Starbucks gives juice a shot
The company makes its biggest move outside of coffee.
The coffee company has opened its first Evolution Fresh location in the Seattle suburb of Bellevue. It will offer freshly squeezed fruit and vegetable juices along with wraps, salads and soups. Vegan and vegetarian options will be available as well. Previously, Evolution Fresh juices were available at grocery stores. If the pilot store is successful, as it probably will be, Starbucks will open others. This is a risk worth taking.
CEO Howard Schultz is trying to transform Starbucks from a retail chain into a consumer packaged-goods company. Earlier this month, the company announced Verismo, a single-cup brewing system that competes against Green Mountain Coffee Roaster's (GMCR) Keurig machine. Schultz is accelerating the growth of branded Starbucks products in grocery stores. Starbucks, which has about 17,000 locations worldwide, can boost sales only so much by opening more stores.
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Evolution Fresh's fresh and healthful product lineup -- which includes pomegranate juice, cucumber pineapple ginger juice and carrot orange mango Juice -- is a natural fit with the Starbucks brand and is already sold in stores on the West Coast. It also addresses a weakness in the coffee company's lineup: Starbucks' food is often mediocre and overpriced. Evolution Fresh could become an alternative to McDonald's (MCD), which has gained traction in the coffee business. One problem, though, is the price.
According to USA Today, which first reported news of the store opening, a full-size juice and salad or sandwich will cost about $20. A 16-ounce "hand-crafted juice" will cost $7.99. Competition in this market is fierce. Jamba Juice (JAMBA), a rival to Evolution Fresh, has struggled. It reported a net loss in the last quarter of $9.8 million, despite a 4% increase in same-store sales in 2011 -- less than half of the 9% figure reported by Starbucks.
Shares of Starbucks have soared since the company's 2009 restructuring, though Wall Street analysts forecast slower movement over the next 52 weeks, with shares expected to hit $55.43. The stock traded around $53 Monday morning. If the Evolution Fresh experiment succeeds, the stock will surely go higher.
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