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File: A Starbucks Coffee barrista readies a beverage for a customer in the new 42nd Street store August 5, 2003 in New York City.
Yesterday, Starbucks announced that it's buying Southern California's own Evolution Fresh Inc., for $30 million. That's pretty small potatoes as M&A activity goes. But for Starbucks, buying the juicemaker — which, according to the Starbucks announcement, is "one of the only true juiceries left in the industry that still cracks, peels, presses, and squeezes its own raw fruits and vegetables" — is just the beginning of the beginning.
And a risky undertaking.
Starbucks wants to move beyond coffee and expand its presence far beyond its retail stores. So far, it's been doing this slowly and carefully — and has already endured one misstep, when it over-expanded prior to the financial crisis. In Steve Jobsian fashion, CEO Howard Schultz returned to the company to trim, reinforce, and realign. The ship was righted. But now it's looking to grow again.
[T]he company faces the challenge of expanding its presence without watering down the brand. To guide that effort, Starbucks Chief Executive Howard Schultz last year tapped Jeff Hansberry, an industry veteran who has sold everything from Hawaiian Punch to gin and who has established himself as a possible successor to the Starbucks founder.
Interestingly, Hansberry wrote the announcement of 'Bucks Evolution Fresh acquisition. This is clearly his baby. But how will his plans play out? Will Starbucks become something of a Whole Foods for Starbucks-ness, selling its core coffees but surrounding itself with similar, high-end brands that can be unified with that Starbucks DNA? I can see a world in which every Starbucks is a coffee place and a juice bar.
But Starbucks might instead be aiming for stand-alone juice stores, at least according to the WSJ's reporting. And this will be more difficult to pull off. Starbucks would have to build and nurture an entirely new brand, built around the values of health and vitality, rather than the pleasures of coffee, tea, and sugary morning and afternoon treats.
Starbucks is more than fully recovered from its dark times. Wall Street likes the company's moves, rewarding it with an ever-ascending stock price, which is now trading in the mid-$40 range, well above even where it was when investors felt it was on the mend, with a share price in the mid-$20s.
But that probably why Starbucks is looking for new business to tackle — and new competitors to take on, like Jamba. Not to mention turning itself into your friendly neighborhood investment bank.
The risk of course is that as it's forcing itself to grow, it's repeating the mistakes of the past.