My Analysis of Starbucks’ $30M Acquisition of Evolution Fresh, Getting into the Organic Juice Business
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?)
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.” width=”177″ height=”97″ />