The smoothie operators

It's an irritating fact that the most delicious tasting foods and drinks are often the most unhealthy. But one enterprise, Innocent Drinks, has managed to achieve the perfect combination in its range of beverages. Catherine Chetwynd met up with co-founder Richard Reed to discover how the venture first came about

From selling 24 bottles of smoothies on the first day of trading on 28 April 1999, four years later Innocent drinks is shifting some 25,000 bottles a day, and the company�s turnover is £10m. Creators of Innocent - Richard Reed, Jon Wright and Adam Balon - have been friends and entrepreneurs since they met at St John�s College, Cambridge, in 1992. Wright ran a design agency out of his bedroom and the three of them would run club nights and DJ at them.

Says Richard Reed: �We always talked about setting up our own business but, coming to the end of our third year, and with the pressure of student loans, we got caught up in the milk round of the impressive sounding companies that came to present to us. So we signed up and moved to London.� Reed worked at advertising agency BMP, Balon at McKinseys and then Virgin Cola, and Wright at Bain & Company.

�We continued to see each other regularly and four years later were still talking about setting up a company, so one weekend away we sat in a ski lift trying to think of a good business idea,� says Reed. �We wanted it to last, not to be a flash in the pan.�

The principle was to come up with something that made life a bit easier or better, and the first inspiration was electric baths that filled themselves to a predestined level and temperature at the touch of a button. �The initial sketches all involved water and electricity in close proximity, which seemed guaranteed only to make life a bit shorter.

�We realised we needed to understand our target audience and the only audience we really understood was ourselves and our friends,� he says. �That was when we thought of small bottles of really healthy drinks.� And Innocent - fresh, unadulterated fruit drinks - was born.

The three of them spent the next six months working on the idea and experimenting with recipes, until they were ready to try them out on the public. �We bought £500 worth of fruit, made it into our favourite recipe and sold it at a music festival,� says Reed. �We put up a sign that read: Should we give up our jobs to make these smoothies? And asked people to throw the bottles into bins marked Yes and No. The Yes bin was full.

�That gave us the courage to go into work on Monday and resign. People were brilliant, so supportive. All our companies said we could come back if it did not work, and BMP gave us an office with computers, phones and faxes to use free for two months.�

The next few months were hard. The trio thought they could get Innocent drinks into the market within a month and it took nine. �We had not saved any money,� says Reed. �It was a bleak period and we only got through it because there were three of us. Then we realised we would need some working capital to buy refrigerated delivery vans, print company stationery, and so on.�

The amount Innocent wanted - £250,000 - was more than the banks were prepared to lend, and less than anything a venture capitalist firm would deal in. They were in the market for business angels but had never heard of such a thing. �So we sent out e-mails to everyone we knew saying: does anyone know someone rich?� he says.

Through a friend�s recommendation, they sent their business plan to Maurice Pinto, a 65-year-old retired American, who had invested in businesses ranging from organic retailing to artificial limbs. They met him later that year. �He believed in our idea and in us,� says Reed - even though they broke every rule in the investment manager�s handbook: three close friends, very young; no clear leader - there is still no managing director or hierarchy; no sector experience and no experience of running a business. But four years later, all parties are delighted.

In the early days, the three entrepreneurs certainly did their research. They visited every player in the juice market, large and small, to discuss their plans. Says Reed: �They all said it was a nice idea but that we would need concentrated juices to keep our margins up, preservatives to extend shelf life, stabilisers, thickening agents� When we said that was not what we wanted, they pointed out we would have to make the drinks everyday and deliver them overnight. That was fine.

�We grew the business in the independent trade, which is a brilliant sector to do business with because the person behind the counter is the one who makes decisions,� says Reed. Innocent is not available everywhere because it is quite expensive - between £1.69 and £1.89 for a 250ml bottle. �It takes over 3/4lb of fruit to make one bottle,� he says. �The money goes into the content, not on marketing.�

Some of the money also goes to support non-government organisations in India such as Women for Sustainable Development, which helps people in the most impoverished rural areas achieve self-sufficiency. �The organisation plants dry land mango orchards in the area where we buy our mangoes or supplies cows so that the people tending them can sell the milk, for example. As we have doubled in size, we have doubled our support and now pay for a full-time field worker to be there, too. We do not make a big thing about it. It is a separate part of our business system.�

And recently, some me-too products appeared on the market, all of which have been withdrawn. Ribena Smoothie; Plenty, from the same parent company SKB; and Tropicana, which pulled its version at the beginning of the year. None was made from unadulterated fresh fruit.

So, what next? �We are two months into a four-year plan to become Europe�s favourite little juice company, to be the dominant premium fresh juice company in the UK and be up and running in three urban areas across Europe - Scandinavia, Belgium and northern France.�

And vegetable juices are a possibility. Reed says carrot juice is delicious but it separates and looks unappealing, and Innocent is not prepared to use stabilisers. �We also have our eye on anything where there is no natural, fresh alternative - baby food, soups, ice cream, body care products�� Body care products? Some years ago, Reed stayed at a spa in Bali where he was invited to eat the creams before they used them as treatments. �That is the right principle - they don�t taste nice but they should be that natural,� he says. �The skin is the body�s most absorbent organ: 60% of what you put on your body ends up in the same place as what you eat.�

The initial poverty-struck nine months apart, it sounds as though launching smoothies went relatively smoothly. Well, not quite. There was the fridges incident. �It was a Friday afternoon and I was ordering metallic silver fridges but wanted to see them,� says Reed. �The salesman told me he could get one to me by Tuesday but, if I ordered then and there, I could have them at £100 a unit cheaper.

�I thought, £100 x 50, that�s huge, and ordered,� he says. �When they arrived, they were not metallic silver but grey plastic, they did not have a light inside and ran at 15 degrees centigrade. Fruit needs to be kept at 5 degrees centigrade. I had just blown our entire marketing budget on 50 warm plastic boxes. We got out of it, but lost our deposit,� he says.

More positively, their determination to stick to pure, Innocent ingredients was the key to their success. �One of the greatest things we learned was when not to compromise. We sometimes conceded one point to win another, but there has to be a threshold. Everything in Innocent drinks had to be natural and fresh and we stuck to that.� Innocent ingredients remain above suspicion.

Catherine Chetwynd is a freelance journalist specialising in business travel, conference, incentive and exhibition writing. She also writes for The Times and the Financial Times.