Pacific Business News

IN DEPTH: FAMILY-OWNED BUSINESSES

Nina Wu, Pacific Business News, From the May 6, 2005 print edition
Smoothie shop's strategy: Stay close to competition

Small-business Issue:
Competing in the same
neighborhood with a larger rival with deeper pockets

Strategies:
* Expand product line and offerings.
* Improve the quality to differentiate it from the competitor.
* Cultivate relationships with a loyal customer base and seek out new customers through advertising.
* Seek the most prominent location. Instead of spending money on demographic research, seek locations close to a larger competitor that already has done the work.

Using organic produce costs Gonzalez more, forcing him to increase prices by about 8 percent last month. The prices now range from $3.35 for a 16-ounce berry smoothie to $5.25 for a 32-ounce power smoothie -- still competitive with Jamba Juice. He said the increase also was due to higher fuel costs. He picks up fresh fruit daily using his own truck, keeping careful track of the quantity to maximize its use.
Gonzalez's philosophy is to sustain the local economy by buying local. While that might cost more, he says, the loyalty goes full circle because his suppliers are also his customers. Location is key

Loans from American Savings Bank and the Small Business Administration and customer value cards were instrumental in not only helping Lanikai Juice survive, but also in upgrading to a larger shop. Gonzalez says customers visiting the fledgling business stepped forward to buy value cards for between $20 and $1,000 apiece, redeemable at the shop along with a 20 percent discount on smoothies. Lanikai Juice no longer sells the cards, but the cash from the first round allowed Gonzalez to pay his base expenses and move to a 500-square-foot corner location in 2000.

Pablo Gonzalez had practically the only smoothie shop in Kailua town when he opened Lanikai Juice eight years ago. Then Jamba Juice came along in 1999, and Gonzalez feared his business would go under. Several other independent smoothie operators have since disappeared -- among them, Hang Loose Juice, On The Juice and Juice Spot. But he's still in business, and says he's even looking for a second location near the giant smoothie chain. He figures he can compete with them while saving himself the trouble of drawing smoothie customers from a new neighborhood. His strategy: "Be close to the competition and prove the difference."

Gonzalez says he has a loyal customer base on the Windward side -- one that appreciates smoothies made from fresh, locally grown fruits. When they taste the difference, he is confident they will come to him. To remain competitive, Gonzalez came up with different blends of smoothies, with localized names such as Kailua Monkey, Pele's Papaya Cream and Waimanalo Blue. He's doing battle using ingredients such as organic soy milk, granola, apple juice, honey and peanut butter -- and fresh, locally grown fruit, when available. Lanikai Juice uses 100 percent fresh juices, he says, while the competition uses juice concentrates. Lanikai Juice uses fresh, nonfat yogurt -- the competition, frozen yogurt.

"Everyone can make smoothies," he said, "but not like us. We raised the bar on quality."

A native of Argentina, Gonzalez, 51, established the smoothie shop in a 350-square-foot space a few doors down from the current location, now home to the Kailua visitor information center. He now owns the shop, overseeing nine full-time and part-time staff with Tamara Valdivia as his business partner and general manager. The larger corner location was just a short move but it made a world of difference, he says. It is more visible, with outdoor seating and the colorful Lanikai Juice logo and sign on two windows. "You can have good drinks in the wrong location and it's not going to work," he said.

Gonzalez said his second location will likely be near another Jamba Juice. The tough part will be convincing landlords to lease to a small business. Many of the major malls and shopping centers, he said, prefer a large, well-established chain as a less-risky option. But he said Lanikai Juice's eight years in business should help. He paid off his SBA loan in December and says he has good credit and that sales are up this year.

Customers like family...

Gonzalez teaches employees to serve up the smoothies with an "aloha" greeting and a smile. Employees must pass a written test of smoothie recipes to become a part of the team. He wants them to get to know regular customers by name, with the philosophy that they are an extended part of the Lanikai Juice family. Several generations of customers have been at the shop. Kailua resident David Dunham is one of them. He has taken his 7-year-old son to Lanikai Juice since he was born. In order to cultivate new customers, Gonzalez spends a good amount on advertising for a small business. Last year, he estimated spending about $13,000 for ads -- targeting both the Japanese visitor and the local market. He estimates about 15 percent of his business comes from Japan. "They are loyal and they like quality," he said.

Dated: March 15, 2000

Lanikai Juice business partners
Tamara Valdivia and Pablo Gonzalez
train their employees to
treat customers like a family.

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