mor 492 global strategy- jamba juice in china
DESCRIPTION
Analysis of whether Jamba Juice should enter China MOR 492 1. Ariel Furman 2. Tuomas Kuusela 3. Anna Lin 4. Jessie Rubio 5. Vincent Tsao 6. Jan Dong VejdiksenTRANSCRIPT
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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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.
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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
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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
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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.
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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
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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
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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.
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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.
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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
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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
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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
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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
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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
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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
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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.
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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.
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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.
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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
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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
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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