Starbucks last week acquired juice maker Evolution Fresh Inc. for $30 million as part of a plan to launch a new chain of health and wellness stores in the coming year.
In a statement, Starbucks said it has seen success with its expanded healthier menu items on its own menu. With the acquisition, Starbucks expects to "reinvent" the $1.6 billion super-premium juice segment and mark a "significant next step" for the company in entering the larger $50 billion health and wellness sector.
"Even though this is a small acquisition in size, it's a significant strategic decision and direction for the company," CEO Howard Schultz said on a conference call, according to USA Today. "Our intention is to reinvent this category in the same tonality that we have reinvented over the last 40 years the basic commodity of coffee. We see a lot of white space."
Starbucks said more than a year ago that it would be looking for acquisition candidates. Founded by a creator of Naked Juice, Evolution is currently carried on the West Coast in stores such as Safeway, Costco and Whole Foods. Starbucks plans to extend the brand to more retailers. It will replace PepsiCo's Naked Juice in Starbucks' coffee shops.
On the call, Starbucks officials said one competitive advantage is that Evolution squeezes is its own raw fruits and vegetables at its juicery in San Bernardino, CA rather than using pureed or powdered ingredients like Odwalla or Naked Juice. It also uses a process called high-pressure pasteurization to make the juice without heating it. Starbucks doesn't plan to blend juice in the stores.
Starbucks also expects to leverage its business model, including its retail footprint, CPG grocery distribution channels, digital breadth and customer engagement expertise. Said Mr. Schultz on the call, "We feel strongly that we understand the beverage business perhaps better than anyone else who's been in small-box retail."
By mid-2012, he says, Starbucks will test some specialty stores on the West Coast with the units about the size of a Starbucks. The stores will also carry health foods.
In response to an analyst's question, Mr. Schultz also discounted the recent struggles of the Jamba Juice chain, which has seen soft sales as consumers have cut back on extras like blended fruit drinks. Starbucks will be creating a new store experience and he implied that Jamba Juice had lost its way.
"Jamba Juice, I think, drifted into an area of commoditizing their business and no longer standing for what the independents have done so well," Mr. Schultz said, according to The Seattle Times.
How much potential do you see for Starbucks in the health and wellness retail space?