Analyst: Starbucks' Evolution Fresh concept poised for growth

Staff Writer
A second location for the juice concept is in the works for the Seattle area

A second location of Starbucks’ new Evolution Fresh juice concept is in the works in the Seattle area, according to one Wall Street analyst who sees the retail outlet as a “significant opportunity” for the coffeehouse chain.

A spokeswoman for Starbucks on Wednesday declined to confirm the timing or location of the second Evolution Fresh, but she reiterated the company’s plans to grow the juice bar and restaurant concept in general.

The first Evolution Fresh opened in March in the Seattle suburb of Bellevue, Wash.  After reporting the company’s second quarter results, Howard Schultz, Starbucks’ chair, president and chief executive, said consumer response to the concept has been positive and early lessons from the first location will be applied to plans for future expansion.

Seattle-based Starbucks Corp. acquired the Evolution Fresh brand in November 2011 in an effort to capture its share of the estimated $3.4 billion juice market. Evolution Fresh is known for its use of high-pressure processing, which essentially pasteurizes juice without using heat, preserving taste and nutrients.

Starbucks is incorporating Evolution Fresh bottled products in its stores and as part of the company’s growing consumer packaged goods, or CPG, line in other retail outlets. Schultz sees the juice platform as a billion dollar opportunity for Starbucks.

Analyst Mark Kalinowski of Janney Capital Markets said in a report Wednesday that he had visited the Evolution Fresh in Bellevue and he was “incredibly impressed,” saying the opportunity to expand the juice brand is more significant than he thought previously.

Though the primary opportunity will come from bottled juices sold at Starbucks and at grocery stores, Kalinowski said, “We also view the Evolution Fresh standalone retail concepts as a significant opportunity for the company going forward.”

Located in an upscale shopping center next to a Starbucks unit, the Evolution Fresh in Bellevue offers bottled juices, but also juices “on tap” that can be custom-blended.

He described a section devoted to food as similar to Chipotle Mexican Grill, with customers walking down a line to customize their order.

Kalinowski noted a large bottled juice display that advertised “Juicing Made Easy,” with various packages for those following trendy juice cleanse diets. The section also included grab-and-go food offerings, such as wraps, sandwiches and other treats.

Kalinowski said he could envision a smaller version of the display being found in Starbucks locations over time.

“All in all, we left the store very enthusiastic as to the prospects for Evolution Fresh,” Kalinowski wrote.

“We would note that the juices are much higher quality than any juices currently sold by Starbucks, and we view the Evolution Fresh brand as well-positioned to grab market share in the health-and-wellness segment,” he continued. “We also view the Evolution Fresh retail concept as a viable standalone concept, although we believe that Starbucks will most likely leverage their Starbucks-brand asset base to develop the Evolution Fresh brand.”

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