Starbucks Coffee Co. has agreed to acquire Teavana Holdings Inc. – a specialty retailer offering more than 100 varieties of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise – for $620 million cash.
Powered by Starbucks’ existing infrastructure, the coffee retailer said it plans to continue to grow and extend Teavana’s already-successful 300 mall-based stores, as well as add a high-profile neighborhood store concept that will accelerate Teavana’s domestic and global footprint.
“We believe the tea category is ripe for reinvention and rapid growth. The Teavana acquisition now positions us to disrupt and lead, just as we did with espresso starting three decades ago,” said Howard Schultz, Starbucks chairman, president and CEO. “Teavana’s world-class tea authority, coupled with the romance and theater of the retail experience that is the heart and soul of Starbucks heritage, will create a differentiated customer experience and business opportunity that delivers immediate value to shareholders. This complements our existing Tazo brand and gives us the unique opportunity to create a two-tiered market position.”
Starbucks hopes to accomplish in the $40 billion tea market what it pioneered in the coffee and espresso business – a new retail experience.
“By contributing deep tea expertise, global sourcing capabilities and a passion for the category that is second to none in our industry, we believe we can deliver an elevated tea experience together with Starbucks,” said Andrew Mack, CEO and co-founder of Teavana, who has committed to staying and leading Teavana’s day-to-day operations. “After growing Teavana for 15 years, we are thrilled that Starbucks will be able to truly fulfill our mission of bringing premium tea to millions of people on a global platform. It is with great respect for what Howard and his team have built that we join the Starbucks family.”
In 2013, Starbucks said it will integrate its unique assets – including its leading position in social and digital media, its 10 million member global loyalty program, card and mobile payment platforms – with the Teavana customer experience to expand Teavana’s current mall-based store footprint with a comprehensive design strategy that will include new Teavana neighborhood locations in markets across North America and around the world.
Teavana recently opened its first store in the Middle East in partnership with Starbucks’ existing joint-venture partner Alshaya, and has plans to enter new, high-consumption tea markets around the world.
Starbucks remains committed to growing the Tazo business, giving Starbucks a two-tiered market position for tea. Starbucks’ plan is to define a new, elevated platform of tea experience and education, and for both the Teavana and Tazo brands to grow and complement each other while elevating the entire category.
“The acquisition of Teavana supports our growth strategy to innovate with new products, enter new categories and expand into new channels of distribution,” said Jeff Hansberry, president, channel development and emerging brands for Starbucks, who will assume leadership of the new subsidiary. “Evolution Fresh, La Boulange and now Teavana demonstrate how Starbucks will add brands that strengthen our core offering and create a rich ecosystem of experiences with shared values, mutual efficiencies and complementary characteristics, thus forming tangible examples of the success of the Starbucks Blueprint for Growth and a differentiated health and wellness offering in the marketplace.”
Teavana stockholders of record will receive $15.50 per share in cash in the merger, which will result in Teavana becoming a wholly owned subsidiary of Starbucks. Stockholders of Teavana holding approximately 70 percent of the outstanding shares of common stock have approved the merger agreement by written consent, and the closing is expected to occur by year-end, pending regulatory approval.
