Starbucks to Launch New Health Chain
Starbucks Corp plans to start a chain of juice bars starting next year, venturing into territory staked out by Jamba Inc , in its biggest-ever expansion beyond coffee.
The world's largest coffee chain, which has made no secret of its ambitions to expand beyond its staple business, said on Thursday it bought juice company Evolution Fresh for $30 million in cash.
Chief Executive Officer Howard Schultz hopes buying Evolution Fresh, whose products are sold by a handful of retailers including Whole Foods Market Inc , will give the company a meaningful foothold in the estimated $50 billion health food market.
The first juice bars will open on the U.S. West Coast in early to mid-2012, but the company would not say how many were planned. The chain's name has not been revealed and it was not immediately clear whether Starbucks' familiar Mermaid logo -- which recently dropped the word "coffee" from its design -- would be displayed by the new chain.
Schultz said the moves announced Thursday were the first of many things the company planned for the so-called health and wellness market.
"We think we can build a major business," he told reporters on a conference call.
Shares in Jamba dipped 0.6 percent to $1.65 after the announcement. Stock in Starbucks, which is up about 40 percent over the last 12 months, were up 1.1 percent at $43.43 on Thursday afternoon on the Nasdaq.
Seattle-based Starbucks recently has been selling a broader range of branded products through grocery stores and other retail outlets.
San Bernardino, California-based Evolution Fresh sells fruit and vegetable juices and was started by the founder of Naked Juice. It uses a heat-free, high-pressure pasteurization process that it says retains more of the nutrients in its products compared with using conventional heat pasteurization.
Its products are currently sold in Whole Foods and PCC Natural Markets stores on the U.S. West Coast. Starbucks plans to expand distribution into additional retail channels and sell the products in its own retail stores.
Over time, Starbucks said it plans to invest in Evolution Fresh's facility upgrades, as well as its distribution business.
Starbucks expects Evolution Fresh to operate at a modest loss in fiscal 2012 before breaking even in fiscal 2013. The company, which returned to profit growth in 2010 after a painful two-year restructuring, said its forecasts for fiscal 2012 are unchanged as a result of the acquisition.