Jamba Inc. (JMBA) continues to innovate its beverage lines and is ready to make good business this the summer season with its latest Fruit Refreshers with coconut water. The new natural hydrating beverage platform was launched in three flavors –– Pineapple, Strawberry Lemonade and Tropical Mango –– and will available in over 700 stores.
In addition to this beverage line, Jamba also announced the expansion of the very popular Whirl’ns Frozen Yogurt. This line of frozen yogurt treats features signature flavors found only at Jamba Juice. The line was introduced in December 2010. Upon being well accepted by customers, Jamba decided to expand the line to over 100 additional stores in Southern California. Management expects this product to be a successful addition to its afternoon and evening daypart growth.
Earlier, Jamba renewed its partnership with Nestlé USA, part of Nestlé SA (NSRGY) to develop a new ready-to-drink beverage line. Jamba Juice plans to capitalize on its product development talent to create these differentiated lines of energy drinks within the $8.5 billion energy drink category. The company intends to transform itself from a made-to-order smoothie retail chain to a healthy, active lifestyle brand by 2013 and is expanding its menu with a number of food and beverage items in an attempt to increase demand at off-peak dayparts.
During the first quarter of 2011, California-basedJamba aggressively invested in marketing to introduce its new beverage offerings, including an innovative yogurt blend platform and a fruit and vegetable platform. In the first quarter, Jamba benefited from the efficiencies in the costs of sales and labor expense lines. In addition, as a result of Jamba’s positive company-owned comparable store sales increase, it started to leverage its fixed occupancy costs.
Jamba, a former special purpose acquisition company, acquired Jamba Juice in 2006. Following the acquisition, Jamba went in for a rapid expansion program. However, since 2007, Jamba remained unprofitable mainly due to its foray into new, mostly cooler-weather markets.
Jamba’s competitors primarily include Starbucks Corp. (SBUX) and McDonald's Inc. (MCD), which has delivered strong comparable sales in the U.S. buoyed by the McCafe Real Fruit Smoothies and Frappes along with other value-based drinks. Jamba currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
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