Tony Gioia loves to eat and that’s a good thing. During some 30 years in the food service industry, he has had to do a lot of it. He’s sipped lattes as chief executive at Tully’s Coffee Corp., sampled mint chocolate chip ice cream as president of Baskin-Robbins, and feasted on Spago’s finest as a founding partner in Wolfgang Puck Worldwide Inc.

Now, settling into his new position atop Manhattan Beach-based Robeks Corp., Gioia is on a health kick. He’s made his way through most of the items on the 85-unit chain’s extensive menu of smoothies, juices and frozen yogurt, becoming accustomed to a morning meal of banana slices, granola and Acai, an antioxidant-rich ingredient he enthusiastically compares to the pomegranate.

“It takes pomegranate to the next level in terms of density of nutrients,” asserts Gioia, who claims a helping of the stuff keeps him alert even if he skips caffeine.

And Gioia better stay awake.

He has a mighty job in front of him trying to push the rest of America’s diet to replicate his something Gioia believes is already happening. He is confident the nation’s sugar-filled, caffeine-fueled soda obsession is finally eroding, and nutritional food purveyors like Robeks, if they position themselves just so, can lucratively ride a wave of health-conscious consumption even if his outlets find themselves often positioned near Starbucks.

A ‘lifestyle play’


That prospect was alluring to Emigrant Capital, a $150 million private equity fund of New York-based Emigrant Savings Bank, where Gioia became an executive partner after leaving Tully’s two years ago. Emigrant recently bought a minority stake in Robeks and, sensing the 10-year-old company needed some tweaking to build its national presence, made Gioia chief executive and vice chairman of the board. New York-based Maverick Capital is a majority shareholder.

“We think about the investment potential,” said Gioia. “It is a lifestyle play where we are expecting more consumers who want to eat and drink healthier to come to this category, and we want to take advantage of that.”

The numbers tell all. Americans are busy slurping smoothies $1.6 billion worth last year, about 94 percent of which were made-to-order drinks, a category that grew 38 percent from 2003 to 2005, according to research firm Mintel International Group Ltd. The trend line points to rising smoothie sales: healthy eating is not just the fringe interest of yoga-mat carriers. Gym memberships are mounting and food-on-the-go is more in demand than ever. Adjusted for inflation, Mintel predicts smoothie sales will increase 7 percent annually to $2.1 billion in 2010.

The growth potential has sparked a feeding frenzy for smoothie shop real estate. Gioia is spearheading rapid, but he maintains prudent, expansion at Robeks. He’s issued a “call to action” to boost the chain to 500 units in five years. “If I thought it was hype, I wouldn’t say it,” insisted Gioia. “We have a very good chance of getting to 500 stores.”

But the competition is stirring. Both existing national players, the biggest of which is San Francisco-based Jamba Juice Co., and other regional players like Robeks, which is largely a West Coast concept, are eyeing the landscape to venture into new markets. Jamba is in the process of being purchased by Services Acquisition Corp., which will provide cash to expand the company’s current 541 locations.

Dan Titus, president of Juice Gallery Inc. in Chino Hills, describes the current smoothie shop boom as the “second wave.” He said the first wave was in the mid-1990s when Jamba Juice squeezed onto the scene and independents like Robeks at the time tried to grab a smaller piece of the smoothie pie. Like then, larger chains are the primary growth drivers, but independents also play a prominent role in their selective geographic markets.

Starbucks style


Gioia equates the current state of the smoothie industry to the premium coffee industry 10 to 15 years ago. At that time consumers were beginning to shift from making coffee at home, where brands like Folgers ruled, to buying coffee at places Starbucks Corp., of course, being the best-known example where they paid top dollar for a single cup.

At first, most might have cringed in horror at a $4 cup of joe. After a while, though, it seemed like even adamant doubters discovered a pricey coffee concoction they liked and jumped on the bandwagon, leading to a surge in demand that couldn’t even be satiated by Starbucks, a company that racked up $6.4 billion in revenues last year. That left room for coffee companies like Tully’s to cultivate customers.

If history repeats for the smoothie industry, it would go as follows: people would replace blender-made and comparatively cheaper drinks (soda and water being the most obvious) with smoothies. The Jambas across the nation, like Starbucks before them, would stand to gain most from this changeover, and Robeks, where the average bill is now $5.50, would carve out a nice niche or even become a leading brand.

Aligning Robeks to best attract the burgeoning audience is Gioia’s mission. “Our objective is to appeal to a wider audience as consumers trade up. We want to capture more of that audience,” he said. “A company our size typically has to evolve for a national strategy.”

However, the geographic spread of smoothie joints hasn’t been entirely smooth.

Randall Hiatt, president of Costa Mesa-based restaurant consultancy Fessel International Inc., said the concept is a natural for warm climates, but has some trouble translating in colder regions coffee places faced the opposite problem when they jumped into sunny L.A.

“The business has had its limitations in the past in a geographical sense,” said Hiatt. “You don’t see it necessarily have a high presence in New York City. That is probably part of the battle Tony would face.”

But Gioia believes a little tinkering with Robeks, such as simplifying its menu, could go a long way toward improving its growth trajectory. Of the crowded menu, he said, it needs a bit of simplifying so it can be more consumer friendly. To make the appropriate revisions, the company tests out modifications in its stores before rolling them out to the entire chain.

Grace Kim, who runs a Robeks’ franchise with her husband, is thrilled with the performance of her Westchester location, one of the highest grossing in the chain. Titus estimated that smoothie shops, not Robeks in particular, can bring in $150,000 to $300,000 or more a year in revenues and are typically around 1,000 square feet. Smoothies are high-margin products a $4 smoothie can cost around $1 to make.

“It is a great business because you provide something healthy to your customers,” Kim said. “We searched for a lot of things, sandwich places like Togo’s, but it was something quick and something healthy. We really loved Robeks.”

Competitive challenge


But the smoothie industry isn’t standing still as Robeks prepares for expansion. The company has the challenge of keeping abreast as its competitors advance and remedying current issues at the same time.

Fortunately, David Gross, co-founder of Juice Bar Solutions Inc. in Novato, said the company has been ahead of the curve in bringing cutting-edge ingredients to consumers. He said Robeks was first in line on Acai and green tea, and is also integrating other food products besides smoothies. Robeks offers a variety of “healthy eats,” including salads, soups and sandwiches.

“Others that were strictly in the quick-service industry that were one product companies are moving to a broader menu. That seems to be without question where it is going,” Gross said. “I like their (Robeks’) positioning because they offer healthy meals in their stores.”

At Robeks, Gioia is going to have to contend with competitors that aren’t even envisioned yet. Already, new players are entering the field. Dunkin’ Donuts has recently begun selling smoothies, and fast-food companies are sure to come next.

Gioia doesn’t seem worried. He said customers will vote with their wallets.

“There are lessons to be learned from years in the food industry. We are an efficient business model,” he said. “Capital goes to the best use. Consumers dictate to companies how to figure that out. We are constantly listening to the consumers.”