Blending and squeezing: the vital statistics of operating a smoothie and juice bar in Australia.
Mmm, have you got the taste for a juice bar investment? Thanks in no small part to Boost Juice Bars, which is taking its brand around the world, Australians are enthusiastic consumers of smoothies and juices.
In fact in 2015-16 we are spending $360.7m on our favourite liquid fruit and vegie treats. And that’s bringing in profits of $13.3m for the businesses operating in this sector.
And annual growth has been high – 9.8 percent for the five years up until 2016. But despite a slow down on growth, predictions for the next five year are for a positive 4.1 percent increase.
There are 91 businesses in the juice bar marketplace, which is still at an early stage of development, according to IbisWorld’s Juice and Smoothie Bars in Australia Industry Report, March 2016.
As the sector matures competition increases. Franchised brands have taken hold of this young segment of the beverage market, with Boost Juice Bars, Top Juice and Kick Juice Bars the key players.
Controlling juice bar costs
Controlling inventory is key to success so a sustainable supply chain is an important element of the franchise system. Fruits, vegetables, dairy products and packaging are key costs.
Fruit and vegetables are core ingredients and inevitably affected by weather conditions and production costs. The past five years have seen substantial cost increases in Australian-grown vegetables as a result of changeable weather patterns and prices for both fruit and vegies are expected to rise this year.
However, IbisWorld predicts input prices will match the increase in sale prices, so the average profit margin (estimated to sit at under four percent) could be maintained for the next five years.
Other costs of doing business – rent and labour – are increasing. For every dollar spent on capital, a juice bar business will spend an estimated $16.71 on labour, reports IbisWorld.
As we have seen with other retail franchises, particularly food franchise systems, the way to combat rising rents is to embrace new, smaller footprint models.
As companies head overseas with their successful Aussie brands, the changes to business models to suit local demographics, cultures and tastes may in turn improve the franchise operations here.
Greater efficiencies will help the brands expand.
Customer demand for juice and smoothie bars
Discretionary income and nutritional trends have a big impact on demand.
This is an industry dominated by the health conscious consumers aged 20 to 34 who have high levels of discretionary income.
It’s encouraging that teenagers are the second biggest consumers of smoothies and juices, who although they have limited income are attracted by branding and marketing campaigns.
The third largest group is the 35 to 50 year olds, likely to include parents of these teenagers. They embrace the health conscious trends but are constrained financially by demands from their dependents.
This is an urban business, with New South Wales and Victoria hosting the majority of juice bars in Australia – 60 percent – with hot and humid Queensland in third place.
Typical locations are shopping centres, food courts in shopping centres and airports, and sites neighbouring gyms, sports centres or cafes.
Boost Juice Bars has a national presence, Top Juice operates interstate, but most brands operating multiple sites in this sector are focused on their local region. When the smaller players make moves to expand, it will be through either improved economies of scale or joining existing franchise systems.
There is a medium level of competition with the influencers of success the price to value equation, location, customer service, brand recognition and staffing.
External competition is seen in cafes and coffee shops, fast food outlets and grocery stores.
Overall, the trend for health and wellbeing is driving this sector with key franchise brands delivering advantages over independents.
- Check out the juice bars category
- Coming up…what franchise brands have to offer.