Why Innocent’s ethos survived Coke acquisition

In 2009, the news that the Coca-Cola Com­pa­ny had tak­en a sig­nif­i­cant stake in Inno­cent Drinks went down like sour milk among loy­al cus­tomers of the smooth­ie brand. “You just killed your busi­ness!” and “I can’t believe how angry I am!” were just some of the heat­ed com­ments post­ed on social net­works and the company’s blog at the time.

At that point, Inno­cent was an eth­i­cal out­lier. The com­pa­ny used sus­tain­able sup­ply chains and recy­clable pack­ag­ing, while giv­ing a share of prof­its to its foun­da­tion – a char­i­ty tack­ling hunger in the devel­op­ing world. To con­sumers, these pro­gres­sive prac­tices made Inno­cent the antithe­sis of cor­po­rate giants such as Coca-Cola. For many observers, the deal was an exis­ten­tial threat to the sus­tain­abil­i­ty cre­den­tials the brand had been build­ing since its estab­lish­ment in 1998. 

Coca-Cola increased its hold­ing to more than 90% in 2013, although Innocent’s founders each retained some equi­ty. But, more than a decade on from the ini­tial invest­ment, those at Inno­cent would argue that not one of the neg­a­tive prophe­cies has come to pass. On the con­trary, they believe that the brand’s record on envi­ron­men­tal, social and cor­po­rate gov­er­nance (ESG) has improved as a result of the multinational’s invest­ment. The busi­ness would have been at risk if its founders had refused the deal, which came dur­ing a reces­sion in which they had already been forced to made redun­dan­cies.  

Keeping at arm’s length

Emi­lie Stephen­son, who heads Innocent’s ‘force for good’ depart­ment in the UK, believes that hav­ing a “con­nect­ed, not inte­grat­ed” rela­tion­ship with Coca-Cola has helped the brand to sus­tain its ESG stan­dards. 

“It means that we do things inde­pen­dent­ly,” she says. “We’re part of the sys­tem, but we have very much kept our iden­ti­ty.”

When Coca-Cola first took a stake, it offered Inno­cent its own floor at the company’s Lon­don HQ, but Innocent’s founders refused. “That would have saved us a lot of mon­ey on rent. But I remem­ber them explain­ing clear­ly to us that keep­ing our own space, which we could brand as we want­ed, was so impor­tant in retain­ing our iden­ti­ty and cul­ture,” says Stephen­son, who recalls that no one from Coca-Cola trans­ferred over. 

She stress­es that safe­guard­ing the brand’s val­ues was a pre­req­ui­site of the deal. Eth­i­cal red lines includ­ed the business’s com­mit­ment to fund­ing the Inno­cent Foun­da­tion. 

“It’s an inte­gral part of who we are as a busi­ness,” Stephen­son says. “Coke want­ed us to con­tin­ue with that. It was in their inter­ests to do so and leave us to it.” 

Innocent’s man­age­ment team worked hard to ensure that employ­ees could see the ben­e­fits of the deal, she adds. These includ­ed the fact that they could pro­mote their eth­i­cal val­ues to a much wider audi­ence. 

Stephen­son is one of many long-serv­ing employ­ees who are still with the com­pa­ny since its inde­pen­dent days, which she believes is a fur­ther sign that Inno­cent hasn’t lost its orig­i­nal val­ues. 

“I’ve been here 15 years. On the board we still have at least sev­en peo­ple who were here before the takeover,” she says, acknowl­edg­ing that “things might be dif­fer­ent now if there had been a mass exo­dus when Coca-Cola arrived”.

Independent audits and inspiration

In 2018, Inno­cent earned B Cor­po­ra­tion sta­tus for the first time, even though its par­ent com­pa­ny is not a B Corp. This is no mean feat, giv­en the extreme scruti­ny that the cer­ti­fy­ing body, B Lab, exer­cis­es over the ESG cre­den­tials of sub­sidiaries of large cor­po­ra­tions. For instance, Method, a mak­er of non-tox­ic clean­ing prod­ucts, had to relin­quish its B Corp sta­tus after it was acquired by SC John­son in 2017.

Chris Turn­er, exec­u­tive direc­tor of B Lab UK, says: “We recog­nise these big changes in own­er­ship are huge for small­er busi­ness­es and can affect their envi­ron­men­tal and social per­for­mance.” 

All B Corps must apply for recer­ti­fi­ca­tion every three years, but when one under­goes a sig­nif­i­cant change in own­er­ship, it’s required to do so annu­al­ly. B Lab also oper­ates a pub­lic com­plaints pro­ce­dure, enabling any­one to report any recent­ly acquired B Corp that they believe may be mis­rep­re­sent­ing its ESG per­for­mance.

The case of Method notwith­stand­ing, Turn­er says it’s unusu­al for a B Corp to lose its sta­tus after a takeover. If any­thing, the acquir­er is like­ly to become more eth­i­cal itself, which helps to explain why B Corps are such attrac­tive acqui­si­tion tar­gets. Research pub­lished in the jour­nal Busi­ness Strat­e­gy in the Envi­ron­ment in 2020 showed that, if the sell­er had a high­er ESG per­for­mance than the buy­er, the latter’s ESG per­for­mance tend­ed to improve.

“More and more B Corps are being acquired by multi­na­tion­als that aren’t B Corps,” says Turn­er, cit­ing Unilever, which bought Ben and Jerry’s in 2001 and has been on a streak of acquir­ing B Corps ever since.

“The idea we’ve been prov­ing by cer­ti­fy­ing B Corps for over a decade now is that busi­ness­es that are eth­i­cal thrive in the long term,” he observes. “Big firms are wak­ing up to this. A great exam­ple is Danone, which is on the way to becom­ing the world’s largest B Corp.”

Turn­er says that Danone’s ini­tial inspi­ra­tion was a US baby-food brand called Hap­py Fam­i­ly Organ­ics, a B Corp that it bought in 2013. With­in five years of that acqui­si­tion, the whole of Danone North Amer­i­ca was cer­ti­fied as a B Corp.

Shaping culture

“Small­er busi­ness­es can be inspired by the scale they can achieve by being part of a big­ger group,” he says. “But I’m sure these big busi­ness­es look at the kind of cul­ture that their acqui­si­tions have and think: ‘Wow, let’s have a piece of that.’”

Stephen­son believes that both par­ties can ben­e­fit great­ly from each other’s strengths, espe­cial­ly through col­lab­o­ra­tion. For instance, “Coke is doing a lot of great stuff on sus­tain­abil­i­ty on which we work togeth­er. One exam­ple is our devel­op­ment of a sus­tain­able bot­tle that doesn’t use fos­sil fuels. We’re work­ing with them on var­i­ous plant-based pro­to­types. It’s use­ful, as they put lots of mon­ey into R&D. We’ve taught them a lot and, arguably, they’ve taught us more.”

A healthy com­mer­cial envi­ron­ment requires small trail­blaz­ers, strong inde­pen­dents and multi­na­tion­al cor­po­ra­tions, accord­ing to Turn­er, who says: “The star­tups stretch our vision and inno­va­tion in the com­mu­ni­ty, while the big busi­ness­es and their acqui­si­tions stretch our scale and reach. You need all of that.”

Stephen­son agrees. “If you’re anti-cap­i­tal­ist, that’s one thing. But big com­pa­nies are where they are and they’re use­ful, so you might as well be encour­ag­ing them to do the right thing,” she says.

What does Coca-Cola think of Innocent’s sus­tain­abil­i­ty record? “It’s some­thing they’re proud of,” Stephen­son says. “There’s no way they’re ever going to change that. We’re doing real­ly well, so why would they want to?”