Smoothie’s – Glass half full or half empty?

May 2011

Contents

Market Environment

50

100

150

200

250

20

40

60

80

100

2005 2006 2007 2008 2009 2010(est)

2011 2012 2013 2014 2015

£m

m lit

res

Volume sales (litres) - left axis Value sales (£m) - right axis

Market size & forecast

Source: Mintel

Market trends and forecast for smoothie value (current prices) and volume sales, 2005-2015

• Having seen exponential growth of 159% in volume sales between 2005 and 2007, the smoothies

market then saw a dramatic reversal in fortunes with a 36% decline between 2007 and 2009 as

consumer spend became increasingly squeezed

• Mintel forecasts that this decline will slow in 2010 and the market will experience slow but steady

growth thereafter, however not to the extent seen in the mid-2000s where Innocent almost single-

handedly grew the category from scratch

Market share

• It has been an incredibly tough three years for Innocent which has

seen its value cut by a third

• While, this has mostly been due to the recession, its brand equity

has also taken a number of hits which may make it more difficult

to recover in the long-term

• Innocent is increasingly focusing on its kids products which now

account for a fifth of its retail sales. This is a growing market and

one which Ella’s Kitchen, while tiny in comparison, has done well

to exploit

• Pepsico’s presence in the market has been curtailed by the failure

of Tropicana smoothies to fill the gap left by its decision to pull

PJs

• Ironically, this means that Innocent has increased its share of the

market (now 80%) despite losing revenue

Ad Market & Traffic Trends

Smoothies Search Traffic KPIs

Traffic

• Searches for smoothies and smoothie

related terms (including brands) increased

by +2% in 2010 compared to 2009.

• Searches for smoothie terms increased by

+89% Jan to March 2011 v Jan to March

2010.

Insights:

• The term ‘smoothies’ is the highest traffic

driving term. However, this is closely

followed by the brand ‘Innocent Smoothies’

which shows how the Innocent brand has

impacted consumer behaviour when

searching for a specific smoothie product.

1.Microsoft Advertising Intelligence Tool

Smoothie Demographics and Daily Trends

Wednesday has been the largest traffic

driving day over the last 2 months followed

closely by Monday’s.

Potential incremental targeting opportunities

would include up-weighting target campaigns

on certain days of the week

The 18-24 and 25-34 age brackets are the

main age groups for traffic with 34% and

31% respectively.

Gender breakdown tends to focus on

Females with 65% of searches being

female vs. 33% male. 2% remains as

‘unknown gender’.

1.Microsoft Advertising Intelligence Tool – December 2010 to Feb 2011 data

Industry Insights

Internal Market Environment

• Consumers are now demanding a lot more from brands and

• Smoothies have struggled to convince consumers of their value credentials and are

therefore viewed as a non-essential luxury

• Despite UK consumers having less money to spend, the desire for more

premium and healthy products remains a key driver for the soft drinks

sector - and smoothies remains well-placed to meet these needs

• Smoothies have been damaged by negative publicity around their health

credentials

• E.g. damage to teeth and high calorie-intake despite scientific evidence to the contrary

• However, smoothies are still seen by consumers as a healthy product and the

drive towards making sure kids have a healthier diet is playing to their

advantage

• Increased consumer choice means that penetration of individual soft

drink types has been in decline for the past five years for all but

energy/sports drinks

• The economic downturn has had a huge impact on the dynamics of the

market with previously growing categories such as smoothies, bottled

water and premium soft drinks experiencing a sharp drop in sales

Mintel’s analysis shows that litre cartons of Innocent are at roughly the right price-point but that the

impulse 250ml bottles need to come down to stimulate mainstream consumer purchasing. With Coca

Cola now the majority stake-holder in Innocent, it has the opportunity to grow the company so that they

can leverage scale to reduce these prices

Price-point as a barrier to consumer usage of smoothies

Source: mysupermarket.com/Mintel (August 2010)

All prices from Tesco.com in August 2010.

Price positioning of selected soft drinks, based on packaging size

£0.00

£0.50

£1.00

£1.50

£2.00

£2.50

£3.00

£3.50

250ml 330ml 500ml 750ml 1 litre 1.25 litres

Innocent smoothie

Innocent smoothie

Schloer Tropicana pure fruit juice

Coca Cola

Coca Cola

Tropicana

pure fruit juice

RTD ribena

Red Bull

Lucozade

Lucozade Alert

Evian

Fentiman's rose

lemonade

Glaceau mineral water

Expensive

Value

Consumption & most popular brands

Brand Answered yes to ‘consume

most often’

Tesco 20.07

Tropicana Juices 19.15

Innocent 14.35

Asda 12.79

Sainsbury's 12.49

Other Brands 9.39

Other Supermarket's Own Brand 9.32

Ocean Spray Cranberry Classic 8.28

Morrisons 7.89

Capri-Sun 7.76

Ribena 7.3

8.01%

23.59%

68.40%

Consumption: Heavy, Medium, Low

Heavy (More than oncea day)

Medium (Once a day)

Low (2-3 times a weekor less)

Base: Smoothie consumers in the last 12 months

Source: TGI GB Q1 2011

Out of the total fruit drink/ vegetable drink/ smoothie market in the UK Innocent ranks 3rd with 14% of consumers saying it is one of their most often consumed brands.

The relatively high price of smoothie/ fruit drinks market means one can conclude that they could be considered a ‘treat’ or luxury by consumers, which is why almost 7 out of 10 consume them 2/3 times a week or less.

27%

33%

34%

40%

49%

51%

52%

69%

72%

73%

76%

77%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

I would rather just eat fruit than drink a smoothie

They are not as healthy as they claim to be

I am put off by their high sugar content

They are like a meal in themselves

Brands are better quality than own-label

They provide me with an energy boost

They are healthier than pure fruit juice

They taste good compared to other soft drinks

They come in a convenient range of carton/bottle sizes

They are expensive for what they are

They have an exciting range of flavours

They are a convenient way to get part of my 5-a-day

Consumer attitudes to smoothies

Base: 16+ smoothie drinkers in the past 12 months (265)

Source: Toluna/Mintel

• The convenience of smoothies in contributing towards people’s five-a-day is considered a huge

benefit by consumers and this has been a focal point for Innocent’s recent communications

• However, smoothie drinkers are equally enthusiastic about something less widely publicised - the

exciting flavours of smoothies

Attitudes towards smoothies, July 2010

In an ideal world, consumers would like the nutrition of smoothies without the sugar:

“Health professionals often perceive that juices and smoothies are relatively high in calories and sugar compared

with whole fruit, and that consumption should be discouraged in order to prevent a rise in sugar intake. This is an

erroneous belief in the case of smoothies which contain around 30g of total sugar per serving, a similar amount

found in one banana and a portion of mango or cherries.” `Ruxton CHS (2008), British Nutrition Bulletin

Which of the following factors, if any, would persuade you to buy one smoothie brand over another?

Base: 16+ smoothie drinkers in the past 12 months (265)

Source: Toluna/Mintel

Consumer attitudes to smoothies

15%

24%

26%

31%

38%

45%

50%

51%

57%

0% 10% 20% 30% 40% 50% 60%

If it contains one fruit flavour only

If the packaging information is clearer

If it has been made locally

If the company is ethical

If it is fresh but lasts longer

If it contains superfruits

If it has a wide variety of different fruits for

the best health balance

A lack of additives/artificial flavourings

If it has the vitamins from fresh fruit but

without the sugar

Key

purchase

drivers

Secondary

purchase

drivers