Can Starbucks Do For Juice What It Did For Coffee?

Starbucks announced today that it had acquired juice company Evolution Fresh for $30 million, part of a larger effort to move beyond just the coffee business. This acquisition is an important step in its efforts to expand into the $50 billion health and wellness business. Howard Schultz, Starbucks chairman, President and CEO, stated “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.”

Evolution Fresh was started by Jimmy Rosenberg, who was the the founder of Naked Juice. It uses a unique system to keep products as natural as possible: High Pressure Pasteurization. Furthermore, Evolution is one of the few larger juice companies that still cracks, peels, presses and squeezes its own fruits and vegetables rather than using pureed or powdered ingredients. “Consumers trust the Starbucks brand to deliver on superior best-in-category quality and taste. On behalf of all of us at Evolution Fresh, we are proud to join the Starbucks organization,” said Rosenberg.

Starbucks (NASDAQ:SBUX) plans to further build Evolution Fresh’s current distribution and begin selling its products in Starbucks retail stores. Next the company plans to start a new, separate health and wellness retail chain, stocking Evolution Fresh juice and other healthy-living products in early or mid-2012.  ”We are not just acquiring a juice company,” said Starbucks CEO Howard Schultz. “We are using this acquisition to position ourselves, in a broad way, to build a multibillion health and wellness business over time.”

The acquisition of Evolution Fresh may put Starbucks into direct competition with smoothie maker Jamba Juice (NASDAQ:JMBA). Schultz also dismissed analyst concerns that it might share the same fate as the Jamba Juice chain, which has struggled with soft sales as consumers have cut back on extras like blended fruit drinks. He said Starbucks will be creating an entirely different type of store. Starbucks sees Evolution Fresh’s methods as a competitive edge over juice makers such as Odwalla or Naked Juice, which it currently carries in its stores, as it allows the juice maker it to keep a higher nutritional quality in the juice while maintaining the taste.  Starbucks hopes to attract new customers and provide new options for existing customers.
Starbucks’ expects Evolution Fresh to operate at a modest loss in fiscal 2012 and break even in fiscal 2013. The company said the deal does not affect Starbucks’ financial targets for fiscal 2012.

Shares of Starbucks rose 57 cents to close at $43.52 (+1.33%) Thursday.