The General Environment of the Industry
Jamba Juice and its immediate competitors operate under the industry entitled “snack and nonalcoholic beverage bars” [ (U.S. Census Bureau) ]. According to the U.S. Census Bureau the official description of the snack and nonalcoholic beverage bars is as follows: “This U.S. industry comprises establishments primarily engaged in (1) preparing and/or serving a specialty snack, such as ice cream, frozen yogurt, cookies, or popcorn or (2) serving nonalcoholic beverages, such as coffee, juices, or sodas for consumption on or near the premises. These establishments may carry and sell a combination of snack, nonalcoholic beverage, and other related products (e.g., coffee beans, mugs, coffee makers) but generally promote and sell a unique snack or nonalcoholic beverage” (U.S. Census Bureau).
In analyzing the general environment of the industry, several of the six generic elements stand out among the snack and nonalcoholic beverage industry. The first considers the economic conditions and the impact it has on the industry. Realistically speaking fruit smoothies (and eating out in general) is one way a family can cut costs during tough economic times. As Jamba Juice and its immediate competitors (Planet Smoothie, Smoothie King and Juice It Up) approached the recession after the subprime crisis they were faced with lower traffic resulting in lower revenues. As fast food giants were fueling their bottom line with recession busting dollar-menus, healthy options were becoming an unaffordable luxury. Furthermore, the juice bar demographic appeals to a health conscious young woman [ (Costello) ]. While other industries (such as fast food and restaurants) are appealing to the entire family unit in their marketing endeavors. On the other hand, as baby boomers are reaching retirement age and become more focused on prolonging their life, concerns such as cholesterol and diabetes become far more important and serve as an opportunity for the juice bar industry to benefit from. Within a socio-cultural perspective, juice bars are right on the money. Trends toward healthier options in the U.S. are evident with an increased concern for physical fitness, employers encouraging healthy lifestyles (to lower health insurance costs) and parent’s supplication of school boards to give kids healthy options in the lunchroom. Finally, as the smoothie market becomes more and more saturated in the United States, the opportunities to expand globally are nearly infinite.
The Competitive Environment and Porter’s Five Forces
The Threat of New Entrants
The threat of new entrants in the smoothie business are fairly low, meaning that Jamba may see new competitors in the market at any given time. This fact can erode the company’s competitive advantage unless Jamba takes measures to ensure its differentiation from other juice bars and smoothie cafés. Smoothies are not mass-produced and therefore cannot achieve economies of scale. The small scale of the industry means that starting up a new smoothie shop will not include large outlays of cash for capital investments. Product differentiation is subtle at Jamba Juice stores. Their core competency is all inclusive of several factors; a healthy product with portability served in a fun atmosphere. This may offer a subtle differentiator, but is relatively insignificant in deterring new entrants. These threats are compounded by the fact that the smoothie product line can and has been added to many established fast food companies with a renewed appreciation for the health conscious consumer. Other factors contributing the high threat of new entrants include; relatively low capital requirement, zero switching costs, immediate access to distribution channels, and the availability of the raw materials to any buyer. The Bargaining Power of Buyers
According to the Jamba’s income statement, revenues are derived from two avenues; company...