11 June 2008 - Jamba Inc., the owner of the Jamba Juice store chains, is the US market leader in the smoothie drink category, which is valued at USD 2.3 billion. According to industry data, the smoothie market is fast-growing at a 52% rate on average since 2005 and it is projected to grow 65% over the next 5 years.
In a presentation given at a conference in New York City on 10 June 2008, Jamba’s CEO, Paul Clayton, announced that his company’s leadership status is translated by a 19% share of the US market. The company is well ahead of its closest competitors, as Freshens caters for 6% of the market, and Smoothie King and Planet Smoothie for 5% and 1% respectively, he added.
Meanwhile, Emeryville, California-based Jamba is enjoying ongoing success and an average compound annual growth rate of 20% since 2003. Last year alone, total revenue increased 17.9% to USD 317.2 million, up from the USD 269.0 million recorded in 2006.
The smoothie producer is clearly benefitting from the consumption switch with the consumer increasingly demanding healthier products.
As of May 2008, Jamba Juice had 736 stores, of which 549 were company-owned and operated.
However, Clayton, in his presentation, shared his concerns for increased ingredients costs (oranges in particular), some store performances (especially those located outside California), and the tough economic environment in general, which has resulted in a drop in consumers entering Jamba stores nationwide.
Clayton describes 2007 as a “transitional” year. Indeed, despite the increased revenue compared to 2006, Jamba was faced with increased expenses. Moreover, company-owned comparable store sales decreased 1.3% in California, which is traditionally Jamba’s best-performing market.
In the annual financial statement published by Jamba on 13 March 2008, Clayton commented:
“While we are disappointed with certain financial results in fiscal 2007, we made significant progress in the implementation of our strategy that will position Jamba for the future. The economic environment has been challenging and has impacted our store-level economics”.
He then added: "We expect the economic environment to continue to be challenging in 2008, thus we have decided to slow our growth of new company-store openings to enable us to focus on store-level performance. We remain confident that we have the right strategy in place to deliver on our brand promise, improve our financial performance, and increase shareholder value."
This message contrasts with the CEO’s message delivered a year earlier, on 2 April 2007:
"Our priority is to continue to increase store volumes to further enhance our already strong unit economics which in turn is the foundation for healthy new company-owned store growth. We recently opened our 600th store and we expect to open between 450 and 500 locations over the next 3 years”.
To improve Jamba’s financial performance, Clayton has set himself two main objectives:
Firstly, Jamba plans to slow down company store growth in 2008 and, instead, focus on its existing store performance, with a view to get its unit economics back to the level of 2006.
“That is our number one priority”, said the CEO
Secondly, Paul Clayton also wants his company to focus on continuing the evolution of the “Jamba concept” by gradually changing the consumer’s perception of the firm as just a “smoothie chain” to a long-term “healthy living” company.
The first step to recovery was announced by Jamba last month when it said that it would be reorganising its support functions and closing several underperforming stores.
The reorganisation will result in the elimination of approximately 53 support function jobs as well as the closure of 10 underperforming Jamba-owned stores in 2008 and the termination of 7 signed leases for un-built stores.
Jamba made the decision as part of an overall effort to reduce operating costs in light of, among other things, the Company’s decision to moderate new Company store growth in fiscal 2008.
“The Company believes these efforts will help position the Company to best execute its strategy to simplify healthy living”, the smoothie maker said in a statement.
Jamba said it would reduce its guidance to 35-40 new company-owned stores in 2008.
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Jamba made the decision as part of an overall effort to reduce operating costs in light of, among other things, the Company’s decision to moderate new Company store growth in fiscal 2008.
“The Company believes these efforts will help position the Company to best execute its strategy to simplify healthy living”, the smoothie maker said in a statement.
Jamba said it would reduce its guidance to 35-40 new company-owned stores in 2008.
Besides reorganisation and lowering store openings, the Jamba CEO has already started his quest to put the health concept image and impression to consumers.
What Clayton describes as the “Healthy Platform” (in other words Jamba products with 100% pure-fruit, or light smoothies with no more than 180 calories) accounted for 26% of Jamba’s store sales in January 2007. Now, in May 2008, the platform represents 30%.
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A Jamba Juice store |
To improve store performance and to mitigate seasonality (with summer being the traditional period for fresh drinks), Jamba launched breakfast meals in September 2007.
At the time, Paul Coletta, senior vice president, Marketing and Brand Development of Jamba, commented: “Breakfast is the fastest-growing daypart in QSR, a trend which we expect to be very complementary to Jamba Juice’s current line-up of healthy blended beverages … These new products have taken the traditional smoothie one step further, offering unique, on-the-go healthy breakfast alternatives.”
Breakfast meals already account for 5% of Jamba’s store sales.
Extra efforts will be put in place to leverage Jamba’s products, added Clayton.
This will be made possible with an extra focus on selling products beyond the Jamba Juice stores – in supermarkets.
Clayton values this market, also known as the ready-to-drink category at USD 655 million with a compound annual growth rate for 2007-2010 of 25%.
Jamba is already selling its drinks in stores thanks to partnership arrangements with some of the west coast’s leading food retailers, such as Safeway, Albertsons, Walgreens, or even 7-Eleven…
Talking about future growth of this category, Clayton said: “Jamba is looking to bring ready-to-drink products east some time later this year”.
Another major partnership emerged on 27 May 2008.
Indeed, Nestle USA, in cooperation with Jamba, announced that it had launched a new line of Jamba ready-to-drink beverages made with real fruit and boosted with extra nutrients.
“This is the first step in our strong partnership with Nestle,” said Paul Coletta. “Our teams continue to work together on future product extensions that will build and drive the synergy of Jamba retail and ready-to-drink.”
“The response from accounts has been outstanding,” said Steve Presley, vice president, general manager premium ready-to-drink, Nestle Beverage Division. “They recognize the value and growth potential that Jamba RTD brings to the super premium juice category.”
The 2008 Jamba ready-to-drink product line includes six SKUs: three Jamba Smoothies, named Strawberries Wild w/Energy Boost, Orange Dream Machine w/Immunity, Banana Berry w/Heart Healthy Boost; and, three Jamba Juices named Orange Strawberry Banana w/Protein Boost, Mango Orange Peach w/Fiber Boost, Very Berry w/Calcium Boost.
Jamba may well be on its way to recovery. Its Q1 2008 results published in late May indicated revenue of USD 101.6 million, up more than 13% from the USD 89.4 million recorded a year earlier.
"While our first quarter results did not meet our expectations, I believe that we have the right strategy in place to transform our business to a healthy living company, improve the performance of our existing stores, and increase shareholder value," said Paul Clayton.
Another challenge that Jamba is confronted with is the consumer’s different attitudes towards its products. Smoothies are generally perceived as a refreshment drink and maybe not a meal and/or a source of healthy eating or drinking.
Jamba is faced with the task of raising consumer awareness regarding its health concept and its wide range of products.
Clayton wants to communicate more aggressively outside the stores, as beforehand the lion’s share of Jamba’s marketing efforts went to advertising and promotion within the stores.
The Jamba CEO is, however, re-assured when - after having asked the consumer which brand is commonly associated with a place where freshly-blended smoothies can be bought – the general answer was Jamba Juice.
