Starbucks (SBUX) has long been a master at getting people to overpay for something they could consume much more cheaply at home. Now -- confronted by a host of coffee rivals, led by Dunkin' Brands (DNKN) -- Starbucks hopes to pull off that neat profitable trick once more, this time with juice.
On Thursday, the world's largest coffeehouse chain announced its acquisition of Evolution Fresh, a small, high-end maker of juices and cut fruit and vegetables. In a press release, Starbucks proclaimed its intention to "reinvent the $1.6 billion super-premium juice segment, its significant next step in entering the larger $50 billion Health and Wellness sector."
But can Starbucks credibly claim to offer a beneficial addition to our nutritional regimens? This is a place, after all, that sells a 680-calorie Peppermint White Chocolate Mocha ("venti" size, made with whole milk plus whipped cream).
"Starbucks' idea of nutrition is nutrients in products, not real foods," says Marion Nestle, professor of nutrition, food studies and public health at New York University, and author of Food Politics and What to Eat, among other publications. "Starbucks would be a doing a lot more for the health of its customers if it reduced the sizes of its food offerings, and increased the proportion of real foods," says Dr. Nestl In other words: oranges instead of orange juice.
But you can only charge so much for a piece of fruit; the markup on a smoothie or blended juice drink can be many times higher.
Evolution Fresh does at least make a claim to singularity, boasting of new technology called High Pressure Pasteurization, which purportedly eliminates potentially harmful microbes without subjecting the juice to high temperatures that can degrade flavor or nutritional content. The result is a fresh product with a very long shelf-life -- 40 days, reportedly.
"I'm sure the juice is just fine nutritionally," Dr. Nestle said. "This is just part of Starbucks' plan to be seen as health foodish as well as caffeinated."
Starbucks CEO Howard Schultz said as much in an interview with CNBC. Schultz mentioned the respective sizes of "the health and wellness category in America" and "the premium juice business" and said that no "national specialty retailer of any kind" has matched what Starbucks thinks it can do with juice" (seeming to diss Jamba Juice). But aside from touting the taste and shelf-life of Evolution's products, which carry labels like "Daily Detox" and promise "vitality," Schultz said nothing about any actual health benefits.
Instead, discussing plans to open separate specialty stores after introducing Evolution drinks in Starbucks locations, Schultz said the company will "capture the romance and theater of juice beverages." But he did not elaborate on what might constitute that romance and theater, the atmospheric details that are presumably why consumers will be expected to pay a premium. In any case, Schultz sounded confident about Starbucks' ability to pull it off. After all, he'd done it once before, as he reminded the interviewer: "If you think back 30, 40 years ago we reinvented a commodity, which was generic coffee, and built a major business around the experience. We think we can do the same thing with juice."
The products at Starbucks' juice-based specialty shops could well wind up delicious enough to make a claim on our wallets. But as a strategy, the "major push into health and wellness" announced by Howard Schultz amounts to a bet that consumers will happily pay hand over fist for a feeling of health and a taste of wellness, preferring these pleasures to the hard, unglamorous work of exercising regularly and eating right.
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