California-based Jamba Inc. (JMBA), a leading restaurant retailer of food and beverage offerings, announced on Tuesday that it will renew its partnership with Nestlé USA, part of Nestlé SA to develop a new ready-to-drink beverage line. The beverage line will be sold at retail counters in the Northeastern United States by early 2011.
Both Jamba Juice and Nestlé USA plan to capitalize on their respective product development talents to create a differentiated line of energy drinks within the $8.5 billion energy drink category. Jamba intends to transform itself from a made-to-order smoothie retail chain to a healthy, active lifestyle brand by 2013 and is expanding the menu with a number of food and beverage items in an attempt to increase demand at off-peak dayparts.
Jamba, a former special purpose acquisition company, acquired Jamba Juice in 2006. Following the acquisition, Jamba went for a rapid expansion program, increasing the number of company-operated stores by 34% in 2007. However, since 2007, Jamba remained unprofitable mainly due to its foray into new, mostly cooler-weather markets.
Moreover, 75.0% of restaurants are located in California, a state badly hit by the economic slowdown, resulting in thinning traffic. Jamba’s second quarter 2010 earnings of 2 cents per share missed the Zacks Consensus Estimate of 6 cents, but were better than the loss of 10 cents in the prior-year quarter.
Last month, Jamba launched its new breakfast platform and first-ever hot coffee offering. We believe that this strategic partnership with Nestlé is expected to garner some success. The news of this partnership had a positive impact on the shares of Jamba which rose 13.2% to $2.32 on Nasdaq on Tuesday.
Jamba’s competitors primarily include Starbucks Corp. (SBUX) and McDonald’s Inc. (MCD), which has delivered strong comparable sales in the U.S. buoyed by the recently launched McCafe real fruit smoothies and frappes, along with other value-based drinks.
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