Starbucks Coffee Co. this week made a big splash in the $3.4 billion cold-crafted juice market when it opened the first Evolution Fresh™ custom juice bar.
The move into the “healthy beverage” segment comes four months after acquiring San Bernardino, Calif.-based Evolution Fresh, Inc. for $30 million. The concept store, likely to be followed by construction of hundreds nationwide, features a patented juice dispensing system that allows the wait staff to customize high-quality fruit and vegetable juice offerings.
The 8-ounce drinks sell for $4.99 and the 16-ounce drinks are priced at $7.99.
Mixologists at Evolution Fresh™ also offer a selection of salads, soup and healthy snack options and sell TAZO tea in packages and on tap. The single tea tap is for seasonal offerings, according to a company spokesperson. TAZO currently manufactures tea concentrates for lattes and offers a limited selection of bottled tea juice blends first introduced in 2006.
Two deceptively simple technologies come into play in this store.
While it looks like freshly squeezed juice, what comes from the tap has been crushed under such intense pressure that no pathogens survive. After cold pressing and squeezing the fruit, the juice undergoes High Pressure Processing (Pascalization) that allows for a 45-day shelf life. The innovative process retains more of the flavor, vitamins and nutrients of raw fruits and vegetables. Juices go from tree to shelf in seven days or less, eliminating the need for noisy blenders and flies hovering over in-store bowls of over-ripe fruit.
The second innovation is graduated glassware that makes it easy for mixologists to draw unique combinations of juice from the taps. One customer might ask for four ounces of apple with six ounces of pomegranate and eight ounces of tea. Another will stare at the mesmerizing video wall above the taps and order carrot and beet, advertised as the juice highest in B vitamins.
The mix is then poured into a plastic cup with lid and straw. Each shop will have a customized selection of fruit and vegetable juices and a tap for TAZO that holds great promise for tea lovers.
Retail expert Burt Flickinger III, managing director of SRG (Strategic Resource Group) in New York, calls it the “perfect consumer combination” because drinks are customized to each consumer.
Fresh beverages, wraps, soups, vegan items and salads on offer appeal to an entirely different customer than someone ordering high-calorie, high-caffeine lattes at a Starbucks across the street, he notes.
“One wants high-quality, high-octane caffeine and sweet baked goods and the other — an even more knowledgeable young professional, with an even higher level of education, who is more health conscious — wants fresh, natural athletic energy, a meal and health solution at the same time,” says Flickinger.
“People's tastes are changing and Starbucks could be a bellwether,” adds Bob Phibbs, a retail consultant and author known as the Retail Dr. “Their acquisition of Evolution gives them a proven café concept that is right on trend in larger, upscale markets without diluting their Starbucks brand,” he said.
“They are trying things to boost earnings, that's why they are successful. Smaller retailers should take notice and become informed because it is likely those Evolution customers, especially in the NE and NW could be open to similar options. Not another granita machine or "Italian ice" but healthy/healthful juices,” he said.
A challenge for everyone in the fresh juice category is that even at 45 days “shelf life is so low you'll have to burn through a lot of product until the category demand justifies it.”
Ready-to-Drink (RTD) Beverages
The foodservice drinks are flanked with a cold case filled with Starbucks juices. These grab-and-go options will compete with the highly successful Naked Juice, owned by PepsiCo. Evolution Fresh founder Jimmy Rosenberg also founded the Naked Juice Company in 1983. Starbucks previously featured Naked Juice in its stores and will now replace those lines with Evolution products later this year.
Evolution Fresh brand will also be available to grocery channels. Coca-Cola owned Odwalla is the other big player in the $5 billion juice category which includes several pasteurized brands.
The new branding clearly reflects the vibrancy of real, pure ingredients and products, highlighting the fact that the juice is never heated due to Evolution Fresh’s innovative use of (HPP), according to Starbucks.
“Evolution Fresh sets a new standard in premium cold-crafted juice. We are making real juice that has more of the nutrients and flavors from the fruits and vegetables from which it comes from,” said Jeff Hansberry, president, Channel Development. “We have a tremendous opportunity to change people’s lives not only by making premium-quality, natural juices and foods more readily available, but also by offering an extensive variety of choices for customers to select the best options for their lifestyle.”
The company writes that refreshing the brand also marks Starbucks’ commitment to bringing continued innovation to the cold processed category. Many independent juice bars and rivals like Jamba Juice do not pasteurize their in-store offerings. Evolution Fresh plans to build on its product line-up with new seasonal and core juices that are never heated, according to Starbucks.
Fruit Beverage Market
The liquid refreshment beverage category has rebounded since 2010, according to Beverage Marketing Corporation. Sales of fruit beverages declined to 3.5 billion gallons during the recession, representing 12.2 percent of the refreshment market which is dominated by carbonated soda (47.2 percent share).
“Competition from other categories has been intense and innovation has been limited in the fruit beverage category,” according to BMC, adding “Higher prices, particularly for chilled orange juice, has also negatively impacted the category.”
“Over the last five years, fruit drinks have outperformed fruit juice and gained share,” according to BMC. Fruit drinks (vs 100 percent juices) now hold 46.4 percent of the fruit beverage segment. During this same period, BMC reports RTD tea grew by 10.4 percent and jumped 11.5 percent in volume from 2009 to 2010. RTD tea volume is nearing the billion mark at 989.7 million gallons.
In the summer of 2006, Starbucks introduced the Frappuccino Juice Blend, which is described as being "real fruit juices combined with Tazo Tea, blended with ice." A coffee-free "cream" base was created to make a beverage called a Frappuccino Blended Crème. Flavors include Green Tea Frappuccino and Strawberries and Cream Frappuccino. Tazo® Green Tea Crème Frappuccino® was named a Weight Watchers favorite. The line was discontinued in 2008.
Evolution Fresh Format Expansion
Flickinger estimates a $500,000 price tag for each new free-standing store. He predicts hundreds will be built following a six month shakedown period in Bellevue. Growth will be in university towns, he said. “Look for stores across from USC in California and UCLA and in Ithaca, New York, Colorado and Atlanta, Georgia and other ‘trend-setting’ communities,” he said.
Starbucks CEO Howard Schultz said last November that successful independent juice bars gross more than a million per unit, a annual sales number less than the typical Starbucks but somewhat above competitor Jamba Juice.
This is a good time for expansion with shopping mall vacancies at an all-time high, he explains. “Smart landlords will offer generous build-out allowances allowing Evolution Fresh to reach scale faster,” said Flickinger.
Starbucks is a very astute manager of retail properties with choice locations nationwide. Look for store within store expansion of the concept at larger locations, he said.
“Juice makes tremendous sense in retail right now,” said Flickinger.