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.
— Elaine Low (@IBD_elow) November 2, 2017
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.
— Ashley Edwards (@AshleyLFEdwards) November 3, 2017
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 (@Unilever) November 3, 2017
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.”