A Winning Combination

Ever notice how Starbucks and Jamba Juice are usually next to each other?

June, 2004

In this McWorld where the word “Kleenex” is used interchangeably with “tissue” and Xerox can be a verb meaning “to copy,” Starbucks and Jamba Juice have come to occupy their own unique space, at least in Hawaii, where some kids already think “Jamba Juice” before the word “smoothie.”

The brands haven’t been here long. Starbucks opened in Kahala Mall in 1996 and the first Jamba Juice opened in Kailua in 1999. However, today, they’re virtually everywhere, often right next to each other. That’s not a surprise, as the same local holding company, Café Partners Hawaii, owns a 95 percent stake in each Hawaii licensee. Coffee Partners Hawaii (the Starbucks licensee) is a joint venture with Washington-based Starbucks Coffee (NASDAQ:SBUX) and JJC Hawaii LLC (the Jamba Juice licensee) is a joint venture with the privately held Jamba Juice Co.

Greg Meier, president of both Coffee Partners Hawaii and JJC Hawaii LLC, says the two companies operate separately, yet share the same back office and support functions, such as marketing, human resources and IT. According to Meier, the two beverage-based businesses synergize well. “They are very good co-tenants. By being next to each other, they really can activate an area and create a destination, where people can go and hang out,” he says. Meier declines to give gross sales figures but says annual sales for both Starbucks and Jamba Juice in Hawaii for 2003 were 28 percent higher than 2002.

In fact, Hawaii-based Starbucks and Jamba Juice stores are top performers. Paul Clayton, Jamba Juice’s chief executive officer, says, “They’ve been doing phenomenally well on all fronts. Their business performance is producing some of the best results within the Jamba Juice system. The average store volumes in Hawaii from a market standpoint are the highest in the country. Two of their stores are the two highest volume stores in the Jamba Juice system to date.”

Christine Day, senior vice president of Starbucks Coffee International, says Coffee Partners Hawaii has continuously exceeded expectations. “Average annual sales volume for Hawaii (stores) is over $1 million, compared to $900,000 for North American stores. In fact, Hawaii has the highest average annual sales volume per store worldwide,” she says.

Meier cofounded Coffee Partners Hawaii with friends Dean and Scott McPhail in 1996. All three had worked for Pacific Video Enter-tainment Corp., the Hawaii Blockbuster Video franchisee, which operated 16 stores in Hawaii and two in Guam, before selling the franchise to Viacom in 1996. Meier says, “We went from a company that had $25 million in sales and 350 employees to three unemployed guys starting up a new business.”

The friends identified Starbucks as a growing Mainland trend that had legs for Hawaii. However, Starbucks didn’t franchise.

They persisted, and with the aid of business partner and developer Duncan MacNaughton’s family and business contacts, Starbucks eventually classified the Hawaii operation under the international group, which allowed Starbucks to franchise or do a joint venture.

Meier and company kept looking for other ways to grow, and decided to go after California-based Jamba Juice, which didn’t franchise, either. Relationships helped again in this case, as both Jamba Juice and Starbucks have a few board members in common. After working the deal for a year and a half, JJC Hawaii became the Hawaii developer for Jamba Juice in 1999.

In 2000, Café Hawaii Partners secured the rights for Jamba Juice in the state of Florida, forming JJC Florida LLC. In 2002, the Hawaii group expanded Starbucks Coffee into Puerto Rico, forming Café Del Caribe. However, expansion within Hawaii is still far from over.

Today, there are 42 Starbucks and 20 Jamba Juice stores in Hawaii and Meier expects to add up to seven more Starbucks and eight Jamba Juice stores by the end of the year. While opening a Starbucks or Jamba Juice within a block of another one may seem counterintuitive and cannibalistic, it actually seems to work. Says Meier, “Our experience shows the line (at the older location) will fill back in.”

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Author:

Kelli Abe-Trifonovich