As Johnny Lee sang in Urban Cowboy, it can be painful. Starbucks has tried a number of strategies to stimulate growth and lessen its dependence on the $4 cup of coffee. Most have been disappointing. But it just paid $30 million - a piddling amount by today's standards - for a 'super premium' juice company, betting that quality and freshness may do what muffins and ham n' cheese croissants could not: deliver significantly increased sales.
The underlying proposition is that both Boomers and their X-er and Y-er offspring are obsessed with health. They may not really want to exercise or eat well - looked around you at the mall recently? - but they want to feel they are doing something positive even if it is just buying an expensive plastic bottle filled with 'natural' ingredients. Is such behavior delusional from a health standpoint? Of course! But if you are trying to build a multi-billion dollar business, so much the better: redemption for less than five bucks.
This is not to say that Starbucks is that cynical. They have delivered a premium product in an attractive setting for years. And health makes sense as a marketing proposition given their customer base. People will pay to feel good. But whether this is a leading indicator of national attitudes about nutrition is probably not the right question just yet. JL
Bruce Horovitz reports in USA Today:
Starbucks, the go-to java giant, now wants you to drink your juice.
The coffee kingpin says it wants to try to do with juice — and, ultimately, the entire health and wellness category — what it's already done with coffee. It took the first step on Thursday by paying $30 million cash for Evolution Fresh, a small, West Coast maker of super premium juices that still cracks, peels, presses and squeezes its own raw fruits and vegetables.
Starbucks CEO Howard Schultz says his company is about to do nothing less than turn the $50 billion health and wellness category on its head. "Our intention is to reinvent this category in the same tonality that we reinvented the basic commodity of coffee," says Schultz. "We see a lot of white space."
By mid-2012, he says, Starbucks will test some specialty stores on the West Coast — perhaps in the Starbucks-like model — that sell Evolution Fresh juices and health foods. The juice will not be squeezed in the stores.
At the same time, as Starbucks tries to expand its brand well beyond coffee, it will begin to sample and sell the Evolution Fresh juice line in Starbucks stores and also distribute and sell it at major grocery chains. This type of expansion into the grocery store is a key mission for Starbucks.
One brand expert, who is very skeptical about Starbucks and juice, says if anyone can pull it off, it's Starbucks.
"Starbucks cracked the code on how to build an in-store experience," says brand consultant Jonathan Salem Baskin. "But the question is, do people really want to sit in a retail store and savor juice the way they do a cup of coffee?"
That question has yet to be fully answered. It's not that others, such as Jamba Juice, haven't tried. But while super-premium juice is a $1.6 billion category, no chain so dominates the market like Starbucks does coffee.
Jamba Juice has upwards of 700 units domestically. Starbucks has roughly 11,000 domestic locations.
Officials at Jamba Juice declined to comment.
Unlike most super-premium juices, Evolution Fresh uses a special process called high-pressure pasteurization, which preserves the juice without heating it, says Jeff Hansberry, president of channel development at Starbucks. That way, he says, nutrients and taste are not lost.
Evolution Fresh was started by the founder of Naked Juice, Jimmy Rosenberg. He will continue to lead product innovation for the brand.
"We're not only acquiring a juice company," says Schultz, "but using it to build a broad-based health and wellness category over time."
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