Boost Juice Case study PDF

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Case study that they give you for the tutorial exercises, may come up on exam...

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BOOST JUICE1 The juice and smoothie bars industry in Australia is worth an estimated $404.4 million and employs 3,178 individuals. There are 100 businesses operating within the Australian industry, occupying 628 stores.2 Boost Juice is the largest player in this industry, with its parent company Retail Zoo Pty Ltd capturing 54.2% of the market share. Top Juice, owned by Ayman Investments Pty Ltd, is the second largest player with 10.7%. The four largest operators account for over 65% of industry revenue. In contrast to Boost Juice and Top Juice, which are both large-scale franchise operations, most participating businesses within this industry are small, independent juicers and smoothie operators, with few employees and a single owner.2 Boost Juice is part of what has been called the “wellness category”, a category of retail organisation that is one of the world’s fastest growing retail categories. Companies in the wellness category have experienced tremendous growth.3 With the health and wellbeing trend driving consumer demand for juices and smoothies set to continue, the industry is expected to expand further over the next five years. However, industry growth over this time period is projected to be lower, at 4.5%, due to growing internal competition from new entrants and stronger external competition from supermarkets.2 IN THE BEGINNING It was 1999. The incidence of obesity, including childhood obesity, was growing, and there was a gap in the Australian market for a convenient, fresh and healthy alternative to fast food, which at that time was largely unhealthy. On a trip to the US, Janine Allis, who was working as a publicist for United International Pictures, discovered the thriving juice bar concept and the idea for Boost Juice was born.3,4 According to Allis, being a mother was a driving force behind her desire to start her own juice business: I had this vision of job flexibility and hanging out with my kids more. Naivety’s a wonderful thing. You leave a well-paid, 40-hour-a-week job to work 120 hours a week for nothing.4 I just wanted to give my children something quick and healthy on the go when we were out, but there wasn’t much to choose from. I thought if I wanted fresh juice and the convenience of grabbing something healthy on the spot, surely there would be people like me out there who wanted the same thing.5 Allis felt she could improve upon the US juice bar concept by promoting the health benefits of juices and smoothies and delivering a superior customer service experience in more attractive stores.6 Together with nutritionists and naturopaths, Janine formulated Boost Juice’s menu of “healthy” juices and smoothies that are preservative, artificial flavour- and colour-free.3 Janine Allis, arguably most recognisable recently through her appearance as one of the “sharks” (investors) on the Australian reality TV show “Shark Tank”, founded Boost Juice together with her husband Jeff Allis in 2000.7 Selling the family home and with $250K in start-up capital, some of it borrowed from friends, the Allis’s opened the first Boost store in King William Street, in the CBD of Adelaide, Jeff Allis’s hometown, in 2000.5,6,8 Despite living in Melbourne, the smaller Australian city of Adelaide was chosen because it posed less financial risk due to lower costs, including of leasing sites, and allowed them to learn from mistakes and build a business model out of the spotlight of a larger Australian city such as Melbourne.6

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STRATEGY Within 18 years, Boost Juice has grown from a single-store, Australian start-up operated from the Allis’s kitchen bench in their two-bedroom rented residence, to an over 500-store subsidiary of a multi-brand enterprise, Retail Zoo Pty Ltd (comprising over 600 stores and over 8,000 employees), located in 16 countries and headquartered alongside the retailer JB Hi-Fi in a four-level, 6000-square-metre office building in Chadstone Shopping Centre in Melbourne.8,9,10,11,12,13,14 Turning over more than $2 billion since its establishment15, Retail Zoo is valued in excess of $250 million16, with revenue of over $350 million.17 Its tremendous success has seen Boost Juice, its parent company (Retail Zoo), and its co-founder (Janine Allis) win numerous awards. These include Telstra Australian Business Woman of the Year (2004), AMEX Franchisor of the Year (2005), and Winner of National Retailer Association Awards (2008).18 Boost Juice’s strategy is centred on growth. It aspires to be, “one of the world’s most famous and loved brands”, with its global brand strategy being, “To become to juice, what Starbucks is to coffee”.3,19 Boost Juice is one of the largest juice and smoothie franchise in the world20, operating in more countries than any other juice bar world-wide.3 In nine years, Boost has doubled the number of juices and smoothies it sells each month, from one million to two million.6,21 It has achieved its growth strategy through shifting into franchising, acquiring the Viva Juice business, and through expanding: overseas, into a multi-brand platform, into supermarkets, its menu, and into different locations. You no longer need to frequent a shopping centre to purchase a Boost juice or smoothie. You can purchase one using the Boost Juice app and then pick it up on the way to university in a drive-through if you’re commuting from Ballarat, at university in the Union building, or you can buy a bottled juice at a supermarket to consume at home. You can also buy a snack to accompany your juice or smoothie. Shift into franchising: With the Allis’s desire for growth and reportedly designed to be a franchise-run organisation (although Allis denies this in an interview9), Boost Juice started franchising a year after its inception in 2001. Its first franchise was granted in Adelaide.3,18 With only two stores operating, the business quickly expanded when Jeff Allis secured an 18-store lease deal with Australia’s largest shopping centre operator, Westfield, to open stores across Australia.22 In 2001, the first Boost store in Melbourne was opened. This was followed in 2002 by the first store openings in New South Wales, Western Australia, and Queensland.18 In 2013, over 40% of Boost Juice franchisees owned multiple Boost Juice franchises.3 This rapid expansion into shopping centres across Australia necessitated the hiring of employees to help the Allis’s to manage their growing business. Janine’s first recruits were a personal assistant and a person to deal with the franchises. Janine and her staff worked from a home office for two years before the staff of eight outgrew the space, moving to another office which they subsequently outgrew before moving into their current office located at Chadstone Shopping Centre.9 In the early years of Boost Juice, the financial sacrifice the Allis’s had made to start the business was a significant motivator for Janine Allis, and there was little personal financial return for the Allis’s. Janine Allis describes these years as follows: We were sleeping in the same room as our kids …We were all in. There was no option but to

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succeed.4 I didn’t take a salary for three years, and in year four I took out $30,000. I have never been a highly paid person — you have got to have a long-term vision.4 Acquisition of Viva Juice: In 2004, Boost Juice acquired the Viva Juice business, two years after first approaching them. At the time, Boost had over 80 stores and Viva had 24 stores, all company-owned and not franchised. Viva were the only juice and smoothie business that Janine Allis perceived as a competitor to Boost. Viva’s owner had secured “coveted real estate”, including great sites in Melbourne and Sydney airports, that Boost wanted. With this being the first business acquisition for Allis, negotiations lasted six months, and Allis attributes the success of the acquisition to her “girl power team” (Kristie, Naomi, and Jacinta). All 24 Viva stores were converted to Boost Juice stores, and the Viva employees were onboarded.18 Expansion overseas: Having reached saturation point in Australia, capitalising upon considerable international expressions of interest and pursuing their goal to become “one of the world’s most famous and loved brands”, Boost Juice began their globalisation close to home, opening their first overseas store in New Zealand in 2004.3 With Asia being a focal area, they have subsequently expanded into 24 other countries, including Chile (2006), Indonesia (2006), England (2007), Portugal (2007), Macau (2007), South Africa (2007), Singapore (2007), Kuwait (2007), Estonia, Thailand (2008), Lithuania (2008), Germany (2008), China (2008), Malaysia (2008), South Korea (2009), India (2012), Russia (2013), Scotland (2015), Bangladesh (2018), Latvia, Brunei (2016), Namibia, Taiwan, and Vietnam (2018). 3,6,18,23,24,25 As at February 2019, according to the Boost Juice Australia website, Boost has 225 overseas stores in 15 countries.14 Boost Juice’s international expansion strategy sought to “continue the brand’s high growth and high profit “success story” in new markets, all over the world”.3 Boost’s foundations were perceivably strong enough to support international expansion: “With our systems, processes and our committed team, we have an incredibly strong and sustainable base in which to spring-board into the world market”.3 These foundations were strengthened when in 2010, to raise capital to finance further expansion overseas, Boost Juice’s parent company, Retail Zoo, sold a majority stake in the business (reportedly 70%) to The Riverside Company, a US private equity company, for A$65 million.26,27,28 According to Scott Meneilly, then CEO of Boost Juice, “The biggest change with the private equity coming on board was getting some renewed energy in there and experience from a board perspective”.28 Procedurally, a primary vehicle by which Boost has realised their expansion overseas is through appointing a master franchisee in each overseas country, necessitating skill in finding the most suitable and experienced entity for a major franchise deal.3,6 Master Franchisees, typically people, companies or partnerships with retail experience operating multiple outlets in the country, are required to commit to a development schedule, namely an agreed number of retail outlets to be opened in the country over a specified time period.19 For example, in 2009, Boost Juice signed a master franchise agreement in South Korea, which was announced by Jacinta Caithness, CEO of Boost International, as follows: South Korea has already embraced the juice and smoothie bar concept so we are hoping to have over 30 stores opened within the region in the next three to five years. Our newly appointed master franchisees, ‘Joseph’ Young Duk Chang and Kim Sung Yeo come to us with significant

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retail food and beverage experience in the region, so we look forward to working with them and using their local knowledge to break into the market.29 Compared to Australian-based employees, master franchisees, local to the overseas country, have the advantage of local knowledge, including knowing the regulations of the country that need to be met6 and the taste preferences of the local market. In each overseas country, while typically 70 to 80% of the menu is the same as the Australian menu, following local research (including focus groups involving taste testing), the other 20 to 30% is tailored to the specific taste preferences of the locals.3,28 For example, the cherimoya (custard apple) smoothie is popular in Chile and the lychee smoothie is popular in Asian countries.30 Expansion into a multi-brand platform: At one of their strategic planning retreats, Boost’s strong infrastructure (i.e., its back-end departments including franchising, IT, design and development, legals, finance, marketing) was recognised and became the catalyst for further growth through expansion into a multi-brand platform. This new strategy was accompanied by a change in organisational structure: Boost became the foundation brand and subsidiary of a new parent company, Retail Zoo. (Exhibits 1 and 2 illustrate the organisational chart of Retail Zoo and a Boost Juice store respectively .) Accompanying this new strategy and structure were personnel changes, including Janine Allis stepping down as the CEO of Boost Juice and Jeff Allis becoming the CEO of Retail Zoo. According to Janine Allis, “…the business needed new legs to continue the journey” and “Jeff was fresh after a year’s break and we were ready to swap roles; he was chomping at the bit to make his mark on the company”.31 Retail Zoo’s strategy is to acquire strong, small retail food businesses (comprised of four to ten stores) that are a cultural fit and enable their growth within Australia and overseas, using their strong infrastructure to do so.31,32 However, it has also acquired a 23-store business (Cibo Espresso) and launched a business (Hatch Chicken Shop). Always looking to acquire businesses33, currently, its four brands, in order of foundation or acquisition, include: • • • •

Boost Juice Bars (opened in 2000), Salsa’s Fresh Mex Grill (which was originally named El Taquito, a Melbourne-based, nine-store chain acquired in 2007), Cibo Espresso (which was a South-Australian-based, 23-store chain that Retail Zoo acquired a majority stake in for a reported $15 million in 2012), and Betty’s Burgers (which was a Queensland-based, 10-store chain that Retail Zoo acquired a majority stake in in 2017).3,16,28,34,35,36

Expansion into supermarkets: In 2005, Boost expanded into supermarkets, launching a new range of bottled juices, frozen yoghurt and healthy snacks into Coles.3,18 While Boost Juice has less than 0.5% of the $1.7 billion fruit juice manufacturing market, their market share is reportedly growing after they started selling 1L and 350ml bottled products in Woolworths and Coles supermarkets.26 In April 2017, to meet customer demand, Boost undertook product range innovation and launched frozen smoothie packs in four flavours, comprised of whole fruit and vegetable combinations, into Woolworths. Janine Allis articulates the health benefits of this move as follows: “We wanted to make it easy for people to get more fruit and veggies in their diet and, with these smoothie packs, we have used a specific combination of the two”.37 Expansion of menu: Boost Juice espouses that they have continued to expand their range of products

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to suit customer needs and offer more choice. For example, aligning with dietary trends including low/no sugar and Paleo diet movements, in 2013 they added the Lean & Green range and in 2015 they launched the Red Raw range.3 Boost also plan to expand into food, which they have commenced doing at two “Boost &” stores located in Sydney Airport and Chadstone Shopping Centre in Melbourne. Food offerings include protein pots, grain and avocado salads, and boiled eggs, which Janine Allis purportedly finds bemusing: “Literally just two plain boiled eggs and people love it, which is bizarre, because it’s just boiled eggs”.38 Expansion into different locations: To continue their growth trajectory (and increase their customer base), Boost has expanded their store locations beyond their traditional home of metropolitan shopping centres to include regional areas and non-shopping centre locales such as universities, service stations, and drive-throughs. Boost Juice’s first drive-through, located in Ballarat, Victoria, was opened in 2017 in response to demand from customers on social media to offer a drive-through option.38 THE CULTURE AT BOOST JUICE Boost believes that its unique customer service experience, based on the company’s “love life” philosophy, differentiates the company from its competitors.3 This experience is comprised of three elements, including the product, the staff, and the store environment, and is (variously) depicted by the company, in shorter or longer descriptions, including the following: …a great product served by friendly, efficient people in a positive and energetic environment.3 …a great tasting product, served by positive and energetic people who greet you with a smile and are polite enough to call you by your first name; in a bright and colourful store environment with fun music to match.3 Our incredible team members are passionate about giving our customers a great shopping experience and along with the row of busy blenders at the front of the shop, they are the focal point of a vibrant, theatrical celebration – the making and mixing of a great smoothie! So not only is Boost providing customers with an amazing product through the design, shop fit and the fantastic staff – Boost is creating an experience!3 Love life philosophy: Formulated by Boost Juice’s (co-)founder, Janine Allis, at its inception, Boost Juice’s “love life” culture, embodying positive attitudes towards living, is readily visible in-store, in the company’s head office, and in its wider communication. This culture was devised to reflect Janine Allis’s “…enthusiasm and energetic personality…”3, with Allis explaining: You can’t fake it…You either are that person or you’re not. And your brand has that essence, or not. And that is what we thought about when we were building this brand. We wanted the brand to have a personality, and the way to have a personality is to take the personality of a founder into the business.38 Observable symbols of this culture in-store include the store design (including the logo and the Boost Guarantee), the staff uniforms, and the company’s mascot, Barry Boost, who makes appearances at

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shopping centres and in street parades and hands out free samples and hugs.3 Designed to make a strong and lasting brand impression, Boost stores have “…a high quality store fit-out, the latest in light, new and innovative fittings and fixtures, bright, bold, seductive menu boards and the famous Boost graphics”3 (Exhibit 3 illustrates a Boost store.) With the significant emphasis on design in shopping centres, Boost’s store design continually evolves and stores are refreshed every 18 months.28 The Boost Guarantee, emblazoned on the wall of every Boost store, reflects the “love life” culture. (Exhibit 4 shows the Boost Guarantee.) Manifestations of this culture in the company’s head office include the colourful décor, described by Janine Allis (2016) as “more colours than Play School” (p. 79), no dress code in the support centre, and the exuberant behavior of its employees, who Allis (2016) characterises as “bouncing off the walls with enthusiasm” (p. 79). Allis (2016) espouses that the Boost work environment is “fast-paced, dynamic and vibrant” (p. 79). To keep ahead of the competition, and to excel in this fast-paced work environment, Retail Zoo employees are ambitious and self-motivated, with many of Retail Zoo’s staff members being triathletes or passionate about a specific sport.31 Allis (2016) depicts this as follows: At Boost, we’re achieving twice as much as other franchisors in half the time…[and] to keep up in this fast-paced environment, our employees regard their role as more than just a job. (p. 80) Staying late is not a badge of honour. But you do need people to deliver on what’s required to get their job done. (p. 82) The “love life” culture is reinforced in the company’s communication, including its corporate social responsibility (CSR) initiatives, and Boost jargon. A section in the Boost Study Kit (2015) entitled “Loving Life Loving the Environment” describes how Boost converted all stores from polystyrene to paper cups. Boost jargon includes: •

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“Boostie”: the (Australian) nickname it has coined for any Boost lover (including employees, customers, and franchise owners) o “As a Boostie, you will cross-train within the store to continually learn new skills”39 o “Boost is a franchise business, which means we find the most Boostie partners possible to buy and run our stores worldwide”3 Boostieship: a Boost traineeship o “Boostieships – Our unique nationally recognised traineeship program that has been designed to Generation Y standards and aligned to business objectives”40 Boostag...