We were at our first trade show in France, proud to be exporting the Innocent dream. The stand carried our usual mission statement, this time translated into French. It explained Innocent smoothies were 100 per cent natural and contained no colourings, no water, no sugar and no preservatives.
Encouragingly, we were getting plenty of interest, but something felt odd. Our message seemed to be provoking a lot of Gallic smirks and chuckles. It was only when we stopped a passer by to ask what was so amusing that we understood the true limits of GCSE French.
Our stand had certainly made an impression, though not in the way we’d anticipated. Since ‘preservatives’ does not translate directly into French, it turned out that we were advertising ‘condom-free’ fruit drinks.
Innocent’s foreign expansion started by accident. When Marks & Spencer closed down its store on Boulevard Haussmann in Paris, new owner Galeries Lafayette decided to replicate the M&S food hall by selling English snacking products.
A distributor contacted us in late 2005, offering to ship our drinks to France without us having to do anything at all. Soon Innocent was on sale in a lovely store in the middle of Paris. Better still, when we looked at the numbers we were selling more at this single point of distribution than anywhere else in the UK. ‘Great,’ we thought. ‘This international stuff’s easy!’
We hired a guy in Paris to be our one-man team and started to build up stockists. We went to trade shows and, eventually, got the wording correct on our stands. But, of course, we soon realised the idea of one man doing what dozens did in the UK was ridiculous. He was getting swamped.
At the same time, the company faced a larger strategic decision. Should we go for category or international expansion? After rigorous analysis we ended up choosing the latter, partly to drive value but also because our UK supply chain team was already flat out trying to keep up with demand.
The next choice was America or Europe. We seriously considered America and even had a deal in place with Starbucks, which fell through at the last minute. It was a blessing as it would have been too big a step for us and may have killed the business completely.
But we knew that if we wanted to do international, we needed to do it properly – with a country manager and a full sales team. The idea was to keep them focused mainly on sales and marketing but give them almost complete creative control over the brand.
However, the approach was only semi-successful. While invigorating local teams, it created a huge amount of naval gazing about small details that didn’t matter. Certain elements of the brand’s message may have played more strongly in some countries than others. But generally we found consumers were more alike than we’d expected.
So we standardised our marketing model and became far more didactic about how our strategy was executed. We then pumped serious money into each territory to ensure the highest calibre local teams were flying our flag. It was only then that our international business started to take off.
All was going well, until the money began to run out. In 2008, our UK profitability fell away fast. International structures were in place but now we didn’t have the funds to throw at them. Suddenly, we realised we’d have to scale back our European expansion or raise capital to support it. That’s when Coca-Cola came in and our rate of growth increased exponentially.
In any business the test, learn, change cycle must be quick. But overseas it has to run twice as fast to avoid haemorrhaging funds.
In Austria, we learned this lesson, but only just in time. Initially we tried to adopt our UK model of using ‘hero stores’ (such as independent health food shops and cafes) to stock products and build the brand organically before going to the supermarkets.
The problem we found was that Austrian purchasing behaviour is very different from ours in Britain. Austrians tend to go to restaurants at lunch and order schnitzels (or other food, but mainly schnitzels) from menus, so there isn’t the same demand for hero stores.
Thankfully, our Austrian sales chief identified the flaw in our strategy very quickly. Within three months, business was floundering and we were on the verge of shutting the operation down. But he went direct to the supermarkets and managed to convince them to stock our products – not just anywhere but front of store.
Today per capita sales in Austria are almost as high as they are in the UK. The fact a chilled juice market in Austria barely existed before Innocent arrived make this achievement all the more impressive. So much so that the Austrian sales guru and his team now run the brand’s German operation too.
The glamour of being an international business is inescapably cool and seductive. Who wouldn’t want sales everywhere from Copenhagen to Kuala Lumpur?
But never underestimate the sheer cost and complexity of foreign expansion. And always carry a reliable foreign dictionary.
Extracted from ‘Going Global: 30 Years 30 Insights’ by Piper, the leading specialist investor in consumer brands. For more information or to order a copy, please visit Piper’s website.
Adam Balon worked as a business analyst at McKinsey & Co and marketing manager at Virgin Cola before launching Innocent with co-founders Richard Reed and Jon Wright in 1999. Innocent now sells in 15 countries across Europe and turns over more than £200m. The brand is now majority owned by Coca-Cola Group. Balon, Reed and Wright recently stepped down from running Innocent to set up JamJar to invest in their own start up businesses. Balon joined Piper’s Advisory Panel in 2011.
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