Bloomberg News

Starbucks to Open First Tea-Only Tazo Store

June 20, 2012

Starbucks to Introduce First Tea-Only Shop Under Tazo Brand

Annie Young-Scrivner, chief marketing officer of Starbucks Corp., speaks during the company's annual meeting in Seattle, Washington, U.S. Photographer: Kevin P. Casey/Bloomberg

Starbucks Corp. (SBUX:US), the world’s largest coffee-shop operator, will open its first tea-only store in October under the Tazo brand.

The shop will sell more than 80 varieties of loose-leaf tea, which will be priced by the ounce, said Holly Hart, a spokeswoman for Seattle-based Starbucks. While there are no immediate plans to open more stores, the company may consider additional Tazo shops “if we see another opportunity where a location is the right fit,” Hart said.

Starbucks is expanding its offerings beyond coffee to win new customers and help accelerate sales growth. The company this month acquired Bay Bread LLC for $100 million in cash, its biggest purchase, to offer better quality food, and earlier this year opened a store selling flash-pasteurized juice.

“We see Tazo as fitting into our emerging brands portfolio,” which also includes the company’s Seattle’s Best Coffee and Evolution Fresh brands, Hart said in an interview. “We see it as a huge potential and a multi-channel opportunity.”

While the 1,700-square-foot store will still sell traditional behind-the-counter drinks such as iced tea and tea lattes, its blending station will be its differentiating factor, Hart said. Customers, with the help of employees, will be able to create personalized tea blends at the station that they can either take home or brew in the store.

“This store is really a tea playground with a more interactive and engaging community,” Hart said.

Baked Goods

The Tazo store, which will be located near the company’s headquarters in Seattle’s University Village, will also sell pastries, baked goods and packaged chocolates.

Starbucks, which has more than 17,000 locations worldwide, bought (SBUX:US) Tazo in 1999 for $8.1 million in cash, according to data compiled by Bloomberg.

Tazo is now a “$1.4 billion brand” and this store is one of the ways that Starbucks is beginning to push into the $95 billion global tea market, Hart said.

“We’ve recognized the unique opportunities we have with Tazo in multiple channels of distribution as part of our health and wellness initiative,” Chief Executive Officer Howard Schultz said during a conference call in April.

Starbucks revenue (SBUX:US) rose 6.3 percent to $8.04 billion in the U.S. in the year ended Oct. 2. The company’s domestic segment made up 69 percent of sales last year.

Since returning as CEO in 2008, Schultz has introduced Via instant coffee and wrested control of packaged goods distribution from Kraft Foods Inc. (KFT:US) The company has also recently tried to boost sales by attracting afternoon customers with wrap and noodle boxes and a smaller-portion desserts line.

The shares rose (SBUX:US) 0.9 percent to $55.64 at the close in New York. Starbucks has gained 21 percent this year.

The Associated Press reported earlier on the Tazo tea shop.

To contact the reporter on this story: Kelly Blessing in New York at kblessing@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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