Starbucks is expanding its multi-billion dollar company even further with a chain of juice bars, set to open next year. The world wide famous coffee shop chain is the largest in the world and now has plans to break into the health food market, a 50 billion dollar industry. The corporation bought the juice company Evolution Fresh for $30 million in cash last week.
Since the news was announced, stocks in Jamba Inc. have declined while stocks in Starbucks have increased. Jamba, a popular smoothie and juice chain with 752 juice bars in the U.S has been struggling the past few years. Revenues have declined as competition increased with major companies such as Starbucks and McDonald’s Corp introducing competing products.
Jamba CEO James White said “We will continue to accelerate our product innovation and, while we welcome new entrants to the marketplace, we will adjust our strategy as needed.” CEO of Starbucks, Howard Schultz argued that Jamba suffered after it moved toward a more commodity business and away from what popular independents do well.
Speaking about the new business venture Schultz said “We think we can build a major business”. Starbucks recently dropped the word ‘coffee’ from their famous Mermaid logo, suggesting that they don’t want to be only associated with coffee anymore. This is a move proven to be effective by other companies that have expanded their products.
Apple Inc. dropped the word computer from its name four years ago placing a stronger focus on consumer electronics, such as iPods, iPads and iPhones. PepsiCo was also once called Pepsi-Cola, before it became a broader beverage and food company. Starbucks says its developing consumer products business will one day be on par with its coffee shops in sales, although this prospect is at least several years away.
Bob Goldin, executive vice president at food service consultancy Technomic said “It has interesting potential, but I don’t know if it has the broad appeal that coffee has”. Morningstar analyst R.J. Hottovy argues a different prospective, “Starbucks is smart enough that, if it’s something that doesn’t work, they can pull the plug pretty quickly”.
President of channel development at Starbucks, Jeff Hansberry, notes that Evolution Fresh uses a special process called high-pressure pasteurization, which preserves the juice without heating it so the nutrients and taste are not lost. Although Starbucks have not yet released the number of juice bars they will be opening, it is official that the first of the juice bars will open on the West Coast of the U.S next year.