My Analysis of Starbucks’ $30M Acquisition of Evolution Fresh, Getting into the Organic Juice Business

Written by Max Goldberg on November 11, 2011. Follow Max on Twitter: @livingmaxwell.

Yesterday, Starbucks announced that it had purchased Evolution Fresh for $30 million in cash and held a conference call formally disclosing its plans to enter the $50 billion health and wellness industry.

Started by Jimmy Rosenberg, the original founder of Naked Juice, Evolution Fresh is a California-based company that sells a line of organic and non-organic pressed juices in retail locations on the West Coast.

This acquisition by Starbucks is just the first step of a large strategic initiative to tap into the growing health and wellness sector.

“Our intent is to build a national health and wellness brand leveraging our scale, resources and premium product expertise. Bringing Evolution Fresh into the Starbucks family marks an important step forward in this pursuit,” said Howard Schultz, Starbucks Chairman, President and CEO. “Over the last year-and-a-half we have looked comprehensively at possible opportunities and chose Evolution Fresh because it stood above anything else in terms of premium quality, nutrition and potential for growth.”

While Evolution Fresh will soon be sold in Starbucks nationwide and through other distribution channels where the company has existing relationships (supermarkets, Big Box stores, etc.), the most interesting aspect of the conference call was Howard Schultz talking about the new, stand-alone concept (juice bars) that he will be opening in the first half of 2012.

When pressed for details on what these stores would look like and what exactly they would be selling, Howard Schultz revealed very little.

What he did say, however, is that:

– The stores would be relatively the same size and have the same layout as existing Starbucks outlets.

– Several locations would be opened in California next year in order to test and fine tune the concept.

– People have been recruited from the juice and health & wellness industries to develop the prototype, which they have been working on for the past 6 months.

– He and his team scoured the globe looking at many different existing juice businesses and potential acquisitions.

– The company wants to use its beverage capabilities to deliver the same “theater and romance” experience for a new health and wellness concept.

Howard Schultz said that Starbucks had “cracked the code” in developing a model that will work in the health and wellness area.

WHY EVOLUTION FRESH?

There were a few probable reasons why Starbucks chose to buy Evolution Fresh.

1) Evolution Fresh sells its pressed juice using a method called High Pressure Pasteurization (HPP). Unlike flash-pasteurization, which kills many of the enzymes in juice with its high heat, HPP’s impact on enzymes is much less severe, yet this technology still enables a much longer shelf-life than raw juice.

HPP is a big strategic advantage and necessity for Starbucks if it intends to sell Evolution Fresh at tens of thousands of retail points across the country.

2) The second reason for the acquisition was to acquire the talent of Jimmy Rosenberg.

Jimmy Rosenberg has been in the juice business for more than 25 years and will help develop recipes for the new health and wellness concept and for existing Starbucks locations.

He will be the Chief Juice Officer of Evolution Fresh. (Have you ever heard of a better title in your life?)

MY TAKE

If you follow the organic scene in New York City, the announcement that Starbucks is entering the juice business comes as absolutely no surprise.

Earlier this year, the New York Post reported that Howard Schultz checked out The Juice Press and then last month reported that it had stolen away long-time manager of Liquiteria, Yohana Bencosme.

There were also rumors floating around that Starbucks was looking to buy Organic Avenue, something that Organic Avenue Co-Founder Doug Evans told me was “100% not true.”

Getting into the health and wellness business makes sense for Starbucks because that is unquestionably where the growth is. What Starbucks’ exact concept will be, however, remains to be seen.

We know that it will have fresh juice. We know that it will sell pressed juice from Evolution Fresh. We know that it will have food.

We don’t know:

– If the juice and/or food will be slightly or heavily organic.

– What the concept will be called but we know it won’t be “Starbucks Juice”. The Starbucks brand has nothing to do with health and wellness.

It could very easily be Evolution Fresh. It is a great name and represents health, wellness, wholesomeness, and positive change.

– What the wellness component will be. Will there be classes, lectures or seminars?

My guess is that it is going to be something more than selling healthy food and juice. There will probably be an educational component to it as well, similar to what Whole Foods is doing with its Wellness Clubs.

I am just hoping that Howard Schultz incorporates a very large amount of organic food and juice into his concept.

Our country wants organic, and “natural” just does not cut it for people who truly care about their health.

Furthermore, we need Howard Schultz as an advocate for the organic movement in the U.S.

People listen to what he has to say, and Starbucks has such incredible reach that the company could have an incredible impact on the industry.

As soon I have more information about what this health and wellness concept will be, I will pass it along.

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10 Comments

  1. Thank you Max for this update.
    This huge and very important. I agree with your analysis.

    Yours in health,
    stephanie

    Written by stephanie haughey on November 12, 2011 @ 12:10 pm
  2. Hi Stephanie,

    My pleasure. I’m sure one of the first stores will be in the SF area, so you’ll have to check it out for us!

    Live well,
    Max

    Written by Max Goldberg on November 13, 2011 @ 8:42 pm
  3. Yes, thank you for this informative article.
    Your statement that “Our country wants ‘organic’, and ‘natural’ just doesn’t cut it for people who truly care about their health” is spot on!!
    There’s something in the mix here, too, that brings up the question of scale and the sourcing of product ingredients. For the overall, real health of ‘people and planet’, not simply of any given bottom line, spreading the wealth through disseminated, local, organic sourcing would be the way to go.
    Joyful Blessings,
    Alisa Rose
    ww.ambianceeco.com

    Written by Alisa Rose Seidlitz on November 16, 2011 @ 1:21 pm
  4. Hi Alisa Rose,

    My pleasure and I am glad you enjoyed it. Yes, if we could get organic and local to everyone, that would be the best case scenario.

    I appreciate your feedback.

    Live well,
    Max

    Written by Max Goldberg on November 17, 2011 @ 3:56 pm
  5. Hi Max
    I buy sell food companies here in Los Angeles, and I was in contact with Jimmy Rosenberg after meeting at the Fancy Food Show. But when we exchanged emails about any interest in selling last year my recolllection was that he was not ready. Amazing how fast things change in this business when the right buyer comes along. THis should go a long way to help convinve other lower middle market business owners to seek a buyer in 2012 would you agree? I write about this gap between expectations and the new normal often and would be curious about your views of Food/Bev M&A in 2012.
    Thanks
    Rick Andrade

    Written by Rick Andrade on January 2, 2012 @ 2:32 pm
  6. Hi Rick,

    Yes, it will probably have an impact. A huge one? I’m not sure.

    My sense is that the money usually does the talking and business owners either want to sell or they don’t. In some cases, organic food entrepreneurs feel like the acquirer will destroy the organic ethos of the company and, therefore, won’t sell at any cost.

    In other cases, the entrepreneur is burned out and/or feels that the acquirer can provide resources that he/she doesn’t have in order to take the company to the next level.

    I think it is very much of a case-by-case basis but clearly the ethical part of organic factors into the decision of whether to take a buyout or not.

    Food and Bev M/A in 2012 in the organic sector: It will absolutely continue because organic is where the growth is. Private equity guys and investment bankers call me looking for deals but the problem is finding companies that meet the $5-10M threshold that many buyers are looking for.

    And once they hit that levels, the buyers are swarming and they don’t stay independent for long.

    There is a huge need for earlier stage private equity/VC in the organic food sector. Lots of young companies need money but can’t find it.

    Thanks for sharing your experience with Jimmy.

    Live well,
    Max

    Written by Max Goldberg on January 2, 2012 @ 4:37 pm
  7. Wonderful web site. Lots of useful info here. I am sending it to several pals ans also sharing in delicious. And naturally, thanks on your effort!

    Written by Seguir leyendo on January 16, 2013 @ 5:41 am
  8. Thank you so much Seguir Leyendo!

    Saludos,
    Max

    Written by Max Goldberg on January 17, 2013 @ 11:10 pm
  9. Hey there. My husband and I eat and drink juice from evolution fresh almost daily. We love customizing our own bowls and are so happy to have a place that serves fast easy meals that comform to our diet. My concern is however the juice… I normally purchase sweet greens in the Togo bottle, but it doesn’t have organic fruits and veggies in it… So am I drinking a high concentrate of pestiside residue or what? They have an “organic V” juice as well but I’m curious as to how much of the pesticides are in the nonorganic juices…

    Written by Roy on February 19, 2013 @ 6:19 pm
  10. Hi Roy,

    Unless you do lab testing, the exact amount of pesticides in non-organic juice is anyone’s guess. However, I would never buy conventional green juice. Why ingest toxic pesticides when you’re trying to put something healthy in your body?

    Live well,
    Max

    Written by Max Goldberg on February 24, 2013 @ 9:32 am

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