Markets

Starbucks Drives Single Tea Brand Strategy with Teavana

Starbucks Drives Single Tea Brand Strategy with Teavana

Starbucks also announced an agreement to sell Tazo brand to Unilever NV for US$384 million, part of an effort to better focus a tea business that has disappointed.

The sale of the Tazo Tea brand to Unilever plc (ADR) will include all of its recipes, inventory and intellectual property that now belongs to Starbucks Corporation.

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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 brand, which is sold mainly in conventional grocery and convenience retail channels, produces a range of tea products, including packaged tea, K-Cup pods and bottled ready-to-drink (RTD) beverages.

"With its strong appeal to millennials, Tazo is a flawless strategic fit for our United States portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington's", Unilever North America president Kees Kruythoff said.

The chain's fourth quarter in 2016 included an extra week, so comparisons between this year and last week will be a little off, the company said.

Tazo, which had sales of $112.5 million over the past year, sells specialty black, green and herbal teas, as well as liquid concentrates to make chai lattes.

For Starbuck's, which acquired Tazo in 1999 for $8.1 million, the deal is a lucrative one which offers a more than 47-times return on its investment. Sales at same stores increased 2% while a growth of 3.3% was expected.

On the company's quarterly call, Starbucks said it would launch a co-branded Chase Visa credit card this winter.

The Seattle-based roaster was also hit by growing pains as the company took charges related to restructuring and refining its operations.

Excluding some items, profit amounted to 55 U.S. cents a share last quarter - in line with analysts' forecast.

US same-store sales increased 2 percent, including a 1-percent increase in the number of customers. He added that the company reset its long-term guidance to "represent performance we can meet or beat in the years ahead".

Starbucks missed analysts' revenue expectations for the quarter. It also cut its global long-term same-store sales growth forecast to 3% to 5% from 4% to 6%.


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