Friday, March 26, 2010

#Starbucks thinking of Jamba Juice?

At first blush my consumer side thought it a good idea- I love them both.  Then I thought about it as a shareholder, and was less and less thrilled.

I have been in the smoothie business, and it was very, very good.  In California, and in the hot weather in the northeast.  In fact, during summer in Washington DC, it was like selling crack.  Of course when winter hit, we couldn't give smoothies away. We hoped global warming made it a long term growth item, but that hasn't worked.

But think of the real estate footprint- there is no synergy to the two that would argue for a combination- the units overlap almost 100%.  And please, please don't think of following the YUM! Multibranding model-fiasco!  Can you add Jamba to Starbucks stores as a featured brand ?  Not likely, they should devote any additional asset space to increasing sales of the base concept, and besides, the smoothies they sell at Starbucks are pretty good already.

How about the juice case?  Well, lets see, does strategic partner Pepsico like to share space with a competitor to Naked juice?  No, they don't.  And they are a real partner, with more potential to grow Starbucks sales- don't piss them off.

How about just operating and growing Jamba as a separate division?  With some great international potential, this makes sense.  But, and I have been here too, when your base business is in recovery mode, the distractions that analysts worry about are real, no matter what management says.  Stay away, stick to the knitting.

The core business of Starbucks is healthy, profitable and has the potential to double and redouble- stay focused on that, and to use the title of a good book and Bain consulting plan- Profit from the Core.  In my concept we recognized smoothies as a menu item, not a concept.  Jamba was a contemporary, and we marveled at how they managed to continue to get funding to grow a flawed business model.  Now they have run out of investors, and the most recent owner to find that out is looking for a way to make some money off Jamba.  I think this is a rumor and would short JMBA, if I traded in short selling.

No comments: