Starbucks to acquire Teavana for $620M
SEATTLE (AP) - Starbucks wants to make the tea shop as ubiquitous as its namesake cafes.
The Seattle-based company said Wednesday that it will pay $620 million in cash to buy Teavana Holdings Inc., which sells high-end loose leaf teas in 300 shopping mall locations. The plan is to expand Teavana's footprint beyond the mall with stand-alone shops, adding tea bars with specialty drinks.
In an interview CEO Howard Schultz noted that Starbucks cafes only sold coffee by the pound in 1987, with the offerings of specialty drinks evolving over time. Schultz said the company would use that experience to transform Teavana over time as well.
Starbucks Corp. already owns the Tazo tea brand, which it purchased in 1999. And the company announced plans earlier this year to open its first Tazo tea shop where customers can buy specialty drinks and blend loose leaf teas with the help of employees - not unlike the shops it's now envisioning for Teavana. Schultz said Thursday that the Tazo shop will serve as a "learning laboratory" for its development of Teavana stores. He said that the brands give the company a two-tiered approach to the fast-growing tea category, since Teavana is a premium loose leaf tea while Tazo is a bagged tea product sold in supermarkets
Schultz said Teavana will also move into the consumer packaged goods category, meaning it will also be sold in supermarkets.
Brian Sozzi, chief equities analyst for NBG Productions, said the deal gives Starbucks a "high/low" positioning in a fragmented tea market, similar to the company's two-pronged approach in the coffee market with its Starbucks and Seattle's Best cafes.
The deal also marks Starbucks latest push to expand beyond its ubiquitous cafes, with the company facing intensifying competition from fast-food chains offering specialty coffees. This summer, Starbucks also bought small bakery chain La Boulange for $100 million, after its purchase last year of fresh juice maker Evolution for $30 million.
While the Starbucks cafes may serve as a blueprint for Teavana's growth, Schultz noted that coffee and tea have distinct cultures and that Teavana stores won't feel like the Starbucks cafes people are so familiar with.
Starbucks cafes, for example, are defined by their rush hour bustle in the mornings. Tea shops have a more serene, cerebral feel. When walking into a Teavana store, Schultz said people feel as if they've "stepped into a shrine to tea."
Teavana shareholders will get $15.50 per share cash in the Starbucks deal, which is expected to close by the end of the year. Starbucks says it will add a penny per share to its 2013 earnings. Analyst Sozzi noted that the deal is an "opportunistic purchase" for Starbucks, since Teavana had its initial public offering last year with shares priced at $17.
Teavana shares jumped by $5.32, or 52.5 percent, to close at $15.45. Starbucks shares fell $1.47, or 2.9 percent, to $48.84.
The Seattle-based company said Wednesday that it will pay $620 million in cash to buy Teavana Holdings Inc., which sells high-end loose leaf teas in 300 shopping mall locations. The plan is to expand Teavana's footprint beyond the mall with stand-alone shops, adding tea bars with specialty drinks.
In an interview CEO Howard Schultz noted that Starbucks cafes only sold coffee by the pound in 1987, with the offerings of specialty drinks evolving over time. Schultz said the company would use that experience to transform Teavana over time as well.
Starbucks Corp. already owns the Tazo tea brand, which it purchased in 1999. And the company announced plans earlier this year to open its first Tazo tea shop where customers can buy specialty drinks and blend loose leaf teas with the help of employees - not unlike the shops it's now envisioning for Teavana. Schultz said Thursday that the Tazo shop will serve as a "learning laboratory" for its development of Teavana stores. He said that the brands give the company a two-tiered approach to the fast-growing tea category, since Teavana is a premium loose leaf tea while Tazo is a bagged tea product sold in supermarkets
Schultz said Teavana will also move into the consumer packaged goods category, meaning it will also be sold in supermarkets.
Brian Sozzi, chief equities analyst for NBG Productions, said the deal gives Starbucks a "high/low" positioning in a fragmented tea market, similar to the company's two-pronged approach in the coffee market with its Starbucks and Seattle's Best cafes.
The deal also marks Starbucks latest push to expand beyond its ubiquitous cafes, with the company facing intensifying competition from fast-food chains offering specialty coffees. This summer, Starbucks also bought small bakery chain La Boulange for $100 million, after its purchase last year of fresh juice maker Evolution for $30 million.
While the Starbucks cafes may serve as a blueprint for Teavana's growth, Schultz noted that coffee and tea have distinct cultures and that Teavana stores won't feel like the Starbucks cafes people are so familiar with.
Starbucks cafes, for example, are defined by their rush hour bustle in the mornings. Tea shops have a more serene, cerebral feel. When walking into a Teavana store, Schultz said people feel as if they've "stepped into a shrine to tea."
Teavana shareholders will get $15.50 per share cash in the Starbucks deal, which is expected to close by the end of the year. Starbucks says it will add a penny per share to its 2013 earnings. Analyst Sozzi noted that the deal is an "opportunistic purchase" for Starbucks, since Teavana had its initial public offering last year with shares priced at $17.
Teavana shares jumped by $5.32, or 52.5 percent, to close at $15.45. Starbucks shares fell $1.47, or 2.9 percent, to $48.84.
If it ends up in stores I might buy it but only if it has flavors other brands do not have. They are lots of labels for boxes of tea out there but  too many of them taste like cinnamon. Make something different that tastes and smells good.
More ridiculously high priced extravagances in this economy? No thanks.
Teavana?? It makes sense that an overpriced coffee chain would go for an overpriced tea chain. 17-20$ for 2 oz of tea? Tao of Tea and Lupicia are way cheaper and actually have employees that drink tea
 @chandler It is a horrible tea chain and the employees follow you around pushing their wares on you. You are not given a moment's peace until you either curse them out and walk away or shell out 20 bucks for some grams of tea. It sucks.
I'm happy they didn't go after Harney & Sons.
I think they ruined Seattle's Best Coffee which was independent and had a lot better coffee. Â
I am a HUGE fan of loose leaf teas. I think that this could perhaps be a great opportunity for people to become more aware of tea and its health benefits. However, tea is a very delicate thing -- and it certainly cannot be made in less than a minutes time (unlike most Starbucks Coffee drinks or their Tazo tea bags). Teavana sells and brews loose leaf teas that require quality-attention. So I stress, if Starbucks purchases Teavana, I would hope they stick to the values and quality of tea brewing.Â
Now your talking Starbucks. Green tea, black tea, and ginger tea's are incredible.Â
I hope they don't change much within Teavana. Â We have a Teavana tea set that is 100% awesome. Â
Evolution juices used to be $3.99 at PCC. Now $5.99 at Starbucks. Absolute rip off
 @yeahguy Exactly, I was shocked when the cashier said $6.52 for an Evolution Green Juice. And it was gross.
Gobble...gobble....gobble.... Â They're buying up everybody. The corporation has become WAY TOO BIG for my liking. No thanks. I'll stick to mom and pop stands and competitors of the massive SBUX corporation.Â