Can Jamba Hold Out Against the Big Two?

Juice maker Jamba (Nasdaq: JMBA  ) has tried to reduce costs as well as overhaul its menu to include products beyond its signature smoothies. The move has become a virtual necessity, as Starbucks (Nasdaq: SBUX  ) and McDonald's (NYSE: MCD  ) have begun to launch their own competing smoothies. With bigger players entering the market, it was feared that Jamba's market share would take a hit. Toward the end of last year, Starbucks acquired Evolution Fresh, which produces tangerine and organic ginger limeade, among other flavors. This was an important step for Starbucks, as it helped the company better penetrate the $1.6 billion premium juice business as well as the $50 billion health foods market. McDonald's too, has started to serve smoothies at its McCafe bistros.

What sets Jamba apart is its focus on smoothies, plus a wider range of options compared to the big two competitors. This is perhaps why Jamba's same-store sales have been on the rise.

The juice maker recently saw its company-owned same-store sales rise by 12.7% in its first quarter, helped by an increase in store traffic as well as a rise in the average check. Even better, this was the sixth straight quarter of comps growth at the California-based company.

Expanding horizons
Jamba is also looking to expand its global presence. It added 10 new stores this quarter, which includes four franchise stores in the U.S. and six internationally. This year, Jamba is looking to double its global presence. The company rolled out an express version of its stores, christened "JambaGo," last year, which allowed it to move into unconventional locations such as college campuses. CEO James White said Jamba intends to open somewhere between 400 to 500 stores by the end of this year.

These expansions are a very positive step for the company and should put it in a much better position to compete with Starbucks and McDonald's.

Blending in
As White says of Jamba's BLEND Plan 2.0 strategy, unveiled at the start of the year: "Our BLEND Plan 2.0 priorities are to make Jamba a top-of-mind healthy food and beverage brand, embody a healthy, active lifestyle throughout our entire enterprise, accelerate global retail growth through new and existing formats, build a global CPG platform in Jamba-relevant categories and reduce our costs and increase productivity."

I think if Jamba can execute that strategy well, it should be headed for better things. The main challenge for the company will be to be establish itself as a well-recognized brand -- the way people know a Starbucks or a McDonald's. It won't be a simple job, but it is something Jamba will have to do to remain competitive.

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Fool contributor Shubh Datta doesn't own shares in the companies listed above. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of McDonald's and Starbucks and writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On May 15, 2012, at 11:11 AM, twotoadstools wrote:

    While I rarely go to any of these venues - if at all - I can tell you that my family's been to Jamba Juice for smoothies, would probably not go to Starbucks for many reasons, and would most certainly not even cross the threshold of a McDonald's for anything other than a bathroom. Jamba's got this one hands down!

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