Food Business News - June 4, 2013 - 22

Teavana time at Starbucks
LONDON — As Starbucks Corp. works to
integrate Teavana into its portfolio, tea,
a small but core part of the Seattle-based
company’s business for more than 40 years,
should show signs of becoming a meaningful contributor to incremental growth in the
years ahead, Troy Alstead, chief financial
officer and chief administrative officer for
Starbucks, said during a May 22 presentation at the Barclays Americas Select Franchise Conference in London.
Starbucks acquired Atlanta-based Teavana Holdings, Inc. late last year for $620 million in cash. Teavana is a specialty retailer
offering a variety of loose-leaf teas and
tea-related products through 300 companyowned stores and on its web site.
Mr. Alstead said that while tea is the second most consumed beverage in the world,
after water, it is only a “tiny, low single-digit
share of our overall sales.”
But indications are it’s time for tea at
Starbucks, and Mr. Alstead said that over
the next several years tea will become an
incremental driver of revenue and profitability for Starbucks.
Mr. Alstead described the Teavana acquisition as a “threefold proposition” for
Starbucks, with two “high” priorities, and
another further down the road.
The first priority, he said, is remaking
what the typical Teavana store has been.
“The Teavana store … is predominately
a mall-based mercantile (with) very little
beverage presence at all,” he explained. “(It
has been) largely dry tea, (with a) great selection of wonderful teas and merchandise.
That is a very effective, great unit economics

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model. We’ll continue to add Teavana
stores in the appropriate locations that are
consistent with the previous generation.”
With Starbucks’ help, though, Mr. Alstead
said the company is focused on bringing
more beverage innovation.
“It is theater in the store, it is the beverage bar concept,” he said. “And creating a

new concept of a tea house — a Teavanabased tea house — that will feel very similar
and very familiar to that Teavana customer,
but will, we believe, add another layer of
revenue and profitability and growth into
the Teavana concept, which is by bringing
some innovative kinds of tea beverages into
that concept.”
Mr. Alstead said the “new generation” of
Teavana stores will begin to open later this

year, first in the United States, but ultimately in other markets of the world as well.
A second priority with the Teavana acquisition will be finding a way to make tea
a more meaningful part of the experience
within a Starbucks store.
“One of the things we have learned from
our customer, particularly in recent years
as we’ve really tried to dig deeper into understanding our customer, is that the core
Starbucks customer who is a coffee drinker is also a tea drinker,” Mr. Alstead said.
“What Teavana allows us to do is deepen
our capability around high-quality sourcing
and blending of tea. And again, by bringing
together our beverage innovation capabilities in our R.&D. facilities we are developing a whole new platform of tea beverages
that we think will be very exciting.”
The final priority, and one that Mr. Alstead acknowledged is further down the
road, will be taking tea and Teavana and
making them more meaningful in the consumer packaged goods channels.
“Tea down the grocery aisle is a huge
category, all forms of tea — ready-to-drink,
dried,” he said. “And we have an opportunity with a brand like Teavana, particularly as
we build it through the Starbucks platform,
to create more awareness, to elevate that
brand, to create that proposition, to perhaps bring to bear Starbucks loyalty program, to move our customers and to make
them aware that now they can experience
tea down the aisle. And we will layer that
onto our C.P.G. capability.”
He said the move into C.P.G. channels is
“probably two to three years off.” FBN

June 4, 2013

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Food Business News - June 4, 2013

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