Starbucks acquires juice business for $30M
Friday, November 11, 2011
PORTLAND, Ore. (AP) — Starbucks Corp. hopes to do for juice what it’s done for coffee.
The Seattle-based company that changed the way Americans drink their cup of Joe said Thursday that it acquired by juice maker Evolution Fresh Inc. for $30 million as part of a larger effort to move beyond just offering coffee.
Starbucks said it plans to “reinvent” the $1.6 billion super-premium juice segment with its purchase of Evolution, which is based in San Bernardino, Calif. The company plans to open a new chain of health and wellness stores in the coming year that will carry Evolution products such as juices and simple foods. Details are still thin on the new chain, but Starbucks described it as a retail model that has never been seen before.
“We are not just acquiring a juice company,” said Starbucks CEO Howard Schultz. “We are using this acquisition to position ourselves, in a broad way, to build a multibillion health and wellness business over time.”
The move is the latest by Starbucks to broaden its business as consumers demand healthier products and it faces growing competition from the likes of McDonald’s Corp. and Dunkin’ Brands Group Inc.’s Dunkin’ Donuts chain. Starbucks has rolled out lower-calorie and lower-fat food options and sugar-free syrups and switched from whole milk to 2 percent milk as the default in its drinks. It’s also is selling more products, like Seattle’s Best coffee and Via instant coffee, through grocery stores and other retailers.
Starbucks, which estimates that at some point in the future its consumer products business will rival the size of its cafi business, said more than a year ago that it would be looking for acquisition candidates. Its last acquisition in 2008 was of The Coffee Equipment Co., which makes the high-end Clover coffee brewing system.
Evolution, started by the founder of Naked Juice, is a logical choice for the chain as it seeks to offer healthier options. Evolution, which makes fresh fruit and vegetable juices, has products that are sold at Whole Foods, Safeway, Costco and other retailers on the West Coast.
Evolution is one of the few larger juice companies that still cracks, peels, presses and squeezes its own fruits and vegetables rather than using pureed or powdered ingredients. It also uses a process called high-pressure pasteurization to make the juice without heating it. Starbucks sees these methods as a competitive edge over juice makers such as Odwalla or Naked Juice, which it currently carries in its stores, as it allows the juice maker it to keep a higher nutritional quality in the juice while maintaining the taste.
Starbucks did not disclose how many of stores the new chain carrying Evolution products will have or where the locations would be. But the company said the chain will launch on the West Coast and be roughly the size of a traditional Starbucks cafi. Starbucks also plans to upgrade some of its existing stores to make room for the Evolution products and distribute Evolution’s products to other retailers.
Schultz said the company will launch a “full court press” to build the Evolution brand in the coming year, including more details on its new stores. Schultz also dismissed analyst concerns that it might follow in the footsteps of the Jamba Juice chain, which has struggled with soft sales as consumers have cut back on extras like blended fruit drinks. He said Starbucks will be creating an entirely different type of store.
“We understand the beverage business better than anyone else,” Schultz told investors Thursday. “We are replicating the understanding we have about beverage capability and adding the theater and romance (of our coffee stores).”
Starbucks did not change its earnings forecast based on the acquisition. It expects Evolution will operate at a moderate loss in the 2012 fiscal year and breakeven I 2013.
Shares of Starbucks rose 57 cents to close at $43.52 Thursday.
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