Unilever acquires Tazo tea brand from Starbucks for $384 million

Along with releasing their always-anticipated annual holiday cup, Starbucks made another announcement this week as well. The coffee mega-giant is selling their Tazo tea brand to Unilever for $384 million as they say they will be focusing on Teavana as their sole tea brand. The sale includes all recipes, intellectual property and inventory.

Tazo, founded in 1994, was sold to Starbucks just five years later for $8.1 million. The brand is primarily sold in grocery stores. Consumers can buy Tazo as a packaged tea, K-Cup pod or in bottled-form.

Tuesday’s announcement was made as Starbucks released their fourth-quarter results and 2017 financial results. The final numbers came in much lower than Wall Street expected and the markets showed it. Starbucks’ fourth-quarter revenue came in at $5.7 billion. Experts were projecting to see at least $5.8 billion in revenue from the company.

Store sales also lagged behind. The company reported a two percent growth in its global comparable store sales. This number too came in lower than estimated; the Consensus Metrix projected a 3.2 percent growth in that sector.

Although the net income for the quarter also slipped, the outlook wasn’t all that bleak. Starbucks reported a five percent growth in full-year revenue at $22.4 billion.

The sale is perhaps not that surprising, after all, Starbucks announced back in July that it would be closing all 379 brick-and-mortar stores for its other tea brand, Teavana. However, closing down shop for Teavana may have more to do with the changes in how consumers shop than sales. In fact, Starbucks announced that sales for their tea category continue to grow.

“The tea category in Starbucks stores continues to grow double-digits globally,” the company’s announcement read. “With Starbucks well on its way to building the Teavana business to over $3 billion over the next five years.”

Over the past year, Starbucks has sold over $1.6 billion worth of Teavana product in stores. They’ve also launched bottled, ready-to-drink Teavana tea through a partnership with Anheuser-Busch InBev. Next year, the company plans to start selling packaged Teavana teas as well.

In the next five years, Starbucks plans to grow their Teavana line into a $3 billion business.

Kevin Johnson, president and chief executive officer at Starbucks, underscored the importance of Starbucks’ tea category and impressed the company’s desire to focus solely on Teavana.

“Over the past five years, we have established Teavana as our primary global brand focused on the premium tea segment. With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever,” Johnson had to say about the sale.

And Starbucks should be pleased. As Forbes puts it, the nearly $400 million sale to Unilever “marks a more than 47-times return on investment.”

Unilever is already home to many well-known food and drink brands, like Ben & Jerry’s, Lipton, Pure Leaf, Klondike, Breyer’s and much more. The UK-based consumer products behemoth’s leadership claims that, in addition to beefing up the company’s existing tea brands, the acquisition is targeted at millennials.

“With its strong appeal to millennials, Tazo is a perfect strategic fit for our US portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington’s,” Kees Kruythoff, president of Unilever North America, commented on the news. “Tazo’s solid position in the fast-growing specialty tea segment, coupled with Unilever’s tea expertise, presents a fantastic growth opportunity.”

The announcement this week follows Unilever’s acquisition of the organic herbal tea brand Pukka Herbs back in September.

FTC approves Amazon’s acquisition of Whole Foods

Wednesday, the Federal Trade Commission (FTC) signed off on Amazon’s purchase of Whole Foods, The Washington Post reports. The $13.7 billion deal, which Amazon announced in June, is scheduled to take effect by the end of the year.

The FTC said in a statement that it had examined the “proposed acquisition to determine whether it substantially lessened competition.”

The deal would give Amazon 2% of the US grocery market, according to the Post. Walmart, which is among Amazon’s fiercest competitors in the grocery space and elsewhere, holds 20% of the market; Kroger has 7%.

Last year, Walmart generated $200 billion in revenue via grocery sales, the Post says. Kroger reported $115.3 billion worth of revenue in 2016. Whole Foods’ annual revenue approaches $16 billion.

“Based on our investigation,” the FTC says, “we have decided not to pursue this matter further.”

According to the Post, some have called upon regulators to amend antitrust laws to accommodate a corporate climate in which companies like Facebook, Google, and Amazon continue to grow.

The Post notes that the approval of the merger is the FTC’s first major action since President Trump took office in January. Trump has accused the eCommerce behemoth of shirking its taxes, fostering speculation that he might push the FTC to block the deal.

“Amazon is doing great damage to tax paying retailers,” Trump wrote on Twitter August 16. “Towns, cities and states throughout the U.S. are being hurt — many jobs being lost!”

Per the Post, Amazon reported paying $412 million in income taxes last year, $273 million in 2015, and $177 million in 2014. Though many states do not levy sales taxes on online retail transactions, Amazon collects sales tax in states where it is required to do so.

Whole Foods shareholders approved the acquisition earlier Wednesday. It is by far Amazon’s largest takeover to date, the Post reports.

In 2009, Amazon acquired online shoe retailer Zappos for $1.2 billion, and in 2014 the Seattle-based giant snatched up video game streaming site Twitch.

With the Whole Foods deal, Amazon, which has been closing in on brick-and-mortar commerce with services like Instant Pickup and PrimeNow, will enter a grocery sector that is struggling to keep up with changes in the ways consumers buy food. Over the last three years, the Post says, almost 20 grocers have filed for bankruptcy, largely because online food delivery services like FreshDirect are capturing an increasing share of the market.

Amazon has not disclosed its plans for Whole Foods as yet, but some have speculated that the tech company intends to build an online food delivery operation of unprecedented scale.

There are also whispers that Amazon will integrate Whole Foods into Instant Pickup. Customers could order groceries on their way to the store, then pick up their food as they walked in the door. Amazon could also use some or all of Whole Foods’ 460 brick-and-mortar stores as Instant Pickup warehouses and pickup centers.

Some warn that the takeover may jeopardize Whole Foods’ employees. As Amazon increasingly embraces automation and potentially looks to change the manner in which Whole Foods operates, staffing needs could change, leading to layoffs and personnel turnover.

“Amazon’s acquisition is a threat to Whole Foods workers and their families,” Marc Perrone, president of The United Food and Commercial Workers International Union, wrote in a letter to Whole Foods executives, per the Post. “They deserve a clear commitment from the entire board that their jobs, wages, and benefits will be protected from Amazon’s automated business model.”

John Mackey co-founded Whole Foods in Austin, TX in 1980, and remains its CEO today. The grocery chain is renowned for its favorable compensation and treatment of employees, most of whom earn more than minimum wage and benefits, according to the Post.

“Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades — they’re doing an amazing job and we want that to continue,” Amazon CEO Jeff Bezos said in a statement in June.

Featured image via Flickr/Mike Mozart

Campbell Acquires Pacific Foods

In order to expand its consumer base while also shifting to adapt to the needs of its customer base, Campbell Soup announced today that it would acquire Pacific Food for $700 million. While this acquisition does expand its market, this move still plays to the strengths of Campbell as Pacific Food makes organic broth, soup, and other products like plant-based beverages including almond milk.

Pacific Foods has an income of more than $200 million in annual income sales, and should the business maintain its quality, Campbell may be seeing an increase in its consumer base and projected revenue stream. Pacific Foods has reported that the consumer desires have coincided with the direction of Pacific Foods’ product, noting that the evolution of the need for nutritious products has played right into Pacific Foods’ ballpark.

Campbell Soup CEO Denise Morrison made a statement remarking the position of Pacific Foods as a “natural foods industry pioneer that has strong health and well-being and organic credentials, particularly with younger consumers.” This remark reveals that Campbell Soup was looking to expand its consumer base to include younger customers that could grow with the company, ideally remaining loyal customers while also providing more advertisements based on social media practices. Furthermore, considering that Pacific Foods is a strong company, the acquisition is both a move to improve Campbell’s own capabilities while simultaneously removing a competitor.

The emphasis now will be on converting Pacific Foods’ previous customer base, and to do so would be to ensure that nothing with the product changes despite a change in the producing company. Improving the product was an added plus, and it may be a worthy investment in drawing more customers, considering the appreciation for organic foods.

Pacific Foods CEO and founder Chuck Eggert plans to stay on as a supplier through his farm’s operations that were started by his family 17 years ago. One of the reasons given by Eggert as to why the company was sold was his intention to focus on expanding the organic supply chain. Eggert comments that the supply chain is more complicated than selling when it comes to organic food, as there is an added aspect of ensuring the product remains fresh and has a long enough shelf life despite the lack of preservatives.

The deal is not the first of its kind, considering the current transitional climate of the food industry. In recent years Campbell and its industry-leading competition have been acquiring smaller natural food companies in response to their customers. According to the Organic Trade Association, organic food is one of the few places the consumer packaged goods industry and experienced growth. Organic food managed about $43 billion in sales and has managed a growth rate of about 8.4 percent last year. The manner in which these goods are being sold is also in flux, with innovation being pushed mostly by the two main markets leads in organic foods: Amazon and Whole Foods Market.

Campbell in response has made five acquisitions in the past five years including their current deal with Pacific Foods in an aggressive pursuit to reshape the company portfolio in response to changing consumer demand. The other four companies have been Bolthouse Farms, organic baby food company Plum Organics, biscuit maker Kelsen, and salsa and hummus producer Garden Fresh Gourmet. The company also backs a venture capitalist fund that helps facilitate the growth of startups.

While all of these companies have been acquired by Campbell Soup, Morrison’s strategy allows Campbell’s acquisitions to continue its operation, believing in the case of Pacific Foods that it is an Oregon success story. This is good news to customers that may have been hesitant concerning the quality of the product.

Featured Image via Flickr/Jungle Jim’s International Market

Will Dr. Pepper and Pepsi Sell More Than Soda?

In the upcoming year, soda companies like Coca-Cola and Pepsi have decided to switch their focus onto non-carbonated beverages. This is the result of a soda tax following the recent election. Boulder and San Francisco are just two of the cities who are looking at a rise in taxes for their sugar-sweetened drinks. Dr. Pepper and Snapple soon announced they too were joining the ranks of soda companies who are changing up their approach.

This past Tuesday, Dr. Pepper, along with Pepsi, announced that they are pivoting toward acquiring more favored water and probiotic companies. As we all know, however, healthy alternatives cost money.

Pepsi is reported to be investing in a company known as KeVita, a maker of many different probiotic drinks. The details of this investment haven’t exactly been disclosed, but it is speculated that Pepsi will spend close to $200 million. Dr. Pepper has also spent close to $1.7 billion dollars investing in the acquisition of probiotic drink corporations as well which include, but aren’t limited to, antioxidant-infused waters and Bai brand.

Although the news seems new, these investments go back as far as 2013. Bai brand was previously allied with Dr. Pepper. Dr. Pepper helped Bai expand their merchandise and has been distributing their product for the last three years. Dr. Pepper then invested $15 million in Bai during 2015. The same goes with Pepsi who took minority shares of KeVita in 2013 and has been helping the company expand its product since then.

These investments aren’t made without big expectations. Dr. Pepper expects Bai brands to make at least $425 million in profit around 2017. Larry Young, president and CEO of Dr. Pepper, stated Tuesday he believes that:

“In a relatively short time, Bai has carved out a leadership position in the enhanced water category and has now extended that success into other fast-growing and profitable categories. We’re equally impressed with their innovation pipeline, which will continue to meet the needs of consumers seeking great tasting, low-calorie beverages with natural flavors and no artificial sweeteners.”

Pepsi boasted about KeVita as well. Pepsi general manager and vice president of its nutrition division, Chris Lansing said, “KeVita has become an innovative, high–growth brand that is transforming the functional beverage space.”

While this announcement is good news for consumers, it has caused a rise in the trading market. Since Tuesday, Pepsi went up 0.4% and Dr. Pepper went up 1.6%. When the deal closes, KeVita will function separately from Pepsi, and Bai’s founder Ben Weiss will continue to independently lead the industry even after it becomes part of Dr. Pepper’s brand. For Pepsi and Dr. Pepper, 2017 seems to be a year of growth.

Groupon Acquires OrderUp

Groupon has acquired OrderUp, a food delivery service that caters to over 40 cities and 25 states in the United States.

The price of the deal was disclosed, but the six-year-old food service company, which claims to have served over 10 million people, couldn’t have come with a cheap price tag.

Groupon saw a slow decline in the past few years as the “daily deal” concept, making the company thrive, got some competition.

CEO of Groupon Eric Lefkofsky said,

“The potential in delivery and takeout is apparent –especially with the growth of mobile – and OrderUp’s operational ability, coupled with Groupon’s engaged customer and merchant base, bring tremendous scale to the space.”

The company has long since been established in the coupon giving business, ideal for large groups of people who are on a budget.

What makes OrderUp different from its competitors such as GrubHub and Eat 24 Hours is that it has its own delivery system.

OrderUp allows for restaurants who don’t normally deliver to have drivers do it for them; this is especially the case for places that don’t have enough staff or the capability to set it up. Without this feature, restaurants limit themselves to only certain cliental and the money that’s to be made off of delivery costs.

Owner of Di Pasquale’s Marketplace Joe Di Pasquale said,

“When I heard about OrderUp, I was very hesitant. Customers asked us all the time about delivery. However we didn’t have the staff or know-how to organize our own delivery service. OrderUp is the perfect fit for Di Pasquale’s. It’s the easiest way to start a delivery service. Honestly, I should have done it earlier.”

OrderUp uses contracted drivers who can either accept or deny a potential delivery based on their own hours.

In the announcement, OrderUp wrote that Orlando and Cincinnati will be two of the newest cities to have access to the delivery service.

Revolution Ventures managing partner Tige Savage, who is an investor in OrderUp said,

“Consumers love the convenience of ordering online. Yet, outside the major metropolitan markets, its shockingly difficult to find online food delivery options.”

OrderUp sees this acquisition as a great opportunity for the company to expand its outreach.

CEO of OrderUp Christ Jeffery said,

“Groupon’s reach and ability to connect supply and demand at scale make it the perfect destination for us to grow even faster and expand in our targeted local markets. We look forward to bringing the thousands of great restaurants that we feature to hungry Groupon customers across the country.”

Despite the acquisition, OrderUp will still function as a standalone company and will keep their headquarters which are set in Baltimore. This will all be done while still promoting themselves through Groupon’s merchant pages, called Pages, which were created in 2014.

In a press release, it’s described as giving users access to

“ratings, tips, money-saving opportunities and other useful information for local businesses in the United States.”

The feature is similar to that of Yelp and will be a great feature to help promote OrderUp.

This is not the first combination between food delivery services. GrubHub and Seamless are two takeout food establishments that primarily generate business through computer and phone.

The thing that makes this merging of Groupon and OrderUp so different is that they are each bringing something to the table, with Groupon having a background in a variety of deals and OrderUp’s delivery feature.

Image: Via OrderUp

AOL Sold for $4.4 Billion to Verizon

Buy-outs happen all the time. The interesting thing about this is what usually happens after the conglomeration. Things like that almost always change the dynamics and the method of operation of the companies. Even though AOL and Verizon are both involved in the distribution of communication and media, the services they provide are quite varied.

At $50 per share, this should be an interesting absorption for Verizon. The media giant has the chance to traverse itself into a completely different aspect of the media and communication industry.

The days of dial-up internet are far behind us and an industry that provides an outdated service or product doesn’t always survive too long. The future functionality of AOL is what will truly determine if Verizon is in fact paid the right amount for the buy-out.

Looks like Verizon is heading for the ultimate goal of stability through consolidation, at least for the next decade. $4.4 billion is a major acquisition and should be able to be provisional to Verizon for a better status in the market. Either way, whatever the changes Verizon brings about should be frills that will affect their consumers for the better. After all, consumer satisfaction it what culminates to a better turn in the market.

Image: Via Flickr/Jason Persse