The Smoothie Supply Chain - IBISWorld

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Special Report
August 2012
The Smoothie Supply Chain
By Agata Kaczanowska
IBISWorld explores how changes in the supply chain affect growth for
smoothie and juice bars
Rising incomes
will push up
revenue, but
competition will
pressure growth
Consumers are expected to loosen their
purse strings in the coming years,
bolstering demand for the Juice and
Smoothie Bars industry. Rising
employment will increase disposable
income, and Americans will be better
able to afford juice and smoothies from
industry establishments. Consumers will
also have limited time to make their own,
leading them to buy more products on
the go. As a result, Juice and Smoothie
Bar industry revenue is projected to rise
at a 2.2% annualized rate to $2.0 billion
during five years to 2017, including a
1.6% increase in 2013.
Competition souring growth
External competition from other
industries is forecast to restrain revenue
growth in the next five years. The Fast
Food Restaurants industry (IBISWorld
report 72221a), which includes
companies like McDonald’s, is expected
to continue marketing beverages like
smoothies and juices, which draws
demand away from industry
enterprises. Other major competitors
include the Coffee and Snack Shops
(72221b), Vending Machines Operators
(45421), and Gym, Health and Fitness
clubs (71394) industries. Bottled
beverage manufacturers are also
increasingly competing with juice and
Competitionbyindustryrevenue
Industry
Revenue
($thousands)
Fast Food Restaurants 169,709.9
Coffee & Snack Shops 27,843.8
Juice Production 27,282.7
Gym, Health & Fitness Clubs 25,269.1
Vending Machine Operators 7,335.1
Meal Replacement
Product Manufacturing
2,298.2
Juice & Smoothie Bars 1,806.2
Smoothie Production RTD 632.5
SOURCE: WWW.IBISWORLD.COM
smoothie bars, and the most direct
competitors include the ready-to-drink
Smoothie Production (OD4300), Meal
Replacement Product Manufacturing
(OD4285) and Juice Production
(31211c) industries. The combined total
revenue of these industries is projected
to grow from $26.2 billion in 2012 to
$29.0 billion in 2017, representing a
2.1% annualized increase over the five
years. This growth rate includes a 2.2%
initial increase in 2013.
To better compete with the increasing
number of alternative juice and smoothie
retailers, industry operators are altering
their strategies. For example, major
company Jamba Inc. now serves
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WWW.IBISWORLD.COM Special Report August 2012 2
The Smoothie Supply Chain
breakfast items. By diversifying its menu,
the company hopes to attract customers
throughout the day. Companies are also
offering organic products, as well as
drinks that appeal to consumers with diet
restrictions, such as gluten-free or
low-sugar beverages.
A sweet decline
The healthy eating index is projected to
decline in the next five years, despite
widely reported obesity rates and other
nutrition-related diseases. IBISWorld
forecasts that the healthy eating index
will drop at a 0.2% annualized rate in the
five years to 2017. As it turns out,
however, a dip in the healthy eating
index may correspond to increasing
smoothie consumption due their high
sugar content. In fact, the Centers for
Disease Control and Prevention (CDC), a
government health organization,
published specific instructions in 2010
for consumers to follow at smoothie
establishments, entitled “At the
Smoothie Stand.”
This advice from the CDC comes at a
time when sugar consumption is on the
decline in the United States. The percent
of daily calories derived from added
sugars declined from 1999 to 2008,
according to a study published in the
American Journal of Clinical Nutrition in
2011, as cited on the CDC website.
According to data from the US
Department of Agriculture, per capita
sugar and sweetener consumption is
forecast to continue declining to 132.6
pounds per person in 2012, from about
135.5 pounds per person in 2007.
Despite the CDC’s advice for
consumers to decrease sugar
consumption, the federal government
supports the Sugar Processing industry
(IBISWorld report 31131) through
nonrecourse loans and marketing
allotments as part of several programs,
including the 2008 Farm Act, the
Feedstock Flexibility Program and the
Tariff Rate Quota system. IBISWorld
estimates that Sugar Processing industry
revenue will increase 1.1% annually on
average, from $9.0 billion in 2012 to $9.5
billion in 2017. However, the United
States has agreed to increase quotas for
several countries in Latin America over
next 15 years, allowing larger volumes of
low-price imports to enter the United
States at a low-tier tariff rate. As a result,
a larger part of domestic demand will be
met from increased imports, pushing
down US sugar prices. This is expected to
Upstreamindustryrevenue(2012)
Industry
Revenue
($thousands)
Plastic & Resin Manufacturing (polyethylene) 37,844.1
Dairy Product Production (milk and milk-based products) 37,799.3
Cardboard Box & Container Manufacturing (cardboard boxes) 36,899.9
Vitamin & Supplement Manufacturing (all products) 29,245.8
Vegetable Farming (tomatoes, greenhouse crops and other crops) 18,013.1
Fruit & Nut Farming (berries, apples, grapes and other crops) 14,424.6
Sugar Processing (refined sugar) 6,650.2
Wood Pallets & Skids Production (all products) 4,741.9
Polystyrene Foam Manufacturing (consumer and institutional products) 3,401.6
Orange & Citrus Groves (all products) 2,917.9
Soy & Almond Milk Production (soy, almond, coconut and other crops) 1,465.0
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM Special Report August 2012 3
The Smoothie Supply Chain
benefit juice and smoothie bars, which
use sugar in their products.
Juice and smoothie operators’ bottom
lines are expected to benefit from lower
input costs and higher demand for
industry products. Higher demand will
enable stores to boost prices, despite
competition. Consequently, profit, as
measured by earnings before interest
and taxes, is estimated to increase to
3.9% of 2017 revenue, from about 3.0%
of 2012 revenue.
Suppliers smoothing the way
Nonetheless, it takes much more than
sugar to make a smoothie. Juice and
smoothie bars use inputs from 11
upstream industries. The largest
suppliers manufacture polyethylene, milk
and milk-based products, cardboard
boxes, vitamins and supplements,
vegetables, and fruits and nuts.
Regulations for juice and smoothie
bars influence these upstream
manufacturers. For example, the Plastic
and Resin Manufacturing industry
(IBISWorld report 32521) produces
polystyrene (IBISWorld classifies
polystyrene under the industry’s
polyethylene segment). Most juice and
smoothie bar franchises, including major
companies Jamba Juice and Smoothie
King, use smoothie cups made of this
material. The cups help insulate the
beverage to keep it cool, and are sturdy
enough to hold thick drinks. Some
environmental laws have banned the use
of polystyrene cups. Such bans force
companies to find alternative packaging,
which can increase costs or lower
customer satisfaction. Such regulation
also hampers revenue growth for the
Plastic and Resin Manufacturing
industry, which is anticipated to rise
3.8% in 2013. During the next five years,
the plastic industry’s revenue is expected
to rise 8.1% annually on average, from
$37.8 billion in 2012 to $44.2 billion in
2017. Stronger industrial production and
construction activity, which are not
Supply Industries
Juice & Smoothie Bars
End User Markets
Vitamin & Supplement
Manufacturing
Paper Bag & Diposable
Plastic Product
Wholesaling
Frozen Food
Wholesaling
Fruit & Vegetable
Wholesaling
Related Industries
Chain Restaurants Coffee & Snack Shops
Fast Food Restaurants
Households with
Incomes More Than
$75,000
Households with
Incomes Between
$50,000 and $75,000
Households with
Incomes Less Than
$50,000

WWW.IBISWORLD.COM Special Report August 2012 4
The Smoothie Supply Chain
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deterred by these regulations, will
underpin sustained growth for this
industry. For more information on
individual industries within this supply
chain, please reference their respective
IBISWorld reports.
Conclusion
Analysis within IBISWorld reports
enables clients to fully understand the
complex way in which industries are
interrelated. Charts, including the Full
Context Diagram that is on each report’s
website, help clients see the economic
factors and related industries that link
directly to each report. For example,
please refer to the Full Context Diagram
of the Juice and Smoothie Bars industry
(IBISWorld report OD4325). Many of the
supply industries reported are
distributors (also called wholesalers) that
function as a go-between the
manufacturers outlined in this report and
the Juice and Smoothie Bars industry
– an integral part of the supply chain
about which IBISWorld reports.
Contact:
Savannah Haspel
VP, Public Relations
IBISWorld
Phone: 1-310-866-5044
savannahh@ibisworld.com
www.ibisworld.com

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