Overview
Juice Club, the former name of Jamba Juice Company, was founded in 1990 by Kirk Perron and was presented as a health-food store. In the mid of 1990’s, the company started to expand using franchise strategy. In 1995, it changed its name for Jamba Juice Company that allowed differentiating in the market as the competitors started to offer similar products. In 1999, the company merged with Zuka Juice Inc. and acquired 98 smoothie retailing units. In 2006, the company went public having owned and franchised units (Dostal n.p.).
The main problem is that all of the competitors are selling smoothies and it would be difficult for Jamba to differentiate in the market. Big market players Starbucks, McDonald’s, and the likes started offering smoothies to overcome seasonal variability. Similarly, Jamba Juice began offering options traditionally offered by Starbucks and McDonald’s thus presenting threat for brand identity. At the present time, Jamba Juice is recognized for fresh juices and smoothies. As the company aims to increase profitability, it needs to attract customers’ attention all year round offering hot drinks and desserts that are more traditional for Starbucks and McDonald’s menu.
Also, one of the strategic objectives of Jamba is the reduction of operational costs combined with refranchising. A shift from company-owned to franchising requires capital investments. Meanwhile, rigorous competition makes pressure on the prices for the products. In 2012, the company had become profitable for the first time after six consequent years of net losses. Presently, Jamba plans to further grow globally and increase profits. Presently, the company owns 788 stores including both owned and franchised units.
Current Conditions and Strategies
The overall strategy of the company is as follows: “good for you food that tastes good.” Jamba Juice recommended itself as an active-lifestyle company offering healthy options. However, CEO of the company plans for further growth by expanding menu with coffee and desserts. This approach will help increase profitability and attract more customers. However, coffee and desserts are not perceived as healthy options. Thus, Jamba Juice has to tie an opportunity for further growth with offering options that are not perceived healthy by customers.
In 2009, the main strategic objectives were refranchising, international growth, maintaining retail presence in the packaged goods sector, expanding menu, and strict adherence to the expense-reduction plan. As the company succeeded to develop an increase of the comparable store sales of 4-6%, increase operating profit margin by 20-23%, receive $3 million profit from the packaged goods sector, and keep administrative and general expenses flat, Jamba Juice announced new strategic goals. Among them are health food priority, employees’ engagement in the process of promoting healthy style of life, global growth, growth of franchised and nontraditional units, maintaining presence in packaged-goods sector, and reduction of operational costs through effective sourcing, supply, and distribution.
Previously, Jamba Juice succeeded to develop a core competency in the sector of fresh juices and smoothies staring from the beginning of 1990’s. However, in 2008, Starbucks began offering smoothies in its menu. In 2012, Burger King entered the market of smoothies. Thus, the main goal of Jamba Juice is to preserve its core competency and brand identity while increasing profits by offering the new products that do not align with the company’s identity.
Analysis
External Analysis
Industry Analysis
The sector of healthy food within the food industry tends to grow. The demand for natural and organic products is increasing. Customers’ awareness of natural and organic products is increasing. The growth of fast food sector including franchised restaurants and units made up 8.6% annually. Thus, there is an opportunity for growth for Jamba Juice Company (FranchiseHelp Holdings LLC para 3).
Rivalry
According to FranchiseHelp Holdings LLC (para 11) fast food franchising restaurants like Starbucks, Mc Café, and McDonald’s introduce new products lines expanding to other food industry segments. The increasing rivalry and changing menu of the competitors was noted in the case study as well (Case Study 45). Thus, Jamba Juice is operating in a highly competitive environment.
Power of Buyers
Jamba Juice is selling its products to retail consumers. Power of buyers is medium because retail consumers cannot negotiate the price. However, the price cannot be excessively high because competitors are struggling to cut prices.
Power of Suppliers
Power of suppliers is medium because few farmers can produce natural and organic agricultural products. Also, Jamba Juice has an opportunity to negotiate price in case if the suppliers start to increase it. As the industry of natural and organic food is growing, the number of suppliers is increasing each year by 12% (FranchiseHelp Holdings LLC n.p.).
Threat of New Entrants
Threat of new entrants is medium because small food companies can overcome small barriers to entry. Entering the food market does not require significant capital investments. However, it is difficult for the small companies to compete in the market because of big players. Besides, the national government imposes new conditions on producers and sellers of natural and organic products (Daniels para 5).
Threat of Substitutes
Threat of substitutes is high in the sector of packaged food and medium in the sector of healthy organic food. There are a lot of alternatives to packaged food offered by the competitors. However, the alternatives of natural and organic food are limited (Daniels para 8).
Internal Analysis
The core competency of Jamba Juice is production of healthy food and beverages. Also, it has an opportunity for further growth in the segment of packaged food. The company pays attention to the education of the employees in the field of healthy nutrition. It could help increase customers’ awareness regarding healthy food and beverages. Therefore, the number of the customers can be increased (Dostal n.p.).
Also, the company can capitalize on cutting costs. The process of sourcing can be significantly improved. Also, labor costs can be reduced and the operations can be simplified with the help of internet technologies. Marketing and advertising could emphasize 100% natural juices and smoothies on the contrary to the options offered by the competitors that are not healthy. In addition, Jamba Juice can enter the segment of organic coffee and tea (hot drinks), and healthy low-calorie desserts.
Diagnosis
According to evidence presented in the Case Study (40), Jamba Juice follows the strategy outlined. The company pursued the following goals at the beginning of 2009: shifting from company-owned structure to franchise model, global growth, increase of retail presence in the sector of packaged goods, introducing expense-reduction plan, and expanded menu. As Jamba Juice strictly followed the strategy outlined, it succeeded to decrease the number of company-owned units by 200 while the number of franchised units increased by 267. The number of international stores had increased by 34 (from 1 in 2009 to 35 in 2012). Also, the company derived $3 million of revenue from the sector of packaged goods. Operating profit margin had increased by 20-23% because of introducing the cost-reduction plan. The menu was expanded with organic coffee and other hot meal and beverages to enter the segment of hot meal and drinks.
Conclusions and Recommendations
Jamba Juice should enter organic coffee market to increase profitability. The problem of losing the company’s identity can be solved by offering green coffee and caffeine-free options that are considered healthy alternatives to ordinary coffee. In this case, offering healthy coffee options will not contradict with the vision and reputation of the company. A similar strategy can be used when offering desserts. Fruit and low-calorie desserts can be offered instead of the traditional options offered by Starbucks and McDonalds. As the CEO of the company noted, using similar strategy by Starbucks and McDonald’s will help increase customers’ awareness related healthy food which is the core competency of Jamba Juice. Offering healthy options of hot drinks and dessert will help increase profitability during the cold time of the year.
In addition, Jamba Juice could try to use alternative distribution channels to deliver its products to a larger customer base. The company used nontraditional ways of distribution the products in the past. New customers’ segments may not be familiar with the products offered by Jamba Juice.
As the company aims to reduce costs, it should proceed with expanding franchise agreements. As it can be seen from Appendix 1, Jamba Juice succeeded to make profits by shifting from the company-owned stores to the franchised stores. This approach helped reduce fiscal burden and attribute a part of expenses to the franchisees. It was mentioned in the Case Study (40) Jamba Juice kept administrative and general expenses flat. As a result, the company obtained over $228 million in revenue as of 2013 (Appendix 2).
Appendix 1 Store Types and Locations (Case Study 43)
Appendix 2 Jamba Juice Revenue 2010-2013
Works Cited
Daniels, Stephen. US Organic Food Market to Grow 14% from 2013-18. William Reed
Business Media SAS, 2014. Web. 15 October 2014.
Dostal, Eugene. Jamba Juice Introduces Kids’ Meals. Nation’s Restaurant News, 4 January,
2013. Web. 14 October 2014.
FranchiseHelp Holdings LLC. Fast Food Industry Analysis 2014 - Cost & Trends. The Wall
Street Journal, 2014. Web. 13 October 2014.
