Starbucks Drives Single Tea Brand Strategy with Teavana

Jon Howard
November 4, 2017

In announcing the Tazo deal, however, the retailer said it will continue to invest in the growth and development of the Teavana brand in Starbucks stores and in other channels.

Starbucks sold more than $1.6 billion in the Teavana brand in the past 12 months, compared to $112 million in sales for Tazo brand beverages. It was sold mostly at supermarkets, bib-box, and convenience stores, its product lines include packaged teas, K-Cup pods, and ready-to-drink bottles.

Unilever plc (ADR) notes that the acquisition price for the Tazo Tea brand represents 10 times its pro forma EBIT.

Founded in 1994 by a team that included Steven Smith and purchased by Starbucks in 1999 for $8.1 million, Tazo was once a specialty tea brand in its own right.

With its strong appeal to millennials, TAZO is a flawless strategic fit for our USA portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington's.

"With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever", said Kevin Johnson, president and CEO, Starbucks.

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The company also announced that it generated $5.7 billion in revenue in the company's fiscal fourth quarter ended October 1. The company expects to launch a Starbucks-branded credit card with Chase this winter.

Starbucks adjusted earnings per share were 55 cents which were in line with analysts' expectations. Sales at same stores increased 2% while a growth of 3.3% was expected.

Starbucks global same store sales were up 2% following a gain of 2% in the amount each customer was spending and an increase of 1% in transactions.

The coffee giant cut back its profit forecast on the heels of disappointing fourth quarter sales, which were impacted in part by two back-to-back hurricanes. Net revenue was US$5.7 billion, short of the estimate of US$5.8 billion.

In the long-term, the company is targeting annual global comparable-store sales growth of 3 percent to 5 percent and annual consolidated net revenue growth in the high-single digits.

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