Starbucks Corporation (NASDAQ:SBUX) has indicated that it will dispose of the Tazo tea brand at a price of $384 million to Unilever plc (ADR)(NYSE:UL). The coffee chain will instead turn its focus on the Teavana brand though the Teavana stores based in malls will be shuttered. Closing of the deal is expected to occur before year-end after regulatory approval.
“Over the past five years, we have established Teavana as our primary global brand focused on the premium tea segment. We continue to see significant growth in our tea business through our Teavana brand,” said the chief executive officer of Starbucks, Kevin Johnson.
Close to two decades ago Starbucks paid a price of $8.1 million for the Tazo tea brand and this was five years after the firm had been founded. Tazo teas are sold mainly in convenience stores, bib-box and in supermarkets. The lineup of Tazo teas consists of ready-to-drink bottles, K-Cup pods and packaged teas. The announcement by the Seattle, Washington-based coffee chain was made prior to the release of the fourth-quarter earnings.
Despite being ubiquitous in the stores of the coffee chain, sales of the Tazo tea brand in the course of the last 12 months were $112 million which was a small amount in comparison to Starbucks’ combined revenues of $22.4 billion.
Teavana however is a much bigger business. When Starbucks acquired it in 2012, it paid $620 million for the firm which was once publicly traded. This pales in comparison to what Starbucks paid for Tazo.
When acquiring Teavana the rationale behind Starbucks’ thinking was that it would make tea a premium product the way it had done with coffee. That however never happened and four months ago the coffee chain disclosed that all the Teavana retail outlets numbering 379 would be shut down. According to Starbucks the standalone Teavana outlets were underperforming and that was not likely to change.
But in Starbuck’s stores, both brick-and-mortar and online, Teavana products have performed well. In the last 12 months revenues from the Teavana business have reached a figure of $1.6 billion.
On Thursday shares of Starbucks Corporation edged downwards by 0.95% to close the day at $57.36.