'A Fresh Approach', The Times/Raconteur

Wednesday, March 09, 2011

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From the passion-fruit growers of Ecuador to the chill cabinets of Copenhagen supermarkets, Innocent Drinks’ supply chain is fraught with logistical demands. At their Astroturf-clad ‘Fruit Towers’ HQ, co-founder Richard Reed and head of operations, Steve Spall, tell James Silver how it all works.

It all began with “a crazy 70-year-old carrot farmer” called Jeff. It was 1998 and three Cambridge university friends - Richard Reed, Adam Balon and Jon Wright - were looking for somewhere to produce a 1,000 bottles of homemade orange, pineapple and banana smoothies for their stall at a West London music festival. They had a recipe, honed over long weeks with a blender in their shared flat; but with £500-worth of ripening fruit, they needed large-scale blending and bottling equipment fast.

At a local delicatessen they found a bottle of freshly-squeezed carrot juice. They traced it back to a carrot farm in Newark, Nottinghamshire, which was where they met Jeff. “Jeff’s whole life was an ode to carrots,” recalls Reed, Innocent’s co-founder. “And juicing them was his great passion.” Every morning he would juice carrots in an industrial press in his kitchen, before driving the bottles down to London in a mud-spattered Volvo to the handful of outlets he supplied. “His promise was ‘From field to shelf in six hours’.”

It was a slogan which resonated with Reed, who then worked in advertising. After their smoothies proved a spectacular hit at the music festival, the trio quit their jobs the very next day to launch their business. Their earliest supply chain involved buying fruit imported via Rotterdam from a wholesaler, shipping it to Jeff’s unit in Newark, where it was pulped, blended and bottled, before being driven down to cafes, delis and corner shops in London. It was a cobbled-together system, Reed admits, beset with teething problems.

“We soon found out that running a business which involves a raw material that is expensive, has to be kept refrigerated and has a short shelf life is a bitch of a business model,” he says. “Pretty much everyone else in the soft drinks industry makes things where the cost of goods is very low - because it tends to be flavoured water and variations thereof - they don’t have to be kept refrigerated and they’ll easily last twelve months or longer, so you can do massive production runs and store them in warehouses. What we were doing was every day trying to get a sense of what volumes we needed, buying the fruit, squeezing and shipping it.”

Whenever Reed and his partners sought advice they were told bluntly that their ‘freshness first’ supply chain wouldn’t work. “We were always being told we’d have to make our smoothies from concentrate to make them cheaper or use preservatives for longer shelf-life. But in the end, our way of doing it has been our saving grace. Every single multi-national soft drinks manufacturer has made at least one or two attempts to do what we do, but they’ve not been able to crack it. They just don’t understand the dynamics and how to run a chilled supply chain.”

Soon Innocent had outgrown Jeff The Farmer’s facilities and the firm turned instead to another partner with a memorable soubriquet: “Mike The White Jamaican”. Based in Cardiff, Mike had moved as a child to Jamaica, where his family owned banana plantations. Confronted by “three 26-year-olds with no cash and no business”, Mike agreed to manufacture Innocent’s smoothies only because he saw “a glint” in their eyes which reminded him of himself. Tapping into an industrial-scale fruit supply chain and manufacturing expertise would eventually prove a game-changing break for Innocent, but initially growing pains dogged the fledgling company.

One issue was that Mike’s firm, Sunjuice, produced a minimum run of 400 cases a day, which in the earliest weeks left Reed and his colleagues with a mountain of excess stock. “Day one we only sold three cases which meant we had 397 cases left,” he recalls. “The next day we made another 400 cases and we didn’t sell any. So two days in, we had 797 cases on our hands.” In a desperate bid for customers, the trio spent a bank holiday weekend racing around West London, giving away samples. The gamble paid off. The resulting 45 new clients secured them a chilled wholesaler to act as distributor.

“The early years were one Apprentice-style challenge after another,” laughs Reed. “For about five or six years it felt like the wheels were going to come off our supply chain altogether at any moment. The business was growing so quickly and we were always under such pressure that we couldn’t find enough fruit or we lacked manufacturing capacity or we couldn’t get the vans there quickly enough.”

FAST FORWARD to 2011 and Innocent is now a transformed business with a turnover which reached £130 million last year and a looping distribution operation which stretches deep into mainland Europe. Today the company sources 40 different types of fruit from thousands of suppliers around the world, ranging from large farms to small-holders, who have to sign up to Innocent Minimum Standards - exacting Terms of Trade, covering everything from pesticide usage to the social conditions of workers.

“Our supply chain is based around this network of partners with the same outlook as us,” says the man who now oversees the company’s vast operations, Steve Spall. “So, for example, you have berry-growers in Serbia whose berries are collected by a co-op and processed by a processor. There’s an agent who buys them from the processor. And they all share our commitment to quality and sustainability. By choosing partners carefully all along the supply chain, who want to improve their standards and provide a product that doesn’t need sugar and additives to still taste like the original fruit, we work with people who are not only on board with Innocent’s values but educate their supply base too.”

Innocent’s supply chain management depends on capabilities undreamt of during the early years, says Spall, who joined the firm three years ago from Tesco. “One of the key things is our ability to forecast. We make a short shelf-life product and if you make too much, it will waste. If it wastes, it’s bad for the environment and our bottom line.” To improve their forecasting, the company developed an IT tool, known internally as ‘Fortune’, which pools data from both the supply and demand sides of the business.

“All the knowledge we have about what’s going on in the market-place is captured into this tool. Fortune then gives us a view by money, by packs and by kilos, which enables us to turn the best forecast of sales into a demand chain for fruit.” Such is Fortune’s efficacy that Innocent waste less than half a per cent of their product, he claims.

Not a bad achievement when you consider the tortuous nature of the journey, say, from the passion fruit growers of Ecuador to the chill cabinets of a Copenhagen supermarket. Spall says an immutable law of the Innocent supply chain is that fruit has to be processed in season. “We puree it in the country where it’s created,” he explains, “and it’s either pasteurised or frozen and stored into 200 kg drums, which means it has a long shelf life as a product. Or it’s a bulk product like apple or grape juice which comes in a tanker from farms or orchards in Europe.” The puree and juice are blended at the company’s plant in the Netherlands, where (nearly all) of Innocent’s bulk smoothies are created.

“From that point the clock starts ticking,” says Spall. “We load that smoothie blend into a food tanker, which then races across to our co-packers in the UK. It’s pasteurised and packed. From then on it’s a chilled product, which goes out on chill trucks to our warehouses, and from there to the distribution centres for Tesco, Waitrose or whoever it may be, or back to Europe.”

To the surprise of many, Coca Cola now holds a 58% stake in Innocent, after the US beverage giant recently added to the 18% it acquired in 2009. What impact has Coke’s global reach and clout had on the company’s supply chain?

Very little, Spall insists. “Coca Cola has a very different sort of supply chain in Europe to ours. Their product is cooked up a lot hotter, it keeps a lot longer and you can store it warm. In the States, they have things like Minute Maid and Simply Orange, but in Europe they don’t have a chill chain capability like ours. So there’s quite a lot of knowledge there that we have been able to share.”

It is possible that Coke view their investment in Innocent as a way of breaking into the highly-specialised fresh fruit chill chain market in Europe. Certainly, Innocent has built up robust contingency planning, with risk, like product wastage, almost screened out. “We learned to overlap all our partners’ capabilities so they back each other up,” says Spall. “We started in a place where we didn’t have any resilience at all and we’ve been building it up over time.” He adds: “But it’s an ongoing battle.”

INNOCENT BY NUMBERS

Founded -- 1999
Turnover -- £130 million (2010)
Employees -- 250
Products on sale -- 36
Market share -- 77.5%
Retailers -- over 10,000
Furthest Stockists -- Shetland Islands, Salzburg, Copenhagen
Smoothies sold -- 2,000,000-a-week
Stake owned by Coca Cola -- 58%
Profits donated to the Innocent Foundation - 10%

(Read the original article HERE.)

Posted by James Silver - On Wednesday, March 09, 2011

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