Ariel Furman

Anna Lin

Tuomas Kuusela

Vincent Tsao

Jennifer Mo

Jesse Rubio

Jan Vejdiksen

MOR 492 Professor Voigt

Team Six

Content

•  A. Executive Brief

•  B. Juice and the Beverage Industry

–  What is Juice?

–  Reasons to Enter China

–  Country and Business Environment Analysis

–  The Role of Juice in Chinese dietary

•  C. Jamba Juice and The Competitive Advantage

–  Business Model

–  Value Chain

–  Case Study: The Keys to the Success of Starbucks and Haagen-Dazs in China

•  D. Chinese Entry Strategy

–  Partnership: SPC Franchising

–  Penetrate: Identify and Appeal to the New Mainstream Consumers in Tier 1 Cities

–  Present: Create The Ultimate Jamba Juice Experience

•  E. Implementation

–  Financial Projection

–  Implementation Timeline

•  F. Appendix

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11

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14

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23

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25

How

Bring Build

Meet

Why

Executive Brief �It’s More than Juice, It’s The Experience

Objective

Generate $50 million revenue in China

within the next 5 years

Key Challenges

How to make Chinese consumer purchase specialty

drinks and create a strong brand perception

Recommendations

Partner with SPC Group to open café franchises in Shanghai and Beijing

Penetrate through high brand presence and visibility

Present The Jamba Juice experience to attract Chinese

consumers

•  The US market is saturated for Jamba Juice, and Jamba Juice needs to find the new resource of growth to satisfy investors and fulfill the growth imperatives

•  12% CAGR increase in China of juice consumption and the increasing middle class suggests that there is a high potential demand

•  Competitors such as Smoothie King have already entered China; Jamba Juice has to move fast or competitors could create barriers to entry

•  Chinese consumers associates foreign brands with higher quality, and they are becoming very open to westernized products and lifestyle

•  Competitors have established locations in the food courts of popular urban centers with live freshly squeezed juice within an average of $3 price range

•  Juice traditionally has been perceived as a commodity instead of a premium indulgence. The consumption is low compared to developed markets, thus Jamba Juice needs to create demand into the Chinese diet

•  Jamba Juice should focus on bringing The Ultimate Juice Experience, including the commitment to a healthy, fun, and energetic lifestyle. It is a place for people to recharge, meet, and relax with a healthy drink

•  Jamba Juice should build a strong brand and create excitement of the products by attractive indoor decorations, quality products, and premium locations. It should transfer the most of western experience with slight local market adaptation

•  Jamba Juice should enter China through franchising placed in Tier 1 cities (Shanghai and Beijing)in the next five years

•  Jamba Juice should partner up with SPC Group (Relationship already successfully established in Korea), which has had success in opening franchises in China to help expand Jamba Juice’s brand name and achieve high visibility

•  Star employees from United States will train the new-hires in China. It is important to ensure the successful execution of the promise above, to bring premium quality products and services in China.

•  Creative marketing strategies, such as partnership with gyms and flexible promotions should be explored to speed up the penetration process.

4  

Jamba Juice is An Experience

This is Jamba Juice

Beverage/Food Retail

Specialty Retail

Healthy Drinks Cafe

Basic  need  for  a  drink  

Brand  Equity  

Social  Experience  

Customized  products  

Convenience  

What is Juice?

Small global market

Highly versatile, flexible beverage

Easy entry and incorporation

Lifestyle-based, and health focused

Product Portfolio: Smoothies, Freshly Squeezed Juice, baked goods, wraps, snacks

“High quality, better-for-you”, Jamba continues to develop innovative products made from premium ingredients

Jamba dedicates to raise the awareness of a healthy, active lifestyle by improving store designs, sponsoring athletic events, and ongoing health-focused marketing promotions

The Ultimate Jamba Experience

• Jamba juice will satisfy customers’ basic need for a drink that relieves thirsty. However, the juice contains energy and liveliness, conveyed from product design, packaging, and the nutritional value.

An energy drink

• Customers are consciously making a smart choice by purchasing Jamba Juice. It will offer health benefits, and encourage customers to stay active, eat healthy, and have a positive mindset.

A health commit

ment

• Jamba Juice is a cool place to hangout. The colorful indoor design and the friendly staff will both offer a positive experience.

A trendy spot

• Jamba Juice makes customers feel good about themselves. They are choosing Jamba Juice because they can afford a premium and enjoy all the benefits stated above.

A sense of status

Coffee Tea Juice

Small Market Size

Diversified Products Easy Entry

All you need is fruit

Juice = Health

5  

Jamba Juice’s Niche�The New Mainstream Chinese Consumers

1  2  3  4  5  

Global Consumers Domestically focused but upwardly mobile

Locally focused with income

No  disposable  income    

10 6 2 7 3

51% = 600 Million

6

Poor Mass New Mainstream Affluent

Percentage of Urban households by annual income in US Dollar

2010 2020

< $6,000 $6,000 - $16,000 $16,000 - $34,000 > $34,000

26.6% CAGR

The New Mainstream Chinese Consumers demands for Jamba Where they live % of consumers in

tier 1&2 cities 74%

What are they looking for

Emotional benefits 23&

How they spend their money

Willingness to pay a premium

49%

Shanghai Beijing

The new mainstream customers (Global consumers and upwardly mobile sectors) in China is growing and will be willing to pay for the premium juice experience. Jamba juice differentiates itself by creating a experience (emotional benefits). Customers pay for a premium for the relaxing, fun environment while convincing themselves of a healthier lifestyle.

82

6  

Increasing demand and competitive pressure drives globalization in beverages

Cost Drivers (Low)

• Transportation of fruits, keeping them fresh may be extremely costly in some areas

• Does not require additional technology investments, leading to low costs

• Maintaining the quality of fruits or other ”raw materials” may be costly in some markets

Market Drivers (High)

• Lifestyles of developed and emerging markets are converging

• Consumption of healthy drinks increases dramatically with the of disposable

• Income leading to high potential within high GDP growth countries

• Fruits are available in most markets excluding very dry or cold areas

Competition Drivers (High)

• Market saturation in Western markets drives companies such as Jamba Juice to go global

• Emerging foreign markets are becoming key battlefields for Western branded products

Government Drivers (Medium)

• Healthy drinks have no national importance and therefore government barriers of entry should not be high

• Varying health or food safety regulations may make glozalization difficult

Growing Middle class in China is the next sweet stop. Growth Imperative

Declining revenues in the United States between 2010 and 2012 signal intensifying competition and need to seek additional growth elsewhere

• Increasing Chinese Juice consumption (CAGR 12.3 % from 2007 to 2011) tells about market potential

• The success of Western cafés such as Starbucks tells that people in China are very receptive to Western drinks

Knowledge Imperative

Entering China or other similar countries may result in positive learning effects

• For example product adaptation in China may result in products that help Jamba Juice to compete in the home market and other Asian markets

• By entering new emerging markets Jamba Juice will be able to gain experience for further expansion

Globalization of Competitors

Jamba Juice’s competitors, such as Smoothie King, are expanding to China

•  The specialty drink industry for coffee shops and cafés is in high growth due to increasing urbanization and disposable income.

•  However, the market is very affluent and new taste preferences makes the market very unpredictable. •  An identified adoption of Western lifestyle towards more healthy consumption and small ‘going-out-

experiences’ give rise to significant opportunities for Jamba Juice. •  This paired with low government barriers to open a café, makes China and Jamba Juice a perfect

match. 7  

Jamba Juice faces strong competitive pressure

•  The specialty drink industry for coffee shops and cafés is in high growth due to increasing urbanization and disposable income.

•  However, the market is very affluent and new taste preferences makes the market very unpredictable. •  An identified adoption of Western lifestyle towards more healthy consumption and small ‘going-out-

experiences’ give rise to significant opportunities for Jamba Juice. •  This paired with low government barriers to open a café, makes China and Jamba Juice a perfect match.

Porter’s Five Force suggests that the beverage industry has very low barrier to enter and many players, that competitors can easily copy almost ANY competitive advantage.

PEST analysis supports the low entry barrier result with no significant political or technology barrier. The key challenge for Jamba Juice is to create a demand of juice in the traditional Chinese diet and convey the experience rather than the beverage itself to consumers.

Key Takeaways

Social

• Increasing urban population and middle class, low juice consumption

• Health-conscious Preference of freshly squeezed juice with live demonstration

Political

• Huge state-owned, enterprises and fierce competitions, Chinese own food regulation

• New super ministry in 2013 to ensure the quality of food

Technology

• Internet and mobile development as a marketing channel

• Labor intensive • Expensive freezing and storage facility

Suppliers - Low

•  Fragmented source of supply •  Strong internal competition •  Low switching cost •  Sensitive to unpredictable factors,

such as weather

Incumbent Rivals - Medium to High

• All the large beverage producers are aiming to launch healthy juice

• Large number of individual juice crafters established in food court and farmers market

• Undifferentiated products and brand names

Substitutes - High

• Large number of substitutes available, such as condensed juices, milk tea, soft drinks, ice-cream

• Many small, local producers can also squeeze fresh, affordable juice

New Entrants - High

• Very low entry barrier for juice industry

• Low capital requirement • No consumer switching cost • No established brand in the

industry

Buyers - Low to medium

• Small order quantity • Individual consumers have low

bargaining power once if consumer brand loyalty established

• Very price sensitive

Economic • Increase in CPI and Consumer Purchasing Power

• High inflation and raw material cost

8  

The Greatest Challenge: Low Juice Consumption in China

The CAGE distance is relatively high between the US home market and China. The most significant challenge is the cultural distance of making Chinese consumers want and drink juice.

Culture Administrative Geographic Economic

Distance

•  US consumer often purchase ‘on-the-go’ beverages

•  Especially healthy specialty drinks such as frozen yoghurt, juice and smoothies are experiencing growth

•  US consumers purchase Jamba Juice products due to busy work schedule and social leisure time experience

•  Jamba Juice satisfy a need for self realization of a healthier lifestyle through its brand and products

•  Chinese youth consumers in the urban areas are becoming more Westernized in their consumption

•  Higher income and more leisure time increase the need for more than basic product needs

•  Chinese consumers do not drink juice, but have adopted coffee in a similar way as US consumers consume it

•  China’s entry in WTO have lead to lowering of barriers to entry for foreign companies

•  The Chinese government has two layers, national state government and regional government

•  China is ranked as number 91 in ‘Ease to of Doing Business in’ by The World Bank

•  The regional government is exercising protectionist measure against foreign businesses

•  The US embraces competition and entrepreneurship

•  Significantly lower corruption rate

•  Minimum government intervention in business activities

•  More transparent regarding taxes and legislation

•  China is the world’s largest country in terms of population with over 1 billion

•  Hard institutional void lacking in form of underdeveloped roads and railways

•  Significant difference among areas and regions within China, North and South, Coast and center, rural and urban

•  High developed infrastructure

•  High quality of fruits, vegetables

•  High developed communication and technology relations

•  Slowing, but still growing economy with approx. 7-9% GDP growth

•  Huge rising middle class due to increase income level

•  High Gini-coefficient, hence big different between rural and urban areas, center and coastal

•  Affluent consumers •  Increased consumer

spending and expectations to the future

•  Still the largest economy of the world

•  Significantly higher income and wage level than China

•  Slowing economy with big problems

•  Increased unemployment rate

•  Lower expectations to consumer spending

9  

Doing Business in China is Challenging, but Feasible

Standard Institutional Voids

Soft Infrastructure

•  Logistics: The cold chains in Chinese logistics are extremely underdeveloped in comparison with their Western counterparts, making Jamba Juice unable to replicate their US distribution center and fruit sourcing structure.

•  Legal system: The lack of food industry and agriculture regulation makes the Chinese business prone to problems related to low fruit quality.

Hard infrastructure •  Roads and railroads: Underdeveloped

road and railroad networks increase transport times and increase the importance of a well functioning cold chain.

•  Intellectual property: The lack of intellectual property rights enforcement increases the importance of differentiating the franchise stores from imitators by cleanliness and feel.

•  Political voids: Corruption and multilayered political structure creates the need for contracting or strategic alliance as an entry method.

Country Factor Endowments

•  Land: In case of contractual or alliance entry, agricultural or real estate regulation for foreigners do not affect Jamba Juice.

•  Labor: Jamba Juice will encounter low-cost labor in China, but has to consider how to teach about the importance of freshness and cleanliness to its employees.

•  Partner: In case of a contractual or alliance entry, finding a partner that can adapt to Jamba Juices values may be time consuming and costly.

The greatest challenge for Jamba Juice is to build a strong brand that conveys health and fun, while balancing the brand premium and an affordable price due to the general lower income in China. As the infrastructure in China is still developing, Jamba Juice should penetrate Tier 1 cities first, as they have the most developed distribution system.

10  

Jamba Juice’s Penetration as a healthy commitment, a convenient choice, and an incomparable experience

Breakfast Lunch Snack Dinner

•  Popular choice at the start of the day

•  Boost vitamin and nutritional needs

•  Convenience “Grab n Go”

•  An option rather than a necessity

•  Convenience and store display boost sales due to the colorful presence

•  Ritualized, particularly conductive to high customer loyalty

•  A healthier alternative to crackers and chips

•  Only high customer loyalty would choose juice over alcoholic drinks and tea

The role of juice in four meals

Substitutes and competitors in the traditional Chinese diet

Jamba Splashes onto Chinese Taste buds

•  Close to premium office and school location

•  Fast Grab n Go service but sit-down option available

•  Emphasis on the health benefits (vitamin and energy)

•  Price advantage over coffee, promotion

•  Fun and colorful package design

•  High presence with set meal

•  A juice after meal will help relieve the saltines and improve metabolism

•  A healthier alternative than soft drinks

•  Serve as a healthy snack •  A place for people to

hang out and re-energize

•  Place to study and work •  Encourage to stay longer

•  Very Hard to compete with traditional drinks, but promotion could work

•  Partner with local food courts

Coffee, Milk, tea Coffee, tea, soft drinks Traditional drinks (boba), snacks, coffee

Alcoholic drink, tea, soft drinks

Although Juice doesn’t have a dominant presence in the traditional Chinese dietary like tea, Jamba Juice can create the demand by emphasizing the occasion, health components, and emotional benefits. The fact that Chinese don’t drink too much juice gives Jamba the freedom and opportunity to define the juice experience.

11  

Strategic Advantage

Stra

tegi

c T

arge

t

Differentiation Cost Leadership

Focus

Jamba Juice has developed a signature healthy brand based on its high quality product and outstanding customer service in an energetic store environment, attracting a group of targeted, loyal consumers who purchase repeatedly and are willing to pay a premium. These competitive advantages along with strong franchisee support can be translated to expansion into China.

Jamba Juice’s Key Strategic Advantages are Brand, Customer Service, and Product Innovation

Reinvestment  

Marketing  

Franchises  

Profit  

Service   Consumption  frequency  

Standardized  stores  

Brand  

Own  stores  

Franchise  Training  

Development  and  Monitoring  

Lower  operating  cost  

Loyal  customers  

Higher  price  

Increased  margins  

Centralized  distribution  and  

supply  

•  Company goal: “Top of Mind Healthy Beverage & Food Brand”

•  Target middle-high class with disposable income averaging 16-30 in age

•  Consumers are loyal and purchase on a weekly routine •  Offer premium quality ingredients and flavorful, better-for-you

food products •  No high fructose corn syrup, artificial preservatives, or

artificial flavors •  Fresh-squeezed, on-the-spot

•  High quality customer service, superior store experience •  JUICE plan provides extra cash and vacation bonuses

for employees based on store profit and service score •  Comprehensive franchise support including: 6 week training

program, volume discounts from established vendors, regional franchise managers

13  

Jamba Juice should focus on its downstream activities when entering China

Vegetables, fruit and other ingredients R&D

Franchise management and training

Marketing and Branding

Customer and store Service

1 2 3 4 5

•  Jamba Juice has two supplier and distribution alliances with SYGMA and System Services of America

•  Analyzing Jamba Juice internal situation suggest that Jamba Juice, does not have the capital required to enter China based on greenfield.

•  At the same time the Jamba Juice’s value adding activities exists in the downstream activities, which suggest that Jamba should focus on what they are good at:

1.  Branding and monitoring 2.  Well-developed franchise concept 3.  That give consumer high service experience

•  Jamba Juice’s R&D activity focus on developing new eco products and seasonal tastes

•  Jamba Juice provide in-house 6 weeks intensive training

•  The franchisees receive continues support in marketing, sale and training

•  Jamba Juice’s marketing and branding is controlled and developed from the management and implemented through all the stores

•  Jamba Juice ensure through training of the franchisees that customer experience and service a core value for Jamba Juice’s product

Taco Stand Question: “What is Jamba Juice’s good at?”

Answer: Recipe of a customer experience

14  

Three  Concepts   Lessons  for  Jamba  Juice  Starbuck’s  Strategy  

Think Different IMAGE

Introduce a Western Coffee experience rather than an alternative of tea; “where people could meet their friends”

Introduce a Global Juice experience, where people can relax, drink healthy, and have fun for all occasions

Position Smart LIFESTYLE

Adaption: Green Tea and Red Bean flavor Physical presence instead of media promotion Extremely qualified labor force

Adapt to local flavors Source with the highest quality ingredients; Hire friendly, professionals for the best customer experiences

Brand Global STATUS

Extensive customer tasting profile, Consistent Quality Opened the first store in the airport in Korea

Actively engage in market research before opening new stores High-qualify food and services Carefully choose locations with sufficient brand recognition from foreign demand and emphasis the global presence

Lessons of “Sell The Ultimate Experience” from Starbucks and Haagen-Dazs Starbucks: It’s not about Coffee, it’s the experience

Haagen-Dazs: It’s not an ice-cream cone, it’s the occasion Premium Position China’s Hunger for premium

goods, increased buying power and willingness to display wealth “What Rolls-Royce is to cars and Cartier is to jewelry, Haagen-Dazs is to ice-cream”

Jamba Juice will satisfy Chinese’s eagerness to commit to a healthy lifestyle and personality expression. Going to Jamba Juice indicates that you are making a smart choice for yourself and relaxing with your friends

Exotic Products with appropriate local adaptions

Haagen-Dazs maintains all the classic, premium favor while introducing moon cakes

Jamba Juice should introduce most of the feature products to China with minimum adaption such as soy milk and tea drinks

Jamba Juice: It’s not the juice, it’s the experience AND the occasion 15  

Benefits from national responsiveness

Trans-National

Multi-Domestic

International

Global

Glo

bal E

ffici

ency

•  Pushing a franchisee-oriented initiative with local partners to move away from company-owned locations and leverage regional expertise

•  When Jamba travels across borders, it does not change its business model

•  Need for fresh raw materials means that scaling efficiencies is not as important as establishing a strong distribution network

•  Must use their expertise in product and customer service to gain market share and build a brand in China

In partnering with local distributors and franchisers, Jamba Juice should pursue an international strategy that focuses on replicating the Jamba business model in China with minor adjustments for taste and flavors. Economies of scale and global efficiency are difficult to obtain with the volume and nature of fresh fruit product. Jamba is looking to transfer the concept of Western healthy beverage and food to China with little adaptation.

Aggregation? Because of the short life-span of raw materials, aggregation is unlikely with a dispersed network of local suppliers Adaptation? Besides basic changes in regional flavors and tastes, the increasing demand for healthy drinks in China as proven by other competitors gives Jamba Juice confidence to replicate its business model. Arbitrage? Jamba Juice is able to leverage its brand and demand a premium price for its smoothies while taking advantage of low labor costs in China.

Adaptation

Arbitrage

Aggregation

Jamba Juice’s Strategy to tackle China

16  

Jamba Juice should exploit location advantages mixed with cost efficiency

In order for Jamba Juice to create a global advantage in China, they have to emphasize location drivers like national differences, global learning, and global leverage while also taking advantage of economies of scope to spread costs and R&D over a continuously innovative product line.

•  Low labor costs in China

•  Higher willingness to pay for branded goods relative to income level

•  By expanding to China Jamba Juice, can learn about the affluent consumer behavior and adapt

•  Potential political risks nullified by partnership with SPC & RBT

•  Expanded product line maximizes utilization of resources, lowers total costs, and shares R&D

•  Franchising allow Jamba Juice to create better relationship to the government and ease their penetration into the Chinese market

•  With the experience of entering South Korea with similar market condition and target group, Jamba can achieve lower cost from economies of replication

17  

Jamba Juice Should Enter China through Franchising in Tier 1 Cities

Jamba Juice

Global

Asia

China

Licensing/Franchise

Tier 1 Cities: Shanghai,

Beijing, and Hong Kong

Joint Venture

Acquisition

Greenfield

Japan

Southeast Asia Europe

North America

South America

Local

US is experiencing a stagnant growth in the beverage retail specialties market.

Jamba Juice has already opened several stores in Philippines and South Korea.

China has the fastest growing middle class with disposable income.

Working with an established partner in China would mitigate the institutional voids and requires less capital.

Jamba Juice should target consumers in Tier 1 cities that are more inclined to foreign brands and have disposable income to purchase healthy smoothies.

Export Franchising Joint-Venture

Acquisition Greenfield

Cost of Entry

Control

Local market knowledge

Time of entry

Criteria

Entry Modes

Weight

19  

Find the Right Partner SPC is the Winner in China

Franchising is the fastest way to gain high growth and visibility, while keep low cost

Both SPC and Rbt are established, professional franchisers with proven successes in China.

Rbt is run by local businessman, Albert Wu. While SPC is from Korea, Rbt has slightly better local knowledge.

Rbt has proven success with HappyLemon, which aimed for 1,200 stores in the next five years. While Paris Baguette by SPC is much slower in comparison.

SPC has been successful running Jamba Juice in Korea. Huge Plus.

Happy Lemon sells lemon flavored teas, an indirect competitor; While SPC mostly owns bakeries.

Competencies Local Knowledge

Penetration Speed

Existing Relationship

Cannibalization Risk

SWOT Analysis with SPC Strength Weakness

•  Established relationship in South Korea

•  Understanding of Jamba Juice’s culture and goal

•  Over 10 years experience in China

•  Conservative penetration rate •  Face strong competitive

pressure from local businesses

Opportunity Threat

•  Achieve synergy in both South Korea and China, Cooperation with existing bakery franchises

•  Subject to foreign business regulations

•  Distracted by the growth of other brands

20  

Three pillars to replicate the success in China

Jamba Juice’s Success in South Korea

•  Partnered with SPC Group, one of the most well-know food franchising companies in Korea with over 4,500 lcoations in operation

•  Jumper Juice, also called Jambaism, or Jumper wit is an expression to live life full of fun and wit. Jumper wit is always positive and overflows.

•  Product: Classic Smoothies: Strawberries Wild, Mango-a-go-go, and Caribbean passion. But also adjust to local Asian taste: Matcha Green Tea Blast, Jeju Tangerine Juice. Koreans consume twice as many Jeju tangerines as they consumer apples due to they were long used for herbal medicines. Location: Opened first store in Incheon International Airport to reach diverse consumers traveling to and from South Korea

•  Tae-kwan Park, South Korea’s Olympic swimmer is the spokesperson for Jamba Juice South Korea to portray his healthy, energetic and outgoing lifestyle

•  Jamba Juice has opened 5 stores in the past 5 months in Korea. Open 200 locations with SPC in the next two years.

1. Partnership

2. Positioning

3. Present

4. Promote

5. Penetrate

Partnership Penetrate Present

Store experiences + Location

Beijing + Shanghai

SPC and Rbt are both experienced franchisers in China. Jamba Juice can quickly establish brand visibility. Given the relationship in Korea, SPC will be a good partner.

Through franchising, Jamba Juice will adopt a fast expansion plan of physical store locations in expat heavy locations of Beijing and Shanghai.

Customers will have a fun, relaxing experience at Jamba Juice’s colorful physical store, while enjoying a premium healthy juice with friends.

21  

Vendors

Jamba sources and contracts globally to ensure

the right ingredients are delivered at the right

prices.

Potential fruit vendors with reliable history and prices

includes Yiguo.com as well as other local vendors, to ensure the best quality.

Training

Jamba trains on how to manage a Jamba Juice unit

Trains the team so that to ensure a successful

opening

Operations

The Region Franchise Manager will visit regularly

to ensure that Jamba is meeting needs on an

ongoing basis.

Franchise Risk Mitigation built into growth business model

Risk Probability and Severity

Risk Mitigation

Franchiser strays from Jamba Juice’s company culture/ appearance

Low High Have the region manager very clearly communicate the importance of consistency. Relay the importance of strong branding and everything that Jamba stands behind. Communicate a clear termination agreement if parties stray from mission, vision, and brand.

Disagreement with Franchiser and HQ. Low High

Address all cultural conflicts before entering the agreement and write a contract listing out rewards and punishments for each partner

Government intervention Low High

Make sure to choose partner with good government relations and contacts. Create clear standards and protocol to ensure all business being done lawfully.

Increased competition from global competitors High Medium

Use competitive advantages of standardization and customer service to stay ahead and grow faster. Consistent branding and integrated customer marketing will ensure that Jamba stays ahead.

Price sensitivity is greater than brand and premium pricing strategy may not be successful.

Medium High Either adjust pricing or invest in more marketing and development of premium brand.

22  

By fulfilling Chinese consumers’ two needs…

Tier 1 Consumers

Action Locate franchise stores in busy areas close to other cafés and food courts with added local Chinese drinks e.g. green tea and standard product range

Targeted customers

‘New Mainstream’ – income: $16,000 – $34,000, 14 – 35 years, youth, global consumers, health oriented lifestyle

Special Needs Consumers on the way to school

or job wanting something refreshing and healthy, that reflect

their lifestyle and personality of being modern and healthy

Consumers who want to socialize and spend time with their friends

or family. Looking for a good experience and nice atmosphere

On-the-run Social experience

…Jamba can enter a blue ocean in the specialty drink market in China

0

1

2

3

4

5

6

Location Affordability Healthy Service and Experience

Rank from High to Low

Parameters

Starbucks

Other specialty drink providers

Haagen-Dazs

Jamba Juice

Juice makers

Average of Industry Peers

This detailed ranking of the market landscape parameters, that companies in the specialty drinks industry are competing on shows that Jamba Juice should avoid a Red Ocean on price and location. Instead price and location should be mandatory competing factors and service and experience as blue ocean measures to satisfy special needs for the target group.

23  

Sunflour Bakery •  15% off baked

goods after 6pm with a drama show ticket

•  Top Bakery in Shanghai

A “food” twitter with half a million followers

Jamba Juice should sponsor events and engage social media to attract customers

Pulling the Brand through Chinese appreciated channels.

The market pulling for the needs to embrace not only healthy drinks but a new culture.

Sponsorships

Jamba Juice can use celebrities for TV

commercials to gain the attention of the Chinese.

Also, due to the popularity of Korean

culture, Jamba Juice can arbitrage the culture.

Sporting Events

Through the rise in Chinese interest for

sporting events, Jamba Juice can

partner with popular teams to push their

brand.

Sales Promotions Jamba Juice can

offer “happy hour” discount and sales

booth to incentivize the Chinese

consumer to try the products.

Partnership Jamba Juice can

partner with local businesses, such as movie theaters and

gyms to offer discount with

purchase.

Social Media:

Through Weibo, Dianping.com and

Wechat, Jamba Juice have the opportunity to reach 597 million potential consumers.

Jamba Juice in China

Marketing the Brand Identity: The idea of focusing on a single advertising campaign message and leveraging the cost throughout the different channels used, helps build a solid brand identity. Also, marketing in this fashion mitigates the risk for franchisees to diverge in brand identity, therefore maintaining a consistent image throughout China.

The Success of Banana Milk •  1/3 of the entire Korea beverage

imports in five months = 17 Million Sales

•  Popularity gained from k-pop– after launching a Korean TV commercial in China

Jamba

24  

Getting the Chinese to Welcome Jamba Juice

With Jamba Juice’s marketing slowly convincing the Chinese consumers to adopt the western style drink, Jamba will enter China with an alternative menu to familiarize and attract potential Chinese consumers.

Example of Jamba Juice adaptation in China

Western Style Chinese Style

Aloha Pineapple Smoothie

Lychee Blast Smoothie

Strawberry Whirl Kabosu Kumquat Blend

Mega Mango Ancient Logan Splash

Pomegranate Paradise

Green Tea and Fig Chill

Western Taste Chinese Taste Conversion

Existing Juiceries Jamba Juice Appeal to Chinese Consumers

Fixed Menu Item Design Your Own Juice DIY, Trust, Engagement

Food Court Location Individual Stores and Food Court with ample seats and space

Added emotional benefits with friends and families Value of money -> Stay Longer

Limited Promotion Available (Groupon)

Multi-channels of Promotion (K-Pop arbitrage, In-store demonstration, Partnership, Sponsorship, and Social Media)

Words of mouth Trust (Social Media), Immediate incentive to redeem the coupon (Time limitation of partnership), Authority (Celebrities effect)

It’s the Juice It’s the Brand and the Experience

Status and Lifestyle, Proof of Economic Affluence

Domestic Established Foreign Brand Globalization and International

The Ultimate Juice Experience in China

Compared to the traditional Juiceries present in food court, Jamba Juice not only premium quality, freshly squeezed juice, but also the café experience with ample seating, friendly services, ongoing promotion, celebrity support, the DIY experience, and the sense of status. The goal is to appeal to the mainstream Chinese consumers, establish a strong brand, and eventually transfer the brand to a direct experience.

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Footprint to $50 Million in China in 5 Years

We see that Jamba can expect to break even during the third full year of franchising in China, with profits scaling exponentially as volume increases and fix costs are dispersed over high volume production. The demand is present and growing rapidly there in the Chinese market, with the healthy beverage market growing with the rise of the upper middle class. Jamba Juice can enter the market with smaller initial capital investment via partnering with a local company.

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-5

0

5

10

15

20

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2014 2015 2016 2017 2018

Mill

ion

USD

Year

Projected 5 YR Revenue and Profit in China

Revenue

Operating Profit

$50  million  in  revenues  

Break  –even  point  

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Timeline for Implementation

•  Contact and enhance relationship with SPC Group

•  Negotiate franchise agreement

•  Exchange US and China employees to learn

•  Analyze the spending habits of the new main stream consumers

•  Open stores in Beijing and Shanghai

•  Promote Jamba Juice through social media, sponsorship, TV advertising, and in store experience

•  Build the reputation and brand presence

2013 2014 2015 2016 2017 Partner with SPC

Penetrate the new mainstream

Present and Promote the Jamba Juice Experience

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Appendix�Jamba Juice Avoiding Risk Through Franchising

Entry Strategy Risk Con Pro

Franchise Low The Business Model can be altered to the extent that Jamba Juice loses its competitive advantage.

Jamba Juice would be able to adapt quicker and help establish its brand name.

Joint Venture Medium A joint venture may lead to a misunderstanding of company identity, and lead to a violation of intellectual rights.

Jamba Juice would be able to learn how other companies function; however, there is no other company that holds a high enough market share for Jamba to learn from in China.

Green Field High Operating cost will hinder Jamba Juice from ever making a profit since they do not harvest their ingredients.

Jamba would be able to be in more control of the decisions it makes in China, but would still adhere to the Chinese government .

Franchising  In  China  

Low   High  

L  

Volum

e  

Local  Responsiveness  

2 Reasons Jamba Juice Needs to Franchise in China

1) With franchising, Jamba Juice exploits a entry strategy that allows it to be locally responsive by its management, and as Chinese Franchisees open more Jamba Juices, the brand identity becomes strong.

2) Through franchising, Jamba Juice can replicate its Business model, therefore gain economies of scale with aggregation.

Franchise is the best strategy

“Jamba Juice is good at create an experience”

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In  the  US,  tiers  1,2,  and  3  are  able  to  consume  Jamba  Juice  because  income  is  still  disposable.  However,  only  tiers  1  and  2,  embody  Jamba  Juice’s  routine  and  loyal  consumers.      

1  2  3  4  5  

1)  Jamba  Juice  can  enter  an  approximate  18  Tier  1  cities  in  China  with  an  estimated  population  of  over  200  million  potential  consumers  who  have  high  disposable  income  to  become  routine    Jamba  Juice  consumers.    

2)  Jamba  Juice  can  also  enter  25  Tier  2  cities  that  accounts  for  54%  of  China’  economic    growth  and  the  backbone  for  the  “Rise  of  China.”    These  25  tier  2  cities  encompass  a  104,000,000  population  for  Jamba  Juice  to  serve.  

3)  There  are  also  24  Tier  3  cities  that  are  locally  focus,  but  with  disposable  income.  This  emerging  tier  provides  major  opportunities  for  Jamba  to  expand  its  targeted  consumers.  

Global  Consumers  Domestically  focused  but  upwardly  mobile  

•  Jamba  Juice  should  target  Tier  1  in  the  short  run  and  expand  its  stores  to  Tier  2  and  3  cities  after  having  established  a  strong  brand  and  foothold  in  the  opinion  leaders  consumption  behavior  in  Tier  1  cities.  

•  This  will  create  a  domino  effect  and  release  the  most  powerful  measure  to  create  trust  in  Jamba  Juice  brand  for  Chinese  consumers  –  ‘word-­‐of-­‐mouth’.  This  affect  will  allow  Jamba  Juice  to  focus  on  their  core  competences  by  giving  high  quality  experience,  while  the  satisfied  consumers  will  automatically  take  their  friends  and  relatives  with  them  into  the  stores  

Analyzing  the  different  segments  of  the  market  pyramid,  a  key  variable  in  Jamba  Juice’s  entrance  to  China  is  to  locate  stores  in  strategic  cities  and  areas  that  Chinese  people  with  disposable  income.  

Locally  focused  with  income    

No  disposable  income    

Appendix: Jamba has proven the popularity in middle class in United States and South Korea

1  2  3  4  5  

United  States  

In  South  Korea,  Jamba  Juice  consumers  are  in  tiers  1  and  2.These  consumers  are  high  income  earners  and  young  professionals;  they  are  part  of  the  new  generation  of  global  consumers.  

In  China,  there  is  a  booming  urban  population  and  rapidly  growing  middle  class.    Growing  amount  of  people  with  disposable  incomes.  Jamba  Juice  should  target  Tier  1  &  2  for  early  entry  and  then  if  successful,  to  expand  market  share,  grow  to  Tier  3.      

1  2  3  4  5  

1  2  3  4  

If  Jamba  entered  China  

South  Korea  

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Footprints to $50 Million in China in 5 Years

Break Even Analysis ($) 2014 2015 2016 2017 2018

Fixed Cost ($ million) $2 $3.5 $5 $7.5 $9

Capital Investment ($ million) $5 $4 $3 $2 $1

Variable cost ($/lb) $2.00 $1.95 $1.90 $1.85 $1.80

Sell Price ($/lb) $4.00 $4.10 $4.20 $4.30 $4.40

Contribution Margin ($/lb) $2.00 $2.15 $2.30 $2.45 $2.60

Projected Volume (units) 1 3 5 7 9

Revenue ($ million) $2 $6.45 $10.6 $17.15 $23.4

Operating Profit ($ million) ($5) ($1.05) $2.6 $7.65 $13.4

Assumptions: •  Projected volumes are based on obtaining 4% market share of healthy beverage market by 2018,

a reachable goal with major competitors holding 4-7% market share •  Increasing volume is also based on a 10% CAGR for specialty beverage market in China •  Sell price was formulated based on industry average for specialized beverages (~$3/drink) with a

$1 premium for Jamba’s differentiated offering •  Increase in sell price accounts for projected higher demand in the future market

•  Variable cost is roughly 50% of the price based on (CGS+Labor)/Revenue in US 2013 •  Economies of replication result in decreased variable cost

•  Highest initial capital investment comes in Year 1, then a decreasing amount of infrastructure investments over the course of 5 years

•  Fixed cost based on US operations and increasing incrementally with greater scale, matching fixed cost to sales ratio of the US by 2018

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Sources and Websites

•  Websites

•  http://jambajuice.co.kr/web/main.asp

•  http://www.qsrmagazine.com/news/jamba-juice-opens-store-south-korea

•  http://www.businesswire.com/news/home/20110616005786/en

•  http://www.thestreet.com/story/10989666/1/jamba-juice-and-spc-group-celebrate-first-store-opening-in-south-korea.html

•  http://www.koreatimes.co.kr/www/news/biz/2013/02/123_130653.html

•  http://www.chinabevnews.com/2013/09/china-to-become-no-2-market-for.html

•  http://businesstoday.intoday.in/story/case-study-haagen-dazs-in-china/1/184779.html

•  Reports

•  McKinsey

–  Meet the 2020 Chinese Consumer

–  Annual Report of Chinese Consumers 2012

•  ISI Emerging Markets

–  Street Stalls and Kiosks in China

–  Tea in China

•  Passport

–  Fruit/Vegetable Juice in China

–  Beverages in Consumer FoodService: The Best Portfolio Wins

•  PWC

–  Doing Business in China

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