Jamba looks to fresh juice to boost sales

After narrowing losses in the fourth quarter, Jamba Inc. said on Wednesday that it is moving forward with a unit refresh plan that includes an expanded fresh juice bar at the Jamba Juice smoothie chain.

Hoping to capture the growing number of consumers that habitually use juice as a meal replacement or as a dietary cleanse, Jamba Juice has tested the expanded fresh-squeezed juice offerings in three test stores, adding new ingredients like kale, ginger, beets and apples.

In a call with analysts following the release of fourth-quarter results, James White, the company's chair, chief executive and president, said test locations with the redesign have shown a dramatic increase in juice sales.

At one of the new juice bar locations in Santa Monica, Calif., for example, which previously had high juice sales, White said sales of fresh juice quadrupled after the store redesign, which included displays of fresh produce and a more contemporary look.

Typically, fresh-squeezed juice represents about 3 percent of sales, but stores with the expanded offerings showed juice sales jumping to almost 12 percent of sales, he noted.

Though the juice offerings cannibalize smoothies to some degree, White said, “It’s all net positive, and we’re driving more habituation, which obviously drives frequency.”

The company expects to bring the new juice bar design to about 70 to 100 locations by midyear, starting with company-owned locations and moving into the franchise system in 2014, he said.

Jamba, however, faces growing competition in the fresh juice space. Starbucks is growing its Evolution Fresh juice concept, and smoothie players like Juice It Up! are adding fresh juice bars as a growing number of independent juice concepts pop up across the country.

Focus on health, value messaging

For Jamba, the expanded fresh juice offerings are part of an ongoing effort to transform the smoothie chain into a more healthful, active-lifestyle brand. With the redesign, White said, “There will be a discernibly different healthy halo that the consumer will immediately take away, which we think will have a significant impact on our health-and-wellness credentials.”

Citing a choppy economic environment and a “challenged consumer,” Jamba is also focusing on value, with smoothies at the $2.50 price point supported by national radio ads, which White said will be a critical part of efforts to drive in light users.

Now in the third year of an ongoing turnaround plan, Jamba said efforts this year will include new marketing and loyalty programs to drive traffic overall.

In January, for example, Jamba Juice launched new kids meals that include lower-in-sugar 9.5-ounce smoothies paired with kid-friendly foods like pizza swirls and cheese-stuffed pretzels.

Along with the store redesign plan, Jamba plans to grow its limited-menu variant, called Smoothie Station, as well as adding more drive thrus where possible, he said.

Jamba also plans to accelerate growth of the self-service JambaGO outlets, with 1,000 on deck to open in 2013. And the company plans to expand on Jamba Juice-branded consumer packaged goods opportunities.

White said the company may also pursue more “small bolt-on” acquisitions, like last year’s purchase of the Talbott Tea brand.

Profitable in 2012

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For the quarter ended Jan. 1, Jamba Inc. reported a net loss of $6.9 million, or 9 cents per share, compared with a loss of $9.8 million, or 15 cents per share, the prior year.

Revenue for the quarter was flat at $44.2 million, and systemwide same-store sales rose 0.6 percent. Company-owned same-store sales fell 1.2 percent on declines in both average ticket and traffic, but same-store sales at franchise locations rose 2.3 percent.

For Jamba, 2012 was the first year of profitability as a public company. The company recorded net income of $300,000, or a loss of 3 cents per share, for the year, compared with a net loss of $8.3 million, or 16 cents per share, in fiscal 2011.

Same-store sales for the year rose 5.1 percent systemwide. Revenues increased 1 percent to $228.8 million.

The chain added 40 new units in the U.S. and 16 in international markets, not including about 400 of the new JambaGO locations, self-serve outlets in nontraditional locations like schools, stadiums and event centers.

In 2013, the company plans to add another 60 to 80 new units worldwide in addition to the 1,000 new JambaGO outlets.

White said international growth will continue with franchise partners in Canada, South Korea and the Philippines planning to open about 280 stores over the next eight years. The company also announced a new master franchise development agreement with Casa Operadora de Franquicias MAV that will bring about 80 locations to Mexico over the next 10 years.

“We are actively assessing other markets and believe there’s a potential for 1,000 units internationally,” White said.

In his outlook for the year ahead, White said company-owned same-store sales will grow between 4 percent and 6 percent.

Jamba ended the year with 774 domestic locations, including 473 franchised and 301 company-owned units. Jamba Juice has 35 international locations, and 404 JambaGO outlets.

Contact Lisa Jennings at [email protected]
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