Jamba Inc (NASDAQ:JMBA) is health and wellness lifestyle brand best known for its 22 year history of providing trend-setting, better-for-you smoothies and fresh squeezed juices through its more than 750 stores. From 2009-2011, the company had been in a transformational period, during which Jamba undertook several initiatives to return the company to profitability and streamline its' business model. This included the refranchising of over 170 stores, introducing a comprehensive food platform in stores and launching a line of Jamba-branded products. Below is a discussion I had with Chairman, President, and CEO James D. White, highlighting four crucial components to Jamba's future success.
Franchise Store Model
Galileo Russell: Since you took your position as CEO, you have been focusing on a franchise store model. Why is this? Especially with the Jamba Juice store model becoming profitable wouldn't it be much more lucrative to open company owned stores?
James White: We are going for an asset light business model. When I took over Jamba Juice was 70% company owned stores, and 30% franchised. After the recession we wanted to have less risk and unlock potential to accelerate growth by focusing on brand development. We are now shooting for a mix of 80-90% franchised stores and 10-20% company owned stores.
GR: What is the potential for the Jamba Juice retail unit? How many stores do you believe you can open and have operating in the coming years?
JW: We see the potential for 2,700 US stores, as of now there are only about 750 domestic locations. Internationally we have targeted 1,000 locations, and as of now we have 30.
Talbot Teas/Winter Sales
GR: In February of this year you acquired Talbott Teas. How are you integrating this acquisition and what made a tea company a good fit for a smoothie company?
JW: "It's a nice compliment in our stores, and builds out a premium offering for hot beverages. We are very excited to have master tea blender and entrepreneur, Shane Talbott, join our team as well."
GR: Jamba Juice has traditionally a very seasonal business with much higher sales in the summer/hotter months. Are you planning on changing this? How can you leverage the brand's new success to improve winter sales?
JW: We will be rolling out Talbott Teas into stores this fall. This provides an opportunity through made-to order beverages to increase winter product offerings. Jamba Juice is also planning to build a distribution base at premium hotels restaurants, and select retailers with the Talbott brand.
CPG (Consumer Packaged Goods)
GR: In an effort to expand the overall scope of the Jamba Juice brand you have targeted over 50,000 retail locations to sell Jamba Juice branded Consumer Packaged Goods (CPG). In the first and second quarters of 2012 you saw CPG licensing revenue of $0.6 million, but have provided guidance to reach approximately $3 million for all of 2012, where is all this growth coming from?
JW: It will be a combination of our existing (licensing model), and a shift towards Jamba Energy and Talbott Teas. These are both seasonal business that should get a boost in the second half of the year as well as provide the foundation for our next level of CPG revenue growth.
GR: There is a mention of the target of being a "billion dollar" brand by 2016 and achieving $1 billion in annual system-wide sales. Where are system wide sales right now, and where is the bulk of this growth going to come from?
JW: System wide sales were $450 million (including company and franchised stores, and CPG licensing revenue). CPG sales represented about $50 million in 2011, but we are anticipating that number to climb to $150 million this year. as we build out the Jamba Juice and Talbott Teas brands.
GR: As of your last quarterly report you had 130 JambaGo stations across the US, and you stated that you plan to have anywhere from 400-500 by years end. Could you give an estimate of the revenue per unit and what the expected margins will be?
JW: JambaGo is focused on making the brand more accessible to more people. Our main distribution points will be primarily at K-12 schools. We are projecting to have 400-500 units by year end, and $700,000 revenue in 2012 (from JambaGo units). We have also targeted 1500 JambaGo units by the end of 2013.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.