Jamba Juice's smooth(ie) operator

CEO Paul Clayton tells Fortune's Matthew Boyle how the company plans to expand - and how to make a great energy smoothie.

By Matthew Boyle, Fortune Writer

NEW YORK (Fortune) -- In 1990 four Southern California health nuts founded a smoothie joint called Juice Club, which quickly gained a loyal following and inspired copycats. Five years later the name changed to Jamba Juice (Charts), and last November Jamba went public after merging with a special-purpose acquisition company. Wall Street analysts like Piper Jaffray's Nicole Miller Regan believe the stock, currently at $9, has upside potential. CEO Paul Clayton, previously a senior exec at Burger King (Charts), recently sat down with Fortune's Matthew Boyle to talk about Jamba's expansion, the perfect pick-me-up for tired CEOs, and why you'll never see a beige store in Manhattan ever again.

How are things going at Jamba?

CEO Patrick O'Dea tells Fortune's Matt Boyle how tiny Peet's can challenge the giant of the specialty coffee industry. (Read the interview)

We expect to exceed $300 million in revenues this year. Today we have 633 stores, 65 percent of which are company-owned, and 400 of which are in California. This will be the first year where we build more stores outside of California than inside. Our goal is to open 90 company stores this year, plus 50 franchise stores, and supplement that with nontraditional stores, like on college campuses. We have a store within a store inside the Whole Foods in Columbus Circle, Manhattan, and are piloting kiosks inside Safeway grocery stores now.

What are you doing to expand beyond smoothies, which are 89 percent of your sales?

We always see smoothies at the core of our business, so food is complementary. But we are getting ready to launch a hot breakfast product - a savory stuffed pocket.

Our mission in life is to become the world's leading source of healthy energy. At the core of that is fruit. We see how important energy is and how much processed sugar is used [in energy drinks], so we think we can occupy that healthy energy space. We are not going walk away from our core, but we will get more functionally oriented. [To that end] we are revamping our smoothie "boosts": today we have an energy boost, as well as immunity, protein, vita, fiber and femme boosts. We are adding Omega-3, whey protein, and an antioxidant boost to the menu. We have to get customers thinking about the functional benefit beyond taste, but taste is still numero uno.

What's the challenge of taking a brand known for its health consciousness to the masses?

I would say that half of our customers are probably not living a real healthy lifestyle; they just like the brand. It is a treat for them and they walk away feeling good, not knowing anything about what's in the product. Our mission is to take our light users, who come twice a month or less and represent 80 percent of our customers, and move them to medium users, who visit three to seven times a month.

Have you tried products that did not work?

Two years ago we tested a hot tea-based beverage in Seattle and Chicago. Our research said it was well received, but in the end we didn't sell any. Consumers will go to Starbucks (Charts, Fortune 500) for that type of beverage. Maybe over time, as we now bring tea in for our cold drinks, we can get back to that. But our customers trust that what we do is good. So we learned that if you take too big of a leap, you test that trust and run the risk of losing your brand's credibility.

Speaking of Starbucks, what about the in-store experience?

We just engaged a firm to design a new prototype store. As we have evolved, there was always something that somebody didn't like about the stores, so we tweaked it. But after 10 years of tweaking, we have created a hodge-podge. So now we go into the stores and see multiple things that we don't like.

Such as?

At one point in our evolution, the design team built a cheaper store, and it looked cheaper. Also, the early stores had concrete floors that I think are authentic looking, but the operators wanted a tile floor that is durable and easier to clean. So we ended up with tile floors that don't fit with the overall scheme of the store. In addition, our stores started to look a bit juvenile in my opinion. So we want to put back the quality materials and take away the juvenile stuff.

One criticism I have about the New York City stores is that they are beige. We are not a beige brand - we are vibrant and colorful.

What's your favorite smoothie?

I came to this company [in 2000] as a diehard coffee drinker, so I challenged our team to develop products that would wean me off coffee. I still have a cup in the morning, but my routine now is to have an acai supercharger smoothie. Some people don't like the taste of acai, so the secret is to have them take out the sherbet and put in whatever fruit you want. And tell them to put a splash of orange juice in there, and the taste will explode in your mouth. I then put in a performance boost for my bum knee, and a shot of matcha green tea powder, which gives me the energy of coffee, but you don't get the spike and crash of coffee. Top of page