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Jamba juice case study strategic management

16/12/2020 Client: saad24vbs Deadline: 2 Day

31


JAMBA JUICE: MIXING IT UP & STARTING AFRESH *


On January 3, 2017, Dave Pace, CEO of Jamba Juice, rang the Opening Bell of the Nasdaq MarketSite in Times Square. As part of what Nasdaq had done for the last six years during its annual “Fit Week,” Jamba Juice’s appearance was meant to focus attention on those companies that helped individuals lead healthier lifestyles. It was especially appropriate for Jamba Juice, because the lifestyle brand with a passion for making healthy living fun was undergoing a refresh of its own. To be announced in March 2017, preliminary financial results for fiscal 2016 had indicated a decrease in revenue and a loss for the year. Although the company had tried to explain this by pointing to the non-recurring expenses of business model adjustment and corporate relocation, investors were wary as the stock price continued to slide.1 The largest shareholder and activist investor, Engaged Capital, had called on the company to “slash costs and close unprofitable stores”2 which CEO Pace was in the process of doing.


In May 2016 Pace had announced that Jamba would move its headquarters from California to a less expensive location in Texas, restructure the overall organization, and make changes to the leadership team to ensure support for the transition from company-owned stores to a full franchise model. Commenting on this decision, Pace said, “Jamba has pursued our vision to inspire and simplify healthy living for 26 years, starting with a single juice shop in San Luis Obispo, but as we continue to spread our healthy living mission globally, it has become increasingly clear that a relocation of our support center will better position the company to extend our brand and continue to support our franchise partners for the long term.”3


In January 2017 Jamba Juice announced the launch of its ReSet Super Blends, a protein smoothie line developed in collaboration with celebrity fitness trainer Harley Pasternak.4 The new line of protein smoothies included real fruit fortified with calcium, riboflavin, and phosphorus, making for an ideal pre- or post-workout snack or midday “pick-me-up.”


But the question remained, would these ongoing initiatives, mixing up the product line and starting afresh with franchise partners, be enough to keep Jamba Juice top-of-mind with its current customers and attractive to new consumers, especially given the increased competition from smoothies served at the likes of McDonald’s, Burger King, and Dairy Queen?5


Company Background


Juice Club was founded by Kirk Perron and opened its first store in San Luis Obispo, California, in April 1990.6 While many small health-food stores had juice bars offering fresh carrot juice, wheat germ, and protein powder, dedicated juice and smoothie bars were sparse in 1990 and didn’t gain widespread popularity until the mid- to late 1990s.


Juice Club began with a franchise strategy and opened its second and third stores in northern and southern California in 1993. In 1994 management decided that an expansion strategy focusing on company stores would provide a greater degree of quality and operating control. In 1995 the company changed its name to Jamba Juice Company to provide a point of differentiation as competitors began offering similar healthy juices and smoothies in the marketplace.


In March 1999 Jamba Juice Company merged with Zuka Juice Inc., a smoothie retail chain with 98 smoothie retail units in the western United States. On March 13, 2006, Jamba Juice Company agreed to be acquired by Services Acquisition Corp. International (headed by Steven Berrard, former CEO of Blockbuster Inc.) for $265 million.7 The company went public in November 2006 as Nasdaq-traded JMBA. Jamba Juice stores were owned and franchised by Jamba Juice Company, which was a wholly owned subsidiary of Jamba Inc.


In August 2008 Jamba Juice faced significant leadership changes. Steven Berrard agreed to assume the responsibilities of interim CEO.8 In December 2008, James D. White was named CEO and president, while Berrard remained chairman of the board of directors. Prior to joining Jamba Juice, White had been senior vice president of consumer brands at Safeway, a publicly traded Fortune 100 food and drug retailer. During what CEO White called the turnaround years from 2009 to 2011, he worked to eliminate short-term debt, innovate, expand the menu, and change the business model by refranchising stores, growing internationally, and commercializing product lines.


Ongoing Strategic Initiatives


Jamba pursued elusive financial health during James D. White’s tenure as CEO. Although revenue had been down, the company was profitable, and things appeared to be back on track in 2015 as White moved forward with his “BLEND 2.0” strategic priorities. This BLEND strategy was part of a business redirection that included shifting from a company ownership to a franchise ownership model, refreshing the product line, and accelerating global retail growth through new and existing formats. When he retired in 2015, White had been partly successful, growing revenue and returning the company to profitability in fiscal 2012, only to see a loss in 2014. (See Exhibits 1 and 2.)


page C242


When White announced his retirement in October 2015, he felt the accelerated refranchising initiative was virtually complete, and that the company would benefit from a “new generation” of leadership.9 Nearly two years earlier, Jamba Juice CEO White had also rung the opening bell at Nasdaq in New York City. Headlines had announced “Jamba Juice Rings in the New Year with the Unveiling of Brand-New Jamba Kids™ Meals.” This new menu targeting Jamba’s newest and youngest customers involved smaller 9.5-ounce sizes of fruit smoothies—Strawberries Gone Bananas, Blueberry Strawberry Blast-off, Popp’in Peach Mango, and Berry Beet It—plus two new food items: a Pizza Swirl with Turkey and a Cheesy Stuffed Pretzel. The idea for this kid’s menu came from listening to customers, who had struggled to share the larger smoothie drinks with their young children. It also meshed with Jamba’s overall strategy: to create “good-for-you food that tastes good” and to continue to add more full-meal options to the menu for both kids and adults.10 The Jamba Juice Company had been expanding its product line over the years to offer Jamba products that pleased a broader palate. In addition, Jamba had been pursuing an aggressive expansion program, evolving from a made-to-order smoothie company into a healthy, active-lifestyle company.


EXHIBIT 1 Income Statements


page C243


Source: Jamba 10-K reports.


EXHIBIT 2 Balance Sheets (in thousands of dollars)


page C243


Source: Jamba 10-K reports.


EXHIBIT 2 Balance Sheets (in thousands of dollars)


page C244


Source: Jamba 10-K reports.


Just after his arrival as the new Jamba Juice CEO in 2008, White had instituted a set of strategic priorities. Believing it was necessary to revitalize the company, White had outlined the following goals:11


· Transform the chain through refranchising existing stores.


· Initiate international growth.


· Build a retail presence with branded consumer packaged goods and licensing.


· Bring more food offerings to the menu across all dayparts—breakfast, lunch, afternoon, dinner.


· Implement a disciplined expense-reduction plan and improve comparable sales.


In 2012, Jamba Juice had pronounced this turnaround complete and begun to focus on achieving a second phase of growth. CEO White had called this next set of initiatives an accelerated growth BLEND Plan 2.0. By 2016 this plan had evolved into BLEND 3.0 and included the following:


· Become a top-of-mind brand by simplifying and sharpening Jamba’s healthy food and beverage marketing message to better clarify value and make the brand more relevant through brand activation and leadership.


· Create new products, provide category leadership in smoothies, juices and bowls.


· Accelerate global retail growth through new and existing formats.


· Drive the asset-light business model to enhance shareholder value, continuing to reduce operational costs, driving store-level productivity and profitability, and improving efficiency in the supply, sourcing, and distribution process.12


According to White, these strategic priorities supported the company’s mission to “accelerate growth and development of Jamba as a globally recognized healthy, active lifestyle brand.”13


Top-of-Mind Brand


By 2017 Jamba Juice was the smoothie brand leader and #1 retailer for fresh squeezed made-to-order juices. Jamba also boasted over 1.8 million Facebook fans and over 100 million annual visits to its stores. The consumer messaging was centered around the theme “Blend In The Good,” centered on “Whole Food Nutrition,” designed to focus consumers on the benefits of the fresh fruits and vegetables that were used to make Jamba’s smoothies, juices, and bowls. This campaign was executed over multiple media sources, including digital, social, public relations, TV, radio and print. The campaign reached millions of Millennials through the power of social media in partnership with DanceOn, the number one ranked YouTube channel, and with Pharrell Williams. Jamba also entered into or expanded programs with strategic partners including with Spendgo, Google, Twitter, SoftCard, and Groupon, incorporating the Jamba Juice mobile application, helping customers locate stores, order ahead, speed up transactions, and improve the online and in-store experience.


In 2017 the Jamba Insider Rewards (“JJR”) e-mail marketing program had 2 million loyalty members who were rewarded with promotional offers such as discounts, free products, and advance notice of in-store events. Franchisees were provided with tools and technologies that targeted their customers through e-mail, social media, radio and out-of-home advertising, and in late 2015 Jamba piloted a first-ever television ad campaign in key markets.


Regarding its marketing efforts, historically, Jamba had not engaged in any mass-media promotional programs, relying instead on word of mouth and in-store promotions to increase customer awareness. However, Jamba was featured in stories appearing in the Wall Street Journal, New York Times, USA Today, and a host of local newspapers and magazines, as well as profiled spots on TV news shows such as Good Morning America. Jamba had also run an “Ambassadors of WOW” contest nationwide, encouraging fans to nominate themselves or worthy friends or family members to be the new faces of Jamba Juice, creating “wow” through support and involvement within their communities. These ambassadors would have the opportunity to appear in Jamba Juice advertisements and promotional campaigns.14


Jamba also capitalized on the openings of new sites as opportunities to reach out to the media and secure live local television coverage, radio broadcasts, and articles in local print media. Openings were also frequently associated with a charitable event, thus serving to reinforce Jamba Juice Company’s strong commitment to its communities. In addition, Jamba aligned itself with “active living” spokespeople, such as tennis star Venus Williams, who had partnered with Jamba to open two stores in the Maryland–Washington, D.C., area.15


Jamba also re-launched its corporate social responsibility initiatives under the banner of “Team Up For a Healthy Whirl’d,” a platform that encouraged consumers, partners, and employees to join in the company’s efforts to inspire healthy people, products, planet, and community. Through Team Up For a Healthy Whirl’d Jamba led sustainability initiatives, programs to inspire healthier employees, and a number of community engagement activities in the markets it served. Continuing on its mission to serve the community, Jamba launched a grant program, partnering with the National Gardening Association and their Kid’s Gardening program, continuing to drive awareness of the need to encourage better dietary and fitness habits in kids through the Team Up For a Healthy America program and through partnerships with the American heart Association, National Gardening Association, and the GenYouth Foundation.


New Products, Category Leadership

Jamba sought “top-of-mind” leadership by creating innovative and “craveable” menu items they could offer throughout the day—for breakfast, lunch, afternoon, and dinner. Jamba Juice stores offered customers a range of fresh squeezed fruit juices, blended beverages, baked goods and meals, nutritional supplements, and healthy snacks. Jamba smoothie and juice options were made with real fruit and 100 percent fruit juices. Jamba smoothies were rich in vitamins, minerals, proteins, and fiber, were blended to order, and provided four to six servings of fruits and vegetables. In addition to the natural nutrients in Jamba smoothies, Jamba offered supplements in the form of Boosts and Shots. Boosts included 10 combinations of vitamins, minerals, proteins, and extracts designed to give the mind and body a nutritious boost. Shots included three combinations of wheatgrass, green tea, orange juice, and soymilk designed to give customers a natural concentrate of vitamins, minerals, and antioxidants.


As complements to its smoothie and boost offerings, Jamba also offered baked goods and other meal items. Called “tasty bites,” each of these items was made with natural ingredients and was high in protein and fiber. One popular item was steel cut hot oatmeal with fruit, a low-calorie organic product that captured a “best of” rating by nutritionists when compared against offerings from McDonald’s, Starbucks, Au Bon Pain, and Cosi.16 Jamba also offered a variety of grab-and-go wraps, sandwiches, and California flatbread food offerings, as well as “energy bowls” that incorporated whole fruit, fresh Greek yogurt and/or soy milk, and an assortment of dry toppings.


Jamba featured an organic brew-by-the-cup coffee service and a line of Whirl’ns frozen yogurt and sorbet bar treats, with probiotic fruit and yogurt blends. In 2012 Jamba added to the hot beverage category by acquiring premium tea blender Talbott Teas. This acquisition was championed by ABC TV’s Shark Tank venture capitalists Kevin O’Leary, Daymond John, and Barbara Corcoran, who convinced Jamba CEO James White that this acquisition would be a good fit for Jamba’s strategy to “accelerate growth through the acquisition of specialty lifestyle brands that support the company’s expansion into new and relevant product categories.”17


Jamba also transitioned existing stores in selected markets to a fresh-squeezed juice emphasis. This addressed competition from both Juice It Up! and Starbucks, who were expanding their premium juice bar businesses. But the big announcement was when Jamba introduced its Kids Meals. This new menu was targeted toward children ages 4 to 8, with a complete meal—a smoothie plus a food item—containing fewer than 500 calories. The items included whole grains, 2.5 servings of fruit or vegetables, and no added sugar.


page C246


One of the key objectives of Jamba’s growth strategy was to market itself in a way to increase sales year-round and significantly decrease weather and seasonal vulnerabilities. Seasonal issues were serious, since the traditional driver of Jamba’s revenue and profit was the sale of smoothies during hot weather. In southern states (e.g., California), where the weather remained warm year-round, Jamba experienced fairly steady sales. However, in the northern states (e.g., New York), where there was a cold and fairly lengthy winter season, Jamba experienced severe seasonal variability. To counter the seasonal slump, Jamba pushed to increase the presence of nontraditional stores inside existing venues.


Nontraditional Locations

Jamba had generally characterized its stores as either traditional or nontraditional. Traditional locations included suburban strip malls and various retail locations in urban centers. Traditional stores averaged approximately 1,400 square feet in size and were designed to be fun, friendly, energetic, and colorful to represent the active, healthy lifestyle that Jamba Juice promoted.


Nontraditional stores were considered those located in areas that allowed Jamba to generate awareness and try out new products to fuel the core business. Jamba’s nontraditional opportunities included store-within-a-store locations, airports, shopping malls, and colleges and universities.


Store-within-a-store: Jamba Juice had developed franchise partner relationships with major grocers and retailers to develop store-within-a-store concepts. The franchise partnerships provided it with the opportunity to reach new customers and enhance the brand without making significant capital investments. An example of this was the 2016 opening of a combination Timothy’s World Coffee and Jamba Juice franchise location within a Stop & Shop store in Long Island, New York.18


Airports: Jamba operated several airport locations and had the opportunity to develop stores in numerous additional airports. Jamba Juice Company’s highly portable product appealed to travelers on the go and provided them with an energizing boost.


Shopping malls: Jamba had opportunistically established stores in shopping malls that presented attractive expansion opportunities. In addition, as with the airport locations, the indoor setting helped to alleviate weather and seasonal vulnerabilities that challenged traditional locations.


Colleges and universities: The Jamba brand was appealing to the average college student’s active, on-the-go lifestyle, and Jamba had developed multiple on-campus locations across the United States.


Other potential nontraditional store locations: Additional high-traffic, nontraditional locations existed. Many large health clubs included a juice and smoothie bar within their buildings. Jamba could partner with a major gym chain or individual private gyms with high membership rates. Another possibility was to partner with a large school district. Schools across the country were under increasing scrutiny to offer healthy alternatives to the traditional fat-, carbohydrate-, and preservative-rich foods served in cafeterias, especially as a number of states were prohibiting the sale of junk food on K–12 campuses.


Jamba had introduced self-service JambaGO automated drink stations in nontraditional locations, including schools. Taking roughly the space of a soda fountain beverage dispenser, the JambaGo format, which CEO White called a wellness center, included the chain’s branded packaged products, as well as the option of several preblended smoothies. The JambaGO concept was a way to reinforce Jamba as a healthy, active lifestyle brand that was also convenient and portable. This licensed concept represented no capital investment for Jamba and used the razor/razor blade net profit model. White was hoping Jamba would become “the go-to resource for healthy solutions for school foodservice directors.”19 However, current CEO Dave Pace announced plans to exit the JambaGo platform in 2017, stating “the Jamba team has committed to strengthening its core retail business, improving franchise profitability, accelerating ongoing global development, and updating the Jamba Juice brand position. After a detailed review, the Company determined that the JambaGo platform does not align with these objectives and is not a viable option through which to drive long-term profitability and shareholder value.”20 Interestingly, customer feedback had indicated that the quality of the JambaGo product was not up the standards that consumers expected from Jamba; therefore Jamba management felt JambaGo would degrade the brand and impact the company’s opportunity to grow the core business and brand over the long term.


Building a Global Consumer Packaged Goods Platform

Jamba Inc. was also aggressively pursuing licensing agreements for commercialized product lines in the areas of Jamba-branded make-at-home frozen smoothie kits, frozen yogurt novelty bars, all-natural energy drinks, coconut water fruit juice beverages, Brazilian super fruit shots, trail mixes, and fruit cups. The objective was to reinforce the Jamba better-for-you message with convenient and portable products available at multiple consumer locations.


In aggressive moves, Jamba had expanded licensing agreements to include a line of fruit-infused coconut water, to be distributed through the Pepsi Beverage Company, Brazilian super fruit shots, and all-natural fruit cups to be produced in partnership with Zola and Sundia Corporation. Other Jamba-branded consumer products included yogurt and sorbet frozen novelty items manufactured under license by Oregon Ice Cream LLC out of Eugene, Oregon,

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