Tuesday, 7 April 2009

Two Stories about a 15% Stake

THE BBC (a neutral to positive story)

Coca-Cola has bought a £30m stake in Innocent, the British fruit drink and "smoothie" maker renowned for its ethical ethos.
Innocent says the minority investment will allow further European expansion. Co-founder Richard Reid said: "Every promise that Innocent has made - about making only natural healthy products, pioneering the use of better, socially and environmentally-aware ingredients, packaging and production techniques, donating money to charity and having a point of view on the world - will remain. We'll just get to do them even more."

THE GUARDIAN (the 'sellout' line)

"Innocent, the defiantly non-corporate maker of fruit smoothies, juices and veg pots, has finally lost its innocence after selling a stake to US giant Coca-Cola for £30m....The sale of the stake marks a watershed moment for the 10-year-old company as it becomes the latest high profile success story to sell-up to a corporate giant....When asked if Coca-Cola had an option in the future to take a controlling stake in the company, Reed would not be drawn beyond saying that "nothing is definite in the future but of course both sides hope the relationship will prosper"."


In 'buzz terms' probably the Guardian one, it's too archetypal a story - David takes payment from Goliath PLC. The internal reality at innocent - nice people working hard to build something they believe in - has always been slightly at odds with the fanatical following externally. They were completely caught out by the public reaction to their announcement they were going to be trialing selling innocent in a few McDonalds outlets. It was mystifying in some senses (for all I know they are also for sale in Shell garages - it might even be illegal to turn down a retailer on political grounds?) But it made perfect sense in cultural terms as people didn't like to see the lamb lying down with the wolf. Coca-Cola is another one of those sorts of brands. Coca-Cola was boycotted by many students unions from about 2003, although there are some doubts today over whether the reasons (Columbian human rights concerns and Indian water concerns) were valid.

I think the question is whose brand is it today and tomorrow. If as its £100m sales suggest it is the mainstream brand of healthy stuff for mums or office workers, the Coca-Cola connection would barely raise an eyebrow. If the original loyal following of more idealistic canvas shoe wearing hippy types still plays a pivotal role (or their public upset over this could) then it's a different story. My suspicion is that media like the Guardian will push the second view, but probably - honestly - nobody will give enough of a damn with everything else going on in the world and the next Ben & Jerry's type global brand will be born. My real concern is just how badly Coke marketers have screwed up brands like this in the past (think Fruitopia) but at least at this stage their almost unerring talent for inauthenticity will be kept well out of Fruit Towers. :J

Declaration of interest: I am very interested in this brand. (Oh and I did some work for them once, which was nice. From which point of view I do obviously wish them well with all of this too :)


Asi said...

brilliant stuff John.

It is such a fascinating development.

Innocent's prominence in the culture of well-doing as well as it's remarkable participative attitude makes every move a social story where people are keen to take a stand and be vocally opinionated.

It is a remarkable brand indeed.

I personally wish them all the best. They have done and will be doing fantastic work and I have trust in them they won't compromise the values that made them who they are.

BTW: your comment on ethical retail hypocrites (or just selective) is totally spot on. People choose their enemies in a very symbolic way...

Nicola Thomas said...

I enjoy your posts Jon very much, nearly as much as I have enjoyed all your books, but this post is a bit lame.
Perhaps I'm one of their 'fanatical' fans you talk of, but putting that aside, people look to innocent as a co setting an ethical standard. A sustainable biz model should also consider the ethics of the money invested into it (hence why we like Nationwide/Co-op/Triodos etc) and as such, this injection by Coke is questionable. Without a doubt, there are still question marks surrounding several issues with Coke, and this potential source of dirty money is why I find myself upset, like so many others. I'm meeting innocent to discuss, and hope it's a fruitful mtg. The one point of interest in your post is whether the Coke marketeers will screw up.
As a big fan of yours Jon, I'm sorry I didn't enjoy this particular post.

John Grant said...

Hi Nicola thank you, will think long and hard about what you have said and just to say now I really appreciate you saying it. I had a real downer on 'Killer Coke' for a number of years, but had read more recently that both the trades union action in Columbia and the indian aquifer stories were now believed to have been overstated. Plus they are quite active in supporting stuff around CSR. I may of course have been taken in by corporate spin. But i felt some remorse that I had been potentially drawn into attacking something which after all at one point 15 years ago had paid me (via St Luke's). The point about dirty money is clear, when you buy an innocent 15% of the profit, notionally, will now contribute to Coke's coffers short or long term (in value or dividends) so if you wouldn't drink Coke for ethical reasons its a quandary for sure.

Nicola Thomas said...

Thanks for getting back to me Jon. I can emphasise with the 'downer' and also understand the biz case for this investment. I get what your saying and thanks for the clarification. Would be good to meet over a cuppa sometime. Having read your books I have a million questions to ask, but could whittle it down to a few vital few! Nicola

John Grant said...

yes definitely, lets do that, you can help me with writing the new one which I am just starting!

I still think you made a really good point which pulled me up sharp and reminded me to be a person first and a (blogger/commentator/consultant/whatever) second. I don't know for sure that Coke are a reformed or maligned player and regardless they are certainly not in any sense an ethical business. They are, and I have first hand albeit very dated experience of this, a rather heartless and monomaniacal money making machine who feed our children bad stuff into the bargain.

It reminded my of what Starhawk wrote about the world being engaged in a desperately close battle between Love and Greed. In that emotionalised and politicised view then this is an extraordinary match - and I've had been absolutely manning the barricades if for instance in my St Luke's days the thought of taking investment from the (toxic) big media companies came up.

I still love the innocent folks to bits though and wish them well.

Confusing eh?


John Grant said...

By the way the other weird thing that surfaced exactly the same day was this news story about a facebook group set up by fans of coca-cola attracting 3 million members.


Now you don't get a feature in the FT about your brand's successes in social media without PR people being involved. So the timing of a story about "How much people love Coca-Cola" is obviously well chosen to add to this debate.

The FT's article on the investment which i hadnt seen is actually quite tough on the whole deal:

Coca-Cola sees health benefits in Innocent stake
By Samantha Pearson
Published: April 6 2009 23:07

Innocent Drinks, the smoothie drinks group set up by student friends a decade ago, is to sell a minority stake for £30m to Coca-Cola to fund expansion across Europe.

The unlikely partnership leaves Coca-Cola, which has been criticised for its sugary soft drinks, with 10-20 per cent of the eco-friendly producer of natural smoothies.


Innocent, which operates in 13 European countries and lifted turnover to £100m last year, did not rule out further deals with Coca-Cola, which only last week had to withdraw an advertising campaign that sought to dismiss myths that it “makes you fat” and “rots your teeth”.

Innocent last provoked fury among its smoothie fans when it decided to trial its drinks in McDonald’s restaurants in 2007

Nicola Thomas said...

It is confusing, fascinating and the stuff of good debates. I've decided there's no point 'crying' over spilt milk. The deal is done. As big fans of innocent (I love them too!), I don't want us to stop at resignation. Rather, I would prefer us to keep on their heels and carefully watch how this partnership unfolds. Much press coverage has pointed to the other 'greed/love' matches, e.g. L'Oreal/Body Shop, but none have really looked at what changes have emerged as a result, if any. Having said all that, when I meet innocent I will ask about their due diligence process... did they take Coke's statements at face value? Other than that, I will be focusing on finding the silver lining in all this (apart from the obvious financial win).

Moving on, that's great you want to meet. Fascinated to know more about the new book and look forward to talking about social change. Shall email you next week.

And finally, thank you for dealing with my original comment so well. Shows strength of character :)

John Grant said...

I just bought myself this book


I suspect when i have read it I will be back on the killer coke side of the debate but lets see.

Peter Senge who I respect was the source of the indian aquifer correction (he said that it turned out Coke was drawing from a deeper aquifer unconnected with those drying up). Plus the whole episode proved to be a spur to Coke working with WWF on its whole water responsibilities.

I had also read that the International Labour Report into labour relations practices in Columbia (Oct08) had exonerated Coke. On further digging I find that this report actually only covers a current workplace practices/policies and not whether their bottler's managers did collude in the past (factual, multiple) murder of trades union leaders.

Not sure where that leaves me on the innocent deal, but less sure I guess. Certainly am going to be knocking those occasional diet cokes at workplace lunches & similar on the head for now.

Nicola Thomas said...

Just ordered the book. Mark the author emailed the other day... you should take a look at his website http://www.markthomasinfo.com/ coz it was the response from innocent that got me really worried and hence why I'm going to ask whether innocent took Coke's claims at face value.

John Grant said...

For those just joining this debate, here is what innocent are saying about all this:

That aside, during our due diligence, we discovered some facts that you might be interested in. We're not here to defend or 'sell' Coke, but it's worth sharing them all the same:

The allegations in Colombia

1) The board of the trade union in question of the murdered trade union leader said in relation to the accusation that somehow Coke was involved in the crime, 'we want to state that we have not a single indication that this is true.'

2) Two different judicial inquiries in Colombia - one in a Colombian Court and one by the Colombian Attorney General - found no evidence to support the allegations that bottler management had conspired to intimidate trade unionists.

3) All Coke bottling partners have extensive, normal relations with multiple unions in Colombia and currently have collective bargaining agreements in place with all of the unions covering wages, benefits and working conditions.

4) The lowest wage paid in any Coke bottling plant is at least 30% above the minimum wage (and this applies to contractors as well as direct employees). On average 30% of Coke employees are unionised, the national average is 3%.

5) The ILO (International Labour Organisation) in October 2008 completed its independent evaluation of Coca-Cola bottling operations in Colombia. The report states "everything suggests that conditions of work applicable to direct employees are duly respected'. And the report concluded that Coca-Cola bottlers are upholding labour standards that have been ratified in Colombia, including confirming that workers enjoy freedom of association, a work atmosphere free of anti-union intimidation and a safe working Environment.

India water allegations

1) In October 2002, Dr. R.N. Athvale, Emeritus scientist at the National Geophysical Research Institute in Hyderabad, India studied the Coca-Cola Company's bottling plant in Kerala and concluded: "There is no field evidence of overexploitation of the groundwater reserves in the plant area." He added that 'any aquifer depletion cannot be attributed to the water extraction in the plant area'.

2) A report from the local Palakkad District Environmental Protection Council and Guidance Society in June 2002 concluded: "We declare that there is no environment harassment to the public by the factory at any level."

3) In Kerala, where groundwater levels have decreased, The Kerala State Groundwater Department has said that any depletion in groundwater was due to poor rainfall and not the plant.

4) The Central Groundwater Authorities have also confirmed there were no abnormal changes in groundwater levels around Coke plants that can be attributed to the Coca-Cola operation.

5) State Government figures have confirmed that in some areas since a Coca-Cola plant has been built groundwater levels (including Varanassi in UP) water levels have actually risen since the plants were built. This is due, in part, to the rainwater harvesting technology employed at the plants that Coke have invested in.

6) They've done stuff that has a positive impact on local water supplies. In one of the driest parts of the State of Andhra Pradesh, Coke worked to reconstruct a dam that is now a direct source of clean water for 80 families, has recharged several community borewells that serve thousands more, and provides irrigation for some 1000 acres of local cropland. They have installed rainwater harvesting systems in 28 plants and in 10 communities. The collected water is used for plant functions, as well as for recharging aquifers. For example, in Kerala, this system harvested 150,000 cubic meters of rain water in 2003, which is equivalent to approximately 50 percent of their annual water usage. They have also installed 300 rainwater harvesting structures across 17 states, including locations at schools and farms.

6) Coke have won numerous awards for their water conservation management in India. This includes being awarded the Golden Peacock Global CSR Award for 2008 for the company's water conservation/management and community development initiatives in India, and for four consecutive years, winning the "Bhagidari Award" from the Delhi government for its water conservation and community development.

Some other stuff we found out that we didn't know before:

1) They do a fair bit on AIDs/HIV

In Africa Coke provide a comprehensive, continent-wide HIV/AIDS prevention and treatment program for the more than 60,000 Coca-Cola system employees, their spouses and their children. The program is the largest single program of its kind in Africa. It combines prevention, awareness and treatment. Antiretroviral drugs are made freely available to all who need them. And they are rolling out the same in China, India and Russia.

2) They give a lot of money to charity

They have a separate charitable foundation. In 2007 they donated $99m to community, disaster relief, education and healthcare charities around the world. They don't really talk about this.

3) They were Greenpeace's preferred global partner for their 'Greenfreeze' initiative - a global program to improve the environmental efficiency of refrigerators worldwide.

4) They are the world's largest juice company. Although they're obviously famous for Coke, in most areas outside of Europe they are number one in juice, so it is not all brown fizzy stuff.

John Grant said...

...and for the sake of balance here is Mark Thomas' letter to innocent which he has published on his own website:

Mark's response to Innocent who are apparently an ethical company but have now received a £30 Million investment from Coca Cola who are probably not an ethical company:
Hi Richard,
I just wanted to drop you a note regarding your new found partnership with Coca Cola. An acquaintance mailed you earlier today and passed your response on to me. There are some fundamental factual inaccuracies and ignorance in your reply. You wrote:
"As a business, Coke are definitely not perfect (although it is worth saying that independent judicial enquiries at the time found that the Columbia (sic) allegations to be unfounded, the same with India water
although I am nervous about saying these things as it makes it sound like I am here to represent Coke, which I am not). But they do show a relatively good track record in learning and making good on the things
they get things wrong. And the people we've met have been decent, ordinary folk."

The allegations against Coca Cola in Colombia are simple: trade unionists working for the company have been intimidated and murdered, in one case Isidro Segundo Gil was killed inside the plant, virtually under the Coca Cola logo, to this day Coca Cola have not had any independent investigation into the allegation that managers of the bottling plants in Colombia colluded with or directed the para military death squads. The murders happened over 12 years ago.
Your response states that "independent judicial enquiries at the time found that the Colombia allegations to be unfounded," What independent judicial enquiries are you referring to? The Colombian judicial system has managed to investigate, prosecute and convict about 1% of the trade unionist murders, out of thousands. So any investigations conducted in Columbia are hardly independent and barely qualify as enquiries.
Or do you refer to the USA court case? Here the Alien Tort Claims Act is being used to try and get the Colombian bottlers and the parent company in the dock. But it can't be that one as initially the case was found to be inadmissible (though it is being appealed), so this is obviously not the 'independent judicial enquiries' that you refer to, is it?
So what 'independent judicial enquiries" are you referring to?
You do not mention the fact that the Coca Cola Company tried to silence the Colombian trade unionists who brought the case against them in the USA. Coke offered to settle out of court to the tune of about $13 million on condition that they give up their jobs working in the Coke bottling plants and that the trade unionists never ever criticise Coke nor any other company that work with Coke in the future. Had the trade unionists signed and taken the $13 million they would break the terms of the settlement and be liable to court action if they criticised you Richard.
Neither do you mention the trade union busting of the company bottlers. The cases of Coke plant managers falsifying evidence against trade unionists, accusing them of terrorism. resulting in innocent men wrongly imprisoned for 6 months before the charges against them being dismissed.
You do not mention the fact that over some 15 years the company bottlers have gone from about 80% of the work force being in permanent employment with 20% casual labour to the situation we now find, where 20% of the work force is permanent and 80% casualised with no rights to even join a trade union.
Richard, I have spent some time in Colombia interviewing and taking testimony from people who witnessed Isidro Segundo Gil's murder to the delivery men who are not allowed to join a union. I am happy for you to have all of these interviews and for you to review them and see for yourself. I can even put you in touch with the people themselves , so if you wish you can visit Colombia and talk to them face to face, I think you would find them decent ordinary folk.
And so onto India, there are many stories here but let us stay with the stories about the Company opening plants (in a water intensive industry) in water sensitive areas with with little or no regard for the communities who find their water compromised and depleted. Once again you say independent judicial enquiries have found claims unfounded. Once again I ask what independent judicial enquiries?
Firstly there are four plants where Cokes operations have put the local community water in danger, in Kerala, near Jaipur and two in Uttra Pradesh. Two of these four plants have been shut down after protests and legal challenges. Coke were forced to close these plants.
The two remaining plants are near Jaipur and near Varanasi, neither plants have had judicial enquiries that found any claims of water depletion unfounded. So I am at a loss as to what judicial enquiries you refer to.
Happily for you Richard I have spent time in India too, and am happy for you to have access to all the interviews I have conducted with local people from all four of the plants, so you can hear for yourself what the allegations are.
Richard, you fail to mention the allegations that are raised against the company in Turkey regarding union busting or in El Salvador regarding Coke's sugar being produced with the help of child labour. Neither do you refer to the allegations of union busting in Ireland or the court findings against the company in Mexico, where they were found to be in breech of anti-monopoly law and intimidated some of the poorest shop owners.
So I am happy to send you a copy of my book which details some of these things BUT more importantly I offer to make my research and interviews on all of these issues available for you to come and peruse , so you might be able to make a more balanced comment on your partnership with the company. I do not understand how you can make comments that Coke have a "relatively good track record in learning and making good on the things they get things wrong" without considering these points.
Yours, Mark Thomas
Additional response:
Dear Richard, just seen another reply you have made to an enquiry about Smoothie and Coke, you quote the ILO report made in 2008 - referring to 'direct' employees. You say "everything suggests that conditions of work and rights applicable to direct employees [in Columbia (sic)] are duly respected." The key here is that over 15 years the ratio of direct employment to casual labour has been reversed, from 80% of the workforce that was 'direct' labour and 20% that was casualised, to the present day where 20% of the work force is direct labour and 80% is casualised. Casual labour have no rights to join a trade union. None whatsoever, I met and talked to plenty of people who testified that this is the case.
So your quote is selective and deceptive that is being used to promote a vision of the company that is simply not true. once again I am happy for you to come and see the interviews and bring your own translator if you wish to go through what these men and women say about working for the company.
Looking forward to hearing from you. Mark Thomas