Innocent Drinks and Green & Black’s have achieved almost iconic status in the marketing industry as examples of what small brands can accomplish with a quality product, a premium positioning and low level, targeted marketing.
But while both have achieved much with their entrepreneurial spirit, the past two years have seen them move into new phases of their development. Innocent has launched its first TV campaign and Green & Black’s was acquired by Cadbury in 2005, which had acquired a 5% stake three years earlier.
The UK food market has a plethora of brands that have built their businesses by taking an artisan approach to production, focusing on quality ingredients, taste or an indulgent positioning coupled with down to earth brand values that set them apart from the major mainstream brands that dominate the market.
Brands such as Eat Natural, the cereal bar maker which last week announced it was doubling its marketing spend to £1m this year (MW last week), and premium crisp brand Kettle Chips have broken into major supermarkets. But in doing so they have become attractive propositions for major food manufacturers looking to buy brands that operate in categories that they have failed to break or to target consumers they do not currently attract.
A sale of the company or at least a stake can offer smaller brands the scale and business structure to launch internationally, help them gain a bigger influence with the major retailers and provide resources to speed up new product development and boost investment in marketing. As the power of the supermarkets and major brands grows, it seems inevitable that smaller brands will have to consider selling to stay in the game.
Not so, says Mark Palmer, the former marketing director of Green & Black’s, who is still a director of the company. He explains/ "These brands are built on a strong product foundation and achieved a level of success before doing any marketing. They then have to look at their business and think ‘We are doing well but how fast do we want to grow?’ That decision can be as broad as looking to sell a stake to whether or not to take on a new member of the sales team."
Selling out or going global?
Green & Black’s was set up by Craig Sams, chairman of the Soil Association, but he sold an 85% stake to William Kendall, who himself had just sold The New Covent Garden Soup Company to food manufacturer S. Daniels for £24m in 1998. The company was concerned that there would be a consumer backlash against the Cadbury sale but Palmer believes it is "harsh" to suggest that Cadbury bought Green & Black’s as a way of buying instant ethical credentials.
"Some consumers felt disappointed," Palmer admits. "They thought we had sold out but the deal allows us to expand onto a platform we didn’t have the capability for as a privately-owned business. We are now aggressively looking at new markets like the US."
Meanwhile, Hannah Sutter, a former solicitor who launched low-sugar brand GoLower in 2004, says it is not always necessary for companies to sell if they are UK-based and only looking to operate in this country. But she adds: "If the products go into a global market, it becomes difficult to do it without a global business structure."
Sutter believes Innocent’s decision to move into TV advertising demonstrates the pressure on privately-owned brands in the UK. She points out that Innocent created the smoothie category and for a long time did not have any competitors which gave it a lot of freedom to build its market share through sampling and below-the-line work.
She explains: "Now the retailers are bringing out own-brand smoothies that have the same nutritional and taste profile as Innocent, it will lose its position if it does not come out and say something. It is under enormous pressure to maintain its share. The retailers can make the product for less and get better margins and consumers have as much faith in Sainsbury’s Taste the Difference or Tesco Finest. It is very tough for brands. I think Green & Black’s did the right thing."
Palmer, who has also launched his own business consultancy, believes that there is still some confusion about the definition of marketing spend. "It does not just mean investing in brand advertising, it can be about hiring people that specialise in product development. Sometimes that is what investing in marketing is because if you get the product right, you don’t need to spend so much on marketing."
Despite the increasing pressure on home-grown brands, there are some that staunchly believe that it does not have to come to either selling or investing heavily in marketing. Preet Grewal, director and co-founder of Eat Natural, says the company is growing organically by 30% a year and this has allowed it to continually invest in the brand. He adds: "We have control over our own vision and can control our marketing. Sampling has been key for us."
The taste of the product is so important to Eat Natural, says Grewal, that the manufacturing process is a particular area of focus. While he admits it is not the most efficient way of making the product, the bars are still rolled by hand in the company’s factory in Essex.
"As far as we are concerned, it is always a case of whether being more efficient actually makes us a less successful company," says Grewal, although he refutes any suggestion that this will stop Eat Natural from becoming a mainstream brand. He adds: "Times have changed and people are more conscious of buying products on the basis of taste and simplicity."
The need to talk about support and investment in marketing is still "very important" in any discussion with a retailer, Grewal says, but he adds that the abundance of category data that is available means dialogue between the two sides is now more open. "They don’t beat around the bush. They are a business and are there to make money for their shareholders but it is much fairer now than it was."
Sutter says GoLower is not reliant on UK retailers because it also sells its products in the US and Asia and therefore does not face the same issues as Eat Natural or Innocent. However, Eat Natural is available in several European countries such as Belgium and Holland on a small scale, through local importers. This, Grewal believes, further demonstrates that it is not always necessary to go into partnership to expand.
While Eat Natural is seeking to develop into new categories to maintain its organic growth, Grewal is adamant that there is no need to jeopardise its vision to grow the business. "We are not hitting the ball out of the park," says Grewal. "But we are building our business bit by bit."