Boost's pricing problem

About a decade ago I worked for retailer Howard's Storage World. Regularly I'd waste  a good portion of my meagre salary on tasty Boost Juice smoothies, at $5.40 a pop. Since then I'd be lucky to have bought three Boost Juices. Yesterday as I walked by a Boost Juice I glanced up, somewhat nostalgically, at the menu, I noticed that same smoothie now costs $6.50.

That's around a 20% rise in prices over a decade. As Chart 1 shows Boost's prices haven't even kept up with inflation. This makes the economics tough. I've always had my doubts about single-purpose food businesses (juice bars, cupcakes, frozen yoghurt, etc) but this simple fact means that regardless of how well it was doing ten years ago margins will have fallen now. Wages, rent, fruit and milk costs march upwards. If you can't lift prices by the same amount margins are going to get crunched. I'm sure Janine Allis is pleased she cashed out (mostly) in 2010.

Whilst Boost has been struggling, Coke has been soaring. Over the same period it's managed to lift prices at twice the rate of inflation. Where Boost is a marginal business at best, Coke is a fantastic one. It was also a higher margin product to start with.

Now, perhaps I'm missing something. Boost has expanded its product range. Perhaps it's more efficient now. Maybe size has helped it wrangle volume discounts on inputs.

Still, the best businesses can raise prices without customers batting an eyelid. Boost doesn't appear to be one.