Starbucks Chugs Down Jamba's Fruit Shake

Summer is prime smoothie-selling season for Jamba's (Nasdaq: JMBA  ) Jamba Juice chain. On a hot day, a healthy blend of fresh fruit, natural juices, sherbet, protein-packed boosts, and a handful of ice makes for a refreshing treat.

If this were any other summer, Jamba would be charging full speed ahead with its marked-up beverages. But after Starbucks (Nasdaq: SBUX  ) introduced its Vivanno line of smoothies, and with Caribou Coffee (Nasdaq: CBOU  ) also getting into the chilled spirit with its blueberry and acai smoothies, Jamba decided to offer an aggressive discount during peak season.

The smoothie-whirring chain has rolled out a new line of all-fruit smoothies, which made their debut last week and sport a tempting $2.95 price tag. And now the company is offering an online coupon through its Jamba.com website, with which you can get two of the 210-calorie refreshers for the price of one through July 30.

Jamba and competitors such as Smoothie King haven't flinched as fast-food joints upgrade their beverage offerings. The smoothie specialists know that their quality will win out in those cases. After all, Jamba doesn't just serve up the sugary, processed fare you'll find at ice cream parlors or doughnut shops.

Smoothies from McDonald's (NYSE: MCD  ) or Sonic (Nasdaq: SONC  ) would just be taste-bud disappointments to those bred on the real deal. And don't even get me started on the Frutista Freeze drinks that Yum! Brands (NYSE: YUM  ) began selling a couple of months ago at Taco Bell outlets. Despite the mango and strawberry flavors, these are really just glorified, tropical twists on the 7-Eleven Slurpee.

Starbucks, however, is going right for the jugular. The Vivanno drinks include organic fruit juice, protein supplements, and an entire banana in every blended drink.

Jamba is no slouch. It watches over 726 Jamba Juice outlets. Unfortunately, there are more than 20 Starbucks locations on the planet for every one Jamba Juice. If Jamba has struggled to turn a profit under a kinder climate, it will be all the harder to make things work when a juggernaut has a feasible "me too" product.

The smoothie chains can always cling to the survivalist upsides. Starbucks will educate the market. With just four flavors, the coffee giant can help create a new generation of smoothie-slurping aficionados who will then seek out the wider variety of standalone fruit-drink shops. Things could very well play out that way in the long run, but this summer appears shot for the near term. Jamba's hot summer has gone cold.

Other stories to slurp:

Starbucks is a Motley Fool Inside Value selection. Starbucks is a Motley Fool Stock Advisor pick. The Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz doesn't fancy himself much of a coffee drinker, even though he lives within walking distance of three Starbucks locations. He does own shares in Jamba. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (4) | Recommend This Article (5)

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  • Report this Comment On July 23, 2008, at 4:41 PM, gnutt wrote:

    Ummm, have you tried a "vivanno" yet? They really aren't very good, very inconsistent and Starbucks barristas are less than eager to make them. They won't be redefining the smoothie business with these.

    JMBA has their own problems. Starbucks and McDonalds aren't the ones to blame.

  • Report this Comment On July 23, 2008, at 10:33 PM, nomoreramen wrote:

    Wow, I just tried the bannana-chocolate vivanno at Starbucks...it's terrible! stick to the frappachinos.

  • Report this Comment On July 25, 2008, at 12:28 AM, TazzaCoffee wrote:

    Tazza Coffee introduced their smooties about two months ago. They are much better than Starbucks.

  • Report this Comment On July 25, 2008, at 8:00 AM, Xitopie wrote:

    Having all the quick service restaurants jump into the smoothie game simply validates that this is a real product category and brings awareness to the massess. I agree with Rick, the 10k pound gorilla will introduce newbies to smoothies and they will eventually go across the street to Jamba to get a tasty drink.

    Jamba does have other challenges, but if it can weather this storm, I think that the lessons learned in these tough times will pay handsomely in the good times.

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