Summary by Stefan Stern | 15 October 2014
Was it inevitable that Adam and his colleagues (Richard Reed and Jon Wright) would start a business? They had certainly always been ready to try things out even at university. “We formed the world’s least successful talent agency – zero bookings,” Adam said. They ran events and parties. But it was when they had already begun conventional careers, in management consultancy and advertising, that they came up with the idea that stuck.
The friends went on holiday together, and gave themselves the duration of a 10 hour drive to the south of France to decide if they were going to start a business for real, and what it would be. What was the key criterion for starting up? It was finding something annoying about life and thinking of a way to deal with it. We still await the Balon/Reed/Wright key-finding service, one of their abandoned ideas.
They hit upon the idea of fruit. “We only really ate any when we were at our parents’ houses,” Adam confessed. The idea was to try and “balance the bad” – make up for the (not unusual) less-than-completely-healthy lifestyle of an urban 20-something with a new and healthy product.
The idea survived “the overnight test”, and a business plan was written. “It was a really nice deck,” Adam joked.
As a team they were well-matched and well-balanced. Jon Wright, a Bain consultant, worked on the supply chain and manufacturing processes, Richard Reed, an adman, looked at marketing, and Adam… did the rest.
How did they work together? There was no single leader, Adam said. They were joint CEOs from start to finish and that just seemed to work. They trusted each other and kept politics out of their business from the outset. It made life easier and set a good example to future hires. And they were able to build create an organisation that was completely un-political.
The team researched the juice market in depth, visiting a large number of independent stores in London and talking to owners to understand pricing, margins, and demand. They also talked to manufacturers, including a 75-year old carrot farmer who produced Pret a Manger’s carrot juice and shared his expertise. He became their first supplier.
Adam took advantage of his day job at Virgin Cola by getting their designers to mock up some label ideas. And then their early smoothies were tried out at the Jazz on the Green festival in London.
Adam described a process of getting funding that started “incredibly badly.” Fifteen banks turned the boys down at first. Three pitches to angel investors also drew a blank. So initially the founders faced using their own money to get going, having quit their well-paid jobs. Eventually, “ we just emailed everyone we knew and said do you know anyone rich?” And someone did. They found one reliable investor, Maurice Pinto, who put £250,000 into the company.
Years later, Maurice admitted to the team that his usual co-funders had all rejected the idea, and he had unexpectedly had to stand the whole Innocent investment himself.
Did the boys nearly give up at this early stage (1998/9)? The pre-launch period was very tough, Adam said. They had some very bad days. The three of them were able to balance the hard times, with all three of them rarely despairing at once. The team kept them going.
They started selling just a few bottles at a time, then won their first ten store account, and finally got into two Sainsbury’s sites. Adam visited these sites every day to see how they were doing. But Innocent was now up and running.
Through the first years of the new millennium the business grew steadily. The culture was vital. The business had been set up by three friends, and they wanted it to feel like their place. They did not want it to feel like work. There was fake grass on the floor, and “Friday beers”. The key thing was to hire people with the same values.
The three joint CEOs decided to write down the company’s values once they had 40 staff. With 10 people that had not been necessary. All staff were interviewed and five core values were identified: be natural, be entrepreneurial, be responsible, be commercial, be generous.
In hiring people they sought a match with those values rather than, for most roles, specific skills. And they decided not to take on the wrong people in the rush to grow. Or, as they put it: “Rather a hole than an asshole”.
By 2006 they had 100 employees.
Not everything went right. “We thought the on-trade would be a massive part of our business… and we spent a huge amount of time and energy trying to get that right, and just couldn’t.” Today the only pub still stocking Innocent smoothies is Adam’s local.
At one point after a year and a half Innocent lost its bottle supplier. M&S liked their clear bottles and decided to buy for themselves – and the supplier went with them. “And we didn’t have a plan B, at that point.” Their product has a ten day shelf life. They had no stock and some every angry customers. But they got through it, and learned their lesson: from then on they always had two bottle suppliers.
But it was in 2008 that things got really tricky. “Things went really well for the first nine years,” Adam said. “The tenth year everything went to shit.”
The company had expanded internationally, and had launched vegetable pots. Rivals Tropicana launched a smoothie brand. And then the recession hit. Sterling fell, which made dollar and euro-denominated imports expensive. All of their fruit crops had a terrible summer too. And their costs had risen as they had taken on more people. Things went bad fast. The company was shrinking 2% a week. Suddenly, “we were losing money quite quickly.”
We learnt that in bad times you have to talk more, Adam said. The leadership team worked hard to keep the whole staff up to date with the details of the business’ performance and plans. That transparency has endured, right across the business.
The first rescue plan was to try and stay independent, but they quickly concluded that seeking external investment was the best option.
In the end Coca-Cola made the best of five investment offers they received. The Coke offer was the best out of five because it was long term and allowed the business to stay essentially the same. In April 2009, they injected capital for a c. 20% stake. This rose to a 58% stake a year later. And in February last year Coca-Cola bought out the bulk of the remaining equity.
The Coke deal was controversial internally and with customers. The staff was kept informed throughout the process. “Chatwiches” were set up, sandwich lunch sessions where anything could be asked on awkward or difficult issues.
The deal was initially announced through social media, which turned out to be a mistake: it attracted quite a lot of harsh press commentary and some real vitriol from customers. Notwithstanding that strength of feeling, sales were unaffected.
The day they left, Adam confessed, he found himself terribly moved as he prepared to address the team. Fittingly, the trio’s tenure ended with them boarding a dinghy and sailing down the canal to the nearest pub.
Having sold up, the three founders now run JamJar, a venture fund focused on consumer products. “Basically we are trying to find ‘the next Innocent’ without doing all the hard work,” Adam jokes.
Being on the other side of the table has changed them. “We are investors now, not operators, and we are not quite so optimistic! We are more questioning.”
And their experience has given them an understanding of what it takes to succeed: it’s all about teams. “In particular we look for teams of people who can really do what they say they can do. Not everyone can.”
The Innocent team are sticking together through thick and thin. “If you’ve got a good team,” Adam says, “don’t break it.”