But it’s going to take a less traditional route to doing it – because it’s going to be carried on the fins of the Starbucks mermaid.
The coffee giant yesterday announced today that it was purchasing the four year-old juice company for $30 million, and plans to use it as the lynchpin of a bold move into what chairman Howard Schultz termed a “$50 billion health and wellness sector.”
“We’re not only buying a juice company but we’re using this acquisition… to position us to build a major health and wellness category in an exciting way,” Schultz told investors and media during a conference call announcing the deal. “Our logo change [earlier this year] was in anticipation of a new direction to leverage the iconic nature and trust of Starbucks to other products.”
According to Schultz, Evolution’s recent investment in manufacturing technology that enables juices to be pasteurized in the bottle under high pressure – but without the heat that can kill flavor and vitamins — was the prime motivation behind the acquisition. The “HPP” process created a huge turnaround for Evolution, which had previously been hamstrung by its own commitment to freshness, as its lack of pasteurization had kept it restricted geographically to the West Coast. The company adopted HPP technology earlier this year, and it eventually created not just increased distribution, but apparently increased attention, as well.
“Evolution possesses a unique technological advantage – that’s the technology of HPP,” Schultz said. “This gives us a significant technological advantage over Naked, Odwalla, and the people who are selling fresh juice today.”
Schultz said that Starbucks plans to build off of Evolution’s strong distribution infrastructure on the West Coast and expand the Evolution brand into new channels and increase its grocery footprint nationally.
Starbucks will also build out a new series of stores that involve the sale of Evolution products on-premise, but will use Starbucks retail stores as a way of exposing consumers to the brand. He said the model for expanding Evolution was akin to the way the company has grown its VIA instant coffee brand, in which it introduced and sold the product exclusively in Starbucks retail locations before moving it into a number of grocery and large-format retailers. By leveraging the strength and appeal of its powerful brand name and its relationships with retail chains like Costco, Whole Foods and Safeway, VIA is on its way to become a $1 billion brand, according to Schultz.
Evolution Fresh founder Jimmy Rosenberg – who also started Naked Juice, now owned by PepsiCo, in 1993 — will remain with the company in the new role of “Chief Juice Officer” in terms of innovation and development for the brand. Shawn Sugarman, who was brought on board to help the company realize investment and production capacity in 2009, had left the company in advance of the Starbucks purchase.
In an odd twist, the purchase of Evolution Juice means that Rosenberg’s new company may be displacing his previous company in Starbucks stores. The company has sold Naked Juice products for several years, but at least one media outlet, the Wall Street Journal, is reporting that Evolution Juice will replace Naked in Starbucks. That could create a sticky wicket in the relationship between Pepsi and Starbucks, as Pepsi currently distributes the coffee company’s Frappuccino and Doubleshot brands, which are the best-selling RTD coffee products in the country. Calls to Naked were not returned immediately after the announcement.
The sale was a bonanza for Fireman Capital Partners, a Boston-based private equity firm that invested in Evolution Fresh in March, 2010. According to Fireman Capital, the company realized a 40 percent internal rate of return over the brief period of its work with Evolution before selling its stake to Starbucks. Evolution investment advisor Partnership Capital Growth Advisors was not part of the transaction.
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