expected to sell a stake to Coke. We thought we'd end up with another Maurice, but the money we were looking for was massive: £30 million pounds to grow our international business. The market was hotting up and we didn't have time to do it slowly but surely the way we did in the U.K. – we needed to get there fast, and we needed money. We officially launched our fundraising on the 14th of September, the day Lehman went under. Our adviser said: There has never been a worse time in the history of finance to raise funds. So he said we had to go wide and speak to everyone. To cut a long story short, we had eight different offers. We came out of the Coke meeting and said, 'Blimey, that wasn't how we thought it would be.' They were smart, they were honest. They were clear that they wanted to invest and they didn't want to control. That was quite a cool thing to have, especially because all the others had weird clauses. It was "We'll put the money in but you'll have to stop 10 percent going to charity." Definitely no way. Or "We'll put the money in but you have to give us the majority of seats on the board." No way. Coke was willing to sign that they'd have no operational control. That was two years ago, and they've been absolutely true to their word. When we've asked them for help they'll drop anything and help us. But they're really nervous just coming in the building – they tell us they don't want to fiddle with what we've got.
All three founders make a rolling three-year commitment. We can't see how anyone can commit for longer than that. Once a year we look each other in the eye and say, "Are you in?" We've got our 2012 goals at the moment, and we've got a 30-year-vision. We're really keen to get the brand recognized internationally as the one that helps people live well and die old. One could say we're doing OK in the U.K. and just starting to get somewhere in Europe. But we've registered the trademark in the U.S., China and India and we want to get there, too.
I never would have had the confidence to do all this by myself. I think we survived because we were a team of three. Chances are if one of us was having a bad day then somebody else was having a good day. Can I just tell you, though, that the smaller the issue the bigger the argument? We know when to defer to each other on business matters, but the three hugest rows we've ever had were about the color of the walls, the color of the floors, and the one where people thought we were going to thump each other: where we were going to put the bookcase. I think we're all really frustrated interior designers, and it's pure subjectivity: why should someone's view matter more than anyone else's?
I still maintain that choosing cranberry over orange for the walls was the right choice.