Jamba Juice, Inc. (JMBA)

Jamba Juice, Inc. reported earnings today, or, perhaps more accurately, no earnings--it lost 0.21 cents a share in Q1. JMBA is currently selling below book value, but that may not necessarily indicate that it's a good value play. Its products appeal mainly in the summertime, and outside of the West Coast and the South, the weather isn't sufficiently warm to increase demand for cold fruit smoothies year-round. The breakfast shakes it introduced earlier this year were a good idea, but they haven't caught on like the Frappuccino. Perhaps due to the lack of advertising of its new products, same-store sales declined. Jamba continues to have one of my favorite drinks, the Matcha Green Tea Blast. The key for selling drinks seems to be to make them sweet with whipped cream and include chocolate. Jamba, unfortunately, doesn't really have too many chocolate drinks.

But the problem isn't with Jamba's products--its smoothies taste good, and its stores are packed when the weather is hot. Jamba's issue is that consumers think of the company only when the weather gets warm. In order to convince consumers that Jamba smoothies should be a daily addition to one's diet, Jamba needs to add drive-thrus or get locations that aren't in strip malls to encourage time-strapped workers to go to Jamba in the morning. (Do you know a lot of people who regularly go to suburban strip malls--where Jamba has many of its stores--in the morning? I certainly don't.) To give you an example, I work in downtown San Jose, and there are two Starbucks and one Peet's within walking distance, but no Jamba Juice store. If there was a Jamba nearby, I would go almost every single day. A Popeye's Chicken store is opening nearby my office--and still, no Jamba. Jamba's failure to seek out good locations is mind-boggling. By focusing on strip malls, Jamba is robbing itself and its shareholders of the lunchtime and business crowd. It's a very costly mistake, and many a store has gone out of business because it failed to properly choose its location.

In other news, Jamba announced a deal with Nestle today, which pumped its stock 13%, or thirty cents; however, this appears to be old news, as Jamba already announced this deal several months ago. Jamba's shareholder meeting is tomorrow at the Doubletree Hotel. I will try to attend, but may not be able to make it because the Long's Drugs shareholder meeting is on the same day.

My three worst trades, percentage-wise, have been JMBA, SPCHB, and PCYC. I'm losing around 1,600 dollars total on these three stocks and refuse to sell them because once a stock hits the single digits, I figure either it's going to go back up in five years or go bankrupt, and I usually pull the risk trigger and wait and see. I don't have much money in these stocks anymore--but I am still frustrated with Jamba's management because it fails to understand that location is at least half the game in the food business.

Jamba Juice, Shareholder Meeting

One of the benefits of living in California is that many popular companies are based in the Bay Area. I enjoy attending annual shareholder meetings, and the Peet's meeting this year was wonderful. While Peet's is based in Emeryville, CA, the meeting took place at the new roasting facility across the beautiful Oakland Bay. I spoke with the Chairman who told me about Peet's history (Peet's first store was in Berkeley, but Peet's was originally Starbucks and then sold the first few stores in Washington state to "some guy named Howard Schultz," as the Chairman explained, with a smile).

Jamba Juice's annual meeting--its very first one--also took place in Oakland, at the Marriott City Center near Chinatown. The Chairman was impressive to listen to, but the other speakers seemed more focused on marketing than the nuts and bolts of running a business. In an industry where location is everything, Peet's and Starbucks are snapping up almost all the great locations. For example, Peet's just opened new stores in Morgan Hill and downtown San Jose. Those could have been Jamba store locations. Unless Jamba intends on selling its product over the Internet or solely in stores, it needs to focus on locations and favorable lease terms to increase revenue. I was disappointed that the company does not purchase any futures contracts, but a corporate officer explained that the primary product they use was strawberries, and no futures market exists for that ingredient. He also explained to me that Jamba Juice tends to favor suburban locations rather than business-centric, downtown locations because suburbia offers seven-day-a-week foot traffic, whereas business districts are typically ghost towns on weekends.

Some other interesting notes: Jamba is focusing on opening kiosks in airports and perhaps also having drive-thrus. They seem to be shying away from a heavy physical presence, perhaps because of high rents--especially closer to the more residential areas in Washington and California, where strip mall rents are much higher than average. But why go public if the money raised will not be used to increase a physical presence? A private company can just as easily enter into partnerships and devise marketing plans.

The Chairman stated that he has received many offers to open stores internationally but he was being cautious about opening abroad because he wanted to carefully control the brand's image. Another speaker dropped an interesting tidbit about Jamba partnering with another major player to sell beverages in stores. If Jamba partners with Coca-Cola, which has been increasing its non-soda portfolio of assets, most recently with Caribou Coffee, then perhaps the stock will experience a short term boost.

Most disappointing was that Jamba did not offer any of their products at the meeting. For a first time meeting, however, perhaps Jamba did better than most would have.