Starbucks Launches Teavana Cafe as it Looks to Brew More Profit from Beverages

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Following its approximately $620 million acquisition last November, Starbucks has opened its first cafe-style Teavana location on Madison Avenue in New York City, betting that the 300-store strong specialty-tea retailer will give the coffee giant a large cut of the $90 billion global tea market. 

With tea being the second most-consumed drink after water, Starbucks plans to open at least 1,000 Teavana bars (which differ from retail Teavana shops currently found in shopping malls) in North America in the next five years, as well as expand rapidly worldwide, with an eye first on tea-loving Asia.

“Tea has been a part of Starbucks heritage since 1971, when we were founded as Starbucks Coffee, Tea and Spices,” Starbucks chairman and CEO Howard Schultz (who attended the NYC Teavana opening this week, below) commented in a press release, “and this new store concept elevates the tea experience in the same way we’ve done for coffee.”[more]

Positioned as Teavana Fine Teas + Tea Bar, the emphasis on an in-store lifestyle experience is a quick indication of the chain’s parent company. The aesthetics of the store are decidedly zen-modern with the iconic Teavana “Wall of Tea” featuring a wide range of loose-leaf teas and tea blends, and a Tea Bar serving up trendy blends like CocoCaramel Sea Salt Latte or an Iced Blackberry Mojito Lime Cooler.

The specialty food items, including salads and pastries, are of a lighter nature than at Starbucks, and all are considered complementary to the tea flavors. And one more reminder that this is a Starbucks-owned establishment: the prices. Drinks at the new cafe range from $3 to $6 with snacks and small plates costing between $3 and $15. But like at Starbucks, where customers expect a certain degree of quality and service (for a price), the same goes at Teavana.

“You always pay more for consistency and quality,” a customer told brandchannel, while another patron admitted, ““I’m not a tea fan, but given the owner, I thought I’d give it a fair try.”

“We’ve combined the best practices of Teavana and Starbucks—and the high standards each brand brings to tea and coffee—and added the daily ritual of stopping by for a cup of tea rather than just stocking up once a month at a mall outlet,” Charlie Cain, VP of concept development for Starbucks, told brandchannel

The new store, with muted-gray walls, light wood, and museum-grade lighting, bears no Starbucks branding and is among the company’s first locations to use the new hyper-fast Google Wi-Fi network—all of which will hopefully entice customers to linger, unwind (and spend). Cain sees the biggest hurdle to spurring tea adoption in the U.S. as educating the consumer about the world of tea, a goal for which “Teavana is doing it the best.”

Indeed, the move by Starbucks to highlight its secondary (perhaps even tertiary, after food) tea business, first with the Tazo brand (which, reportedly, is fading from its stores) and now with Teavana is in line with beverage market trends, as the global sale of sodas continues to fall while the consumption of teas and water-based beverages grow.

“Tea is the driver,” Cain told brandchannel. “We are serving tea at a higher level, an elevated experience, along with healthier plates, less pastry. We offer 100 teas and an infinite number of combinations—sort of like wine—it can be put into buckets, Merlot or Cabernet, by region.”

Starbucks faces (pardon the pun) steep competition in the premium tea lifestyle space, however. Unilever, which counts tea brands including powerhouse Lipton in its portfolio, recently acquired Australia’s T2 brand, a high-end chain of tea boutiques co-founded by Jan O’Connor and Maryanne Shearer.

T2’s distinctive tea blends and products are now available via branded standalone store/cafes across the country, in addition to in grocery stores and on the menu at upscale hotels and restaurants. With the Lipton and Bushell tea brands already in Unilever’s stable, T2 is the perfect vehicle to create a premium global tea branded experience—and pour cold water on Starbucks’ Teavana ambitions.

With another Teavana tea bar planned to open in Seattle near Starbucks’ global headquarters around Thanksgiving, Teavana’s expansion will fall in line along with Starbucks’ efforts to launch its Evolution Fresh brand and La Boulange bakery treats, turning the coffee purveyor into an all-out fast-casual restaurant with no slowdown in sight.

Images courtesy of the author / Starbucks.

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