Mexx

The Case for Jamba Juice

Matthew, I've already place my bet in the Jamba roulette -that bet is long.

While I concur with some of your points, most of your points are too anecdotal or tactical to make a case for Jamba either way.

There is a lot of pessimism built into the stock, at this level, the numbers don't mean much, the fact that it trades below book is meaningless, there are lots of micro-caps that fit that profile (e.g., VIMC, FMD come to mind).

Nonetheless, I think it comes down to three things:

Unique Value Proposition (UVP): The fact that MCD, SBUX, Dunkin, and everyone else has jumped into the smoothie business simply validates the Product category and exposes more people to the smoothie concept. Competition is alive and well, it may be in very fragmented market but it is there, and lets not forget all the near perfect substitutes in the ready to drink market. So the question is can Jamba create a UVP that can help differentiate itself and help grow their biz. model. My answer is maybe. I think serving quality drinks is a great start, but they have a bit to go in the in-store experience, your example of the 6min. brings to light the in-store issue.

Management: Contrary to other's opinion, I think management is quite competent. Their marketing is stellar, they understand operations and are lasered focus on creative a memorable customer experience so that they increase customer frequency (a key metric). Scoring the Nestle distribution deal in the RTD market by leveraging their brand was a stroke of genius. They are keenly aware of service, throughput, sizing/pricing and are working hard on fixing them. Unfortunately, that leaves little time and money to respond to indiv. shareholder letters. Judging Management responsiveness by the fact that they did not respond to your letter is a bit... petty.

Profitability: It is absolutely critical for Jamba to figure out how to make money on a $2.95 drink and still fulfill the brand promise and deliver a UVP. The scalability of the business, the mass market appeal, and most importantly the ability to make money over the long haul rests in making the $2.95 drink work for the business. This is where the futures market could come into play, along with some tight controls over operations and cost containment.

Bottomline, we are clearly in long-term speculation territory. At the next earnings meeting, pay attention to the three things above, everything else is short-term noise.