Orange Julius, smoothie concepts unveil expansion plans

Nation's Restaurant News, Oct 17, 2005 by Carolyn Walkup

International Dairy Queen is attempting to revive and enlarge its aging but reinvented Orange Julius juice and smoothie brand, while newer and faster-growing smoothie chains are squeezing growth from the expanding segment.

Such rivals as Jamba Juice, Smoothie King and Maui Wowi might be on an expansion fast track, but Dairy Queen isn't giving up on its old-timey contender.

Orange Julius dates back to 1926, when Julius Freed opened his first juice stand in Orange County, Calif., with his proprietary recipe for a frothy, blended beverage of fresh orange juice, egg whites, vanilla flavor and ice. Today, Edina, Minn.-based IDQ, better known for its largely franchised flagship chain, is positioning Orange Julius for new avenues of international growth in a co-branded bundle with Dairy Queen--called DQ TreatWorks.

IDQ bought Orange Julius in 1987 and gradually expanded its offerings to include a variety of fruit-flavored beverages and savory items, including chili dogs and chicken Caesar pitas.

About a decade ago, Orange Julius introduced a smoothie line. Currently, the Strawberry Sensation Premium Fruit Smoothie is the brand's third-best seller, after Orange Julius' original and strawberry flavors.

About 400 Orange Julius outlets and kiosks are operating in the United States, with another 130 in Canada. Those numbers are roughly unchanged from a year ago, when systemwide sales of Orange Julius were estimated at $72 million.

Commenting on the brand's slowdown in growth in recent years, Ann Stone, a spokeswoman for 5,600-unit IDQ, said: "We missed an opportunity to capitalize on our heritage. We have some very strong competitors, but we have the heritage that some of them don't, and we have tremendous locations. We think people know us. We think this is the right time to really explode."

IDQ's new TreatWorks concept, a co-branded vehicle that combines Orange Julius and most of Dairy Queen's treat categories, debuted recently in Tarentum, Pa.; Tampico, Mexico; and China, including four outlets in Shanghai and one in Guangzhou. TreatWorks presents a new showcase for Orange Julius that Stone projects will generate about one-fourth of TreatWorks sales.

Stone anticipates that between 10 and 15 more TreatWorks units will open in 2006 in the Western Hemisphere. "If they are successful, we will move aggressively in 2007," she said.

Unlike stand-alone Orange Julius units, the brand's offerings inside TreatWorks outlets include only the beverage lines and not such items as hot dogs, nachos and pretzels. Stone would not estimate a check average at the first test unit in Pennsylvania but said the average at a stand-alone Orange Julius is about $3.25.

Restaurant industry analyst Ron Paul, president of Chicago-based Technomic Information Systems, said he sees room for growth in the smoothie segment, but primarily in areas like California that reputedly have a more health-conscious population.

"Orange Julius hasn't gone anywhere and is not on a roll. Dual-branding has proven to work, but Orange Julius almost needs to be repositioned," Paul said.

He added that Jamba Juice of San Francisco and Smoothie King of Kenner, La., have had the highest percentages of systemwide sales growth in the past year among the most sizable juice bar chains, with Jamba Juice reporting sales of $285 million and Smoothie King posting $103 million in annual business.

However, several leading smoothie chains are poised for aggressive growth. Paul Clayton, chief executive of Jamba Juice, predicted that between 60 and 80 units would open in the next year. Currently, 205 of Jamba Juice's 511 outlets in 26 states are franchisee-owned.

"I think Jamba is destined to become an international brand," said Clayton, who is a former president of Burger King North America. However, he said the priority is to continue to develop U.S. branches of the chain, including outlets at nontraditional sites, such as airports and college campuses.

Maui Wowi Hawaiian Coffees & Smoothies, with 375 units and kiosks now open in 42 states, including 63 opened in the past year, plans to open another 125 in 2006, said chief executive Michael Haith. The completely franchised, 22-year-old company, headquartered in Greenwood, Colo., sells its products to franchisees.

"Healthy fast food with gourmet-quality products is really in vogue right now," Haith said, explaining the recent growth surge. He said Maui Wowi's typical checks range from $4 to $4.75, and forecasts 2005 system-wide sales of $37 million, up from $33 million last year.

Smoothie King's director of franchise development, Richard Leveille, would not estimate how many more units his chain would open in the next year above its current 390 total. "A lot of franchisees are adding more," he said. Most new units will be located across the Sun Belt and in California, the Northeast and the Midwest.

He declined to divulge Smoothie King's sales trends, hinting only that same-store increases are in the single digits. Smoothie King is one of few chains in the segment that has a retail component, which includes such products as sports beverages, energy bars and vitamin supplements, comprising about 30 percent of sales.