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Well, that was quite a reversal.
Shares of Jamba (NASDAQ: JMBA ) opened 12% lower yesterday after posting mixed quarterly results, but the stock made all of that back to close higher on the day.
The leading stand-alone smoothie chain has been resilient lately. The stock soared 71% last year, and it's already up 29% so far in 2013.
Jamba Juice has an ordering option where a customer can say "make it light" on select beverages and they will be made with one-third fewer calories, carbs, and sugar. Unfortunately someone said "make it light" on the financials this past quarter, and that's where revenue clocked in short of expectations.
However, investors apparently forgave the top-line miss -- coming to appreciate Jamba's first full year of profitability and second straight year of positive comps -- in ultimately bidding the stock out of yesterday's initial hole.
Maybe investors began to dive into the conference call and connect the dots. After all, if you begin to flesh out Jamba's game plan for 2013 and beyond, it certainly seems as if the smoothie giant has Starbucks' (NASDAQ: SBUX ) Evolution Fresh in its crosshairs. Knowing the acquisitive ways of the java giant, is Jamba making itself too attractive for Starbucks to resist as a buyout candidate?
Everyone associates Jamba with its dozens of made-to-order smoothie varieties, but the vast majority of the chain's 809 stores also sell freshly pressed orange juice, wheatgrass, and carrot juice.
The new store format -- and between remodeling old stores and breaking in the fresh design at new locations, we're looking at as many as 100 stores by the middle of the year -- emphasizes the fresh juice offerings that made Evolution Fresh so appealing to Starbucks.
Jamba has already converted three test stores, expanding the juice offerings to include exotic options including kale and ginger, and showcasing the pressing process. The move is paying off. One of the test stores in Santa Monica has seen juice sales go from 3% of revenue to 12% of the mix without completely cannibalizing smoothie sales.
Assuming the new stores continue to be well received, Jamba may transform itself into the juice-centric juice bar concept that Starbucks is trying to build out with Evolution Fresh.
Anything you can do, I can do slower
Starbucks is naturally considerably larger than Jamba, but it can't expand Evolution Fresh -- currently at just four stores -- into hundreds of locations overnight. Jamba can. If it can transform 100 of its stores in California and New York into the juice-promoting redesign in a few months, it won't be long before Jamba's 809 stores (and counting) are up to speed.
Starbucks can't do the same thing with its thousands of coffee stores. It can't make juices the centerpiece of its java havens or go for a "store within a store" redo without killing its golden caffeinated goose. There's a reason why Starbucks is growing its purchases of Evolution Fresh and Teavana as separate businesses.
However, is Jamba making itself too loud to ignore? Will Starbucks be down to snapping up Jamba while it's still cheap to protect and ideally expand its original fresh juice investment?
Into the Starbucks shopping bag
Starbucks has never been afraid of buying a growing if not disruptive concept while it was still in the crib, especially if it would be a natural fit to its java stronghold. Teavana was trying to do to tea culture -- transform it into an upscale lifestyle -- what Starbucks successfully achieved in coffee. Evolution Fresh was a fresh juice company gaining traction. La Boulange was a bake shop specializing in French pastries and sandwiches.
Tea, juices, and baked goods also happen to be areas that Starbucks could be doing a little better on itself. The deals made sense.
Why not smoothies? I mean, have you tried any of the limited offerings at Starbucks? They're not very good.
Starbucks shouldn't buy Jamba just because its own smoothies are weak. Starbucks hasn't been able to make a dent in Green Mountain Coffee's (UNKNOWN: GMCR.DL ) Keurig empire with last year's Verismo rollout, but it has never made a move on Green Mountain. Even now -- when buying the faster-growing Green Mountain at a modest premium would still be accretive to next year's earnings -- Starbucks is going to stick to its own horses in single-serve brews.
However, just as the two cola giants have gone on to make acquisitions in water and juices, Starbucks has shown a tendency to buy beverage brands that would fit the Starbucks message. Jamba is quickly evolving as a lifestyle brand as the leader in a validated category, and now it's moving in on the juice bar turf that Starbucks thought it could corner.
A deal makes sense if Starbucks can get it done without overpaying for Jamba.
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