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WIKI ANALYSIS
Jamba, Inc. (JMBA) owns, operates and franchises Jamba Juice stores, a popular smoothie and juice bar. There are 707 Jamba Juice locations in 22 states and the Bahamas[1]. 501 of these are company-owned and operated stores, while the remaining 206 are franchise locations in college campuses, airports and grocery stores like Whole Foods and Safeway[2]. Jamba Juice has been likened to the Starbucks of smoothie chains, offering blended-to-order fruit smoothies, choices of 10 "Jamba Boosts," which are vitamin and protein supplements, and a selection of baked goods and snacks. Jamba markets itself as a “healthy lifestyle company” and promotes the use of all-natural ingredients in its products[3].
Although generally regarded as the smoothie segment leader in terms of brand awareness and product quality, Jamba faces challenges in driving future growth. The company lost $113.3 million in 2007, and its shares have fallen to less than half of their initial-public-offering price of 2006[4]. Most importantly, JMBA must prove that it can sustain sales growth in its home market of California, a state that accounts for roughly three-quarters of the firm’s revenues, and where it posted a weak performance in 2007[5]. The beverage industry is also becoming increasingly competitive, particularly in the smoothie business where there are few barriers to entry as the drinks are easy to make and generate a relatively high profit margin[6]. JMBA’s ability to diversify its product line will partly determine how well it can thrive in this more competitive environment.
Business Financials
JMBA offers a range of freshly blended beverages, on-the-go breakfasts and snacks in its retail locations. The breakfast line was initiated in 2008 to reduce Jamba’s dependence on smoothies in the ever more competitive beverage industry[7]. The company is also exploring alternative distribution channels; in December 2007 it announced an exclusive worldwide licensing agreement with Nestle USA to produce and distribute a line of healthy ready-to-drink beverages under the Jamba brand name[8].
While JMBA's revenue increased by over 1,200% in 2007, it actually recorded a net loss of $113 million. Part of this discrepancy can be explained by the fact that the company opened 99 new locations last year[10]. Historically, JMBA’s new stores tend to open with lower sales volumes and build sales volumes as they increases brand awareness, especially in new markets[11]. In addition, 15.3% of Jamba's revenue went to general and administrative costs, well above the 10%-11% seen by its peers at comparable revenue levels. The company's other major loss in 2007 was a hefty $200.6 million impairment charge related to goodwill and other intangible assets[12].
Trends and Forces
Jamba’s sales are driven by seasonal changes
Since smoothies represent 85% of JMBA’s total sales, it is no surprise that warm weather is a big factor in how well Jamba performs. During the spring and summer months, daily sales volumes can be twice that of the fall and winter months, especially in colder states like New Jersey and New York. Jamba’s continued expansion depends in part on whether the company can perform as well in colder markets as it does in warmer ones.
A substantial portion of JMBA’s revenue comes from one state
Of Jamba’s 707 stores, 373 are located in California where the company originally started[13]. In 2007, sales from California locations accounted for 74% of revenues, making the firm very susceptible to poor earnings in this particular market[14]. As it turns out, traffic count for California stores fell by 6% in 2007, while same store sales in the state fell by 1.3%. A weakened state economy, competitive pressures, and new Jamba stores taking sales away from existing outlets have all been cited as reasons for the not so stellar performance[15]. Whatever the cause, Jamba must show that it can sustain sales growth in its home market.
Jamba’s success is tied to discretionary consumer spending and the general state of the economy
Jamba Juice markets itself as a “healthy lifestyle company,” and actively promotes its brand as one that believes in being “all natural” [16]. While Jamba has benefited from the upsurge in consumer interest in natural & organic foods consumption, the higher price associated with such foods tends to drive away cost-conscious consumers during economic downturns. The end of 2007 brought tightening credit and rising gas and food prices, trends that are expected to continue into 2008. Given the weak economic forecast, JMBA has scaled back its new store growth for 2008 to 45-55 company-owned stores, compared to the 99 it opened in 2007[17].
Jamba is vulnerable to fluctuations in the prices of fruit and dairy
oil prices As fruit and dairy are the predominant ingredients in Jamba’s product offerings, their prices can have a significant impact on the firm’s costs[18]. The supply and price of fruit of the quality Jamba seeks depends on the supply and demand at the time of purchase and can be highly volatile[19]. For instance, in January of 2007 JMBA’s cost of sales increased due to significant price increases in citrus products as a result of the freeze on the California citrus crop[20].
Competition
JMBA’s direct competition is with regional smoothie stores, most of which are franchises of other smoothie brands like Smoothie King and Maui Wowi[21]. It also competes with a number of quick service restaurants, coffee shops, donut shops and grocery stores[22].
| Company | Revenue (millions USD) | Net Income (millions USD) | Number of Company Operated Stores | Company Stores Revenue (millions USD) | Number of Franchise Stores | Franchise Revenue (millions USD) |
|---|---|---|---|---|---|---|
| Jamba, Inc. | 317[23] | (113)[24] | 501[25] | 306[26] | 206[27] | 11[28] |
| Smoothie King | 500[29] | |||||
| Surf City Squeeze | 219[30] | |||||
| Maui Wowi | 78[31] | |||||
| Orange Julius |
References
- ↑ JMBA 2007 10K, Item 1, pg.6
- ↑ JMBA 2007 10K, Item 1, pg.4
- ↑ JMBA 2007 10K, Item 7, pg.34
- ↑ Wall Street Journal, "Jamba Rebound Faces Hurdles", April 16, 2008
- ↑ JMBA 2007 10K, Item 1A, pg.16
- ↑ Wall Street Journal, "Jamba Rebound Faces Hurdles", April 16, 2008
- ↑ Wall Street Journal, "Jamba Rebound Faces Hurdles", April 16, 2008
- ↑ JMBA 2007 10K, Item 1A, pg.21
- ↑ JMBA 2007 10K, Item 6, pg.30
- ↑ JMBA 2007 10K, Item 7, pg.35
- ↑ JMBA 2007 10K, Item 7, pg.35
- ↑ Wall Street Journal, "Jamba Rebound Faces Hurdles", April 16, 2008
- ↑ JMBA 2007 10K, Item 2, pg.27
- ↑ JMBA 2007 10K, Item 1A, pg.16
- ↑ Wall Street Journal, "Jamba Rebound Faces Hurdles", April 16, 2008
- ↑ JMBA 2007 10K, Item 1, pg.8
- ↑ JMBA 2007 10K, Item 7, pg.36
- ↑ JMBA 2007 10K, Item 1A, pg.16
- ↑ JMBA 2007 10K, Item 1, pg.11
- ↑ JMBA 2007 10K, Item 1A, pg.16
- ↑ JMBA 2007 10K, Item 1, pg.11
- ↑ JMBA 2007 10K, Item 1, pg.11
- ↑ JMBA 2007 10K, Item 6, pg.30
- ↑ JMBA 2007 10K, Item 6, pg.30
- ↑ JMBA 2007 10K, Item 1, pg.6
- ↑ JMBA 2007 10K, Item 6, pg.30
- ↑ JMBA 2007 10K, Item 1, pg.6
- ↑ JMBA 2007 10K, Item 6, pg.30
- ↑ Smoothie King
- ↑ Surf City Squeeze
- ↑ Maui Wowi
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