Jamba Turnaround Adds Stores and New Products

April 30, 2010

James White is taking Jamba beyond smoothies.

Since taking over as CEO in December 2008, White has established a turnaround strategy for the Emeryville company, whose smoothies were once red-hot, but whose growth went cold.

“We know we’ve got an incredible brand,” White said, citing Jamba’s almost 400,000 Facebook fans and a significant Twitter following. “We laid out a clear plan to turn around and ultimately transform the company in the Great Recession.”

The company will complete the refranchising of 150 company-owned stores this year. It also will also add up to 50 net new stores in 2010. Most will be outside of California and franchised, with a focus on college campuses, airports and malls.

“Those are three areas where we have a lot of room to grow,” White said.

Under its prior CEO, Paul Clayton, Jamba tried to move away from franchises to company-owned stores, but refranchising has proved a popular trend during the recession, said Lynne Collier, a managing director with Sterne Agee who covers restaurants, but who does not cover Jamba Inc.

“Not only does refranchising take a load off in terms of operating stores, but it also takes a load off debt. They can use capital from selling stores to pay down debt,” Collier said.

Indeed, Jamba eliminated all long term debt during the 2009 fiscal year, part of White’s financial turnaround. But revenue fell 12 percent last year, to $301.6 million from $342.9 million in 2008.

White said he expects to return to positive same-store sales in 2010, helped in no small part by another of Jamba’s new initiatives: expanding the menu beyond smoothies to appeal to customers more frequently and throughout the day.

Over the past year, Jamba added food offerings like oatmeal, wraps and sandwiches, salads and even flatbreads at some stores. And it’s added a blended tea to give people a reason to stop at Jamba, not at Starbucks, in the morning.

Collier said broadening its offering is a smart move.

“When you have a one-product offering like bagels or smoothies or frozen yogurt, that fizzles out at some point,” she said. “We’ve seen that with niches.”

Jamba is also expanding beyond stores.

While stores will remain the bulk of Jamba’s business, 2010 is the year it adds revenue from new channels like packaged goods and licensed products.

Make-at-home frozen smoothie kits are available at retailers, as are popsicles. A Jamba-branded toy made by Think Wow Toys is sold in 600 Toys R Us stores, and in April 2010 Jamba announced a deal with Headline Entertainment to create a Jamba-inspired clothing line.

White sees brand extensions as a major opportunity. California Pizza Kitchen, for example, gets 50 percent of its pre-tax revenue from its food products business, and Starbucks also gets significant revenue from packaged goods.

“We think we have a brand that is more extendable than either of those,” White said. “We’re just getting started with consumer packaged goods.”

Jamba will add several more licensees this year “where it makes sense and to fill out categories,” White said.

And this year, Jamba will open its first international store as White tries to make it a global brand.