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Starbucks acquires Teavana for $620 Million

92 points| saadmalik01 | 13 years ago |blogs.wsj.com

57 comments

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[+] acgourley|13 years ago|reply
Teavana always had me torn. They found a sustainable formula for popularizing tea. That's good!

But they are very expensive and their sales staff sell on commission which I find uncomfortable.

I find myself in the position where I'm glad they exist but I never recommend anyone to actually go there.

[+] _delirium|13 years ago|reply
I have similar views: I like that people seem to be caring about tea, though I don't find much to like in this particular shop. Nonetheless, several people who know I like tea have pointed me at them, so Teavana must be doing good marketing, to the extent that people who aren't that into tea think of it as something to recommend when they hear an acquaintance likes tea.

I personally mainly shop mail-order from Upton Tea Imports (http://www.uptontea.com). When I compare their selection and pricing to Teavana's, I don't see a lot of reason I would want to switch. But maybe that's like comparing newegg.com to Radio Shack: not really going after the same market segment.

[+] bennesvig|13 years ago|reply
Love the experience at Teavana until someone talks to me. The sales staff are very pushy to the point where shopping there is uncomfortable.
[+] tomkit|13 years ago|reply
I also found Teavana's teas to be adulterated with unnecessary flavors and ingredients that aren't natural to the tea. I instead prefer to go to their cousin store, Lupicia, which are usually located in the same malls. The difference is that Lupicia tries to preserve the tea's natural flavors instead of trying to "enhance" them with fruity flavors.
[+] mattmaroon|13 years ago|reply
I love TeaVana, though I'll admit I mostly order via the website. Their stores do annoy me.

Their stuff is expensive, but it's good. And really how much is expensive tea per glass? 25 cents? Not enough that I care.

And they have all sorts of great mixes. I probably wouldn't order just straight tea there. But the tea quality at TeaVana is much higher than the coffee quality at Starbucks.

[+] bgalbraith|13 years ago|reply
I totally agree. The stores are attractively laid out, and I did manage to get a nice in-cup loose leaf tea infuser, but I disliked my entire experience in the store. The hard sell treatment I got was really unwelcome and the tea itself was way over priced. I won't go in to another one and I don't recommend anyone go there.
[+] dotBen|13 years ago|reply
As an aside, I'm very confident Starbucks will acquire Blue Bottle Coffee in the next 18 months-2 years.

By raising venture funding they are signaling they are looking for some kind of shareholder return/exit. The quality of the coffee, plus the "no-laptops" approach to their official cafes would make a great "luxury"/"high-end" marque and differentiator for Starbucks in markets where they are already saturated or want to attract greater wallet spend (SF, NY, etc).

Look at what they did with Seattle's Best but the opposite end.

[+] tptacek|13 years ago|reply
Why would Starbucks buy Blue Bottle?

SBUX is already a luxury brand. Just because their coffee is not particularly good compared to Blue Bottle's, don't forget that SBUX is still charging $3-$4 for a typical cup.

SBUX can't scale Blue Bottle across their distribution channel, which is enormous. So anything they did to introduce the Blue Bottle brand would dilute their own brand.

Meanwhile, a cup of coffee at Blue Bottle might not even be perceptibly more expensive than a cup at SBUX.

Finally, Blue Bottle has minimal brand penetration across the US. You know about them if you live in Williamsburg in NYC, but lots of people in our Manhattan office had never been to Blue Bottle last time I was in town. They're obviously nowhere in Chicago. Are they even in Los Angeles? They're not in Seattle, or Austin, or Atlanta, or Mpls.

An SBUX acquisition of Blue Bottle seems like a mostly-downside, lose-lose proposition.

(I'm only arguing because it's an interesting question, not because I'm sure I'm right).

(Interestingly, Intelligentsia in Chicago has higher revenues and apparently higher year-over-year growth than Blue Bottle, the same number of locations, and no external funding. Maybe SBUX will buy them! Intelligentsia also ran Clover machines before Starbucks' ill-fated takeover).

(Finally: Ritual, in the Mission, is really good; I think better than Blue Bottle.)

[+] prostoalex|13 years ago|reply
Their premise is that they source hard-to-find high-quality beans. Which creates natural limits to scale. Farmers who sold you 10,000 lbs of coffee beans last year cannot sell you 10,000,000 lbs this year just because you have more capital.
[+] onewland|13 years ago|reply
I think Blue Bottle has more ambitious plans. Have you been to any of the coffee shops in SF (maybe more in the Outerlands) that serve Blue Bottle? They usually have it decal'ed into their front window and the brand displayed prominently. With their precise brewing process and recognizable brand, I think they want to franchise "store-within-a-store"s and get people selling their coffee sourced from their beans made with their equipment without having to pay rents or any of the costs of operating locations.
[+] rjett|13 years ago|reply
There's too much dissonance between the two brands and their models for sourcing, roasting, and preparing coffee are entirely different. It's hard to see the synergy from such an acquisition. The only thing Starbucks could possibly offer Blue Bottle would be distribution channels for bottled iced coffee (New Orleans or Kyoto style), and I suppose that's nothing to sneeze at.

As an aside, the fact that you're making such a claim speaks volumes to how well Blue Bottle markets itself. They seem much bigger than they actually are, due to high profile locations and a loyal fan base. In actuality, they have less than 12 cafe locations in 2 major cities. Those, combined with all their wholesale accounts probably still doesn't come close to the number of Starbucks in Manhattan alone.

[+] rlt3|13 years ago|reply
I did some quick googling, but didn't pick anything obvious up:

Blue Bottle Coffee has 'high-end' coffee shops that disallow laptops?

If so, any reasoning behind this?

[+] amckenna|13 years ago|reply
I have loved Teavana ever since they opened a store in the mall near me. I hope they start using the teas that Teavana has to beef up the selection in Starbucks stores. Tazo is decent but the variety is lacking and they miss out on the complexities of flavor and aroma that specialty teas have.

I will be a happy customer when I can go get a Himalayan young black tea with the same ease I can get a bag of Colombian dark roast beans.

[+] mmwanga|13 years ago|reply
Afternoon hot tea is considered normal in other countries and it's a very strange concept in America. Hope this changes that...
[+] cmelbye|13 years ago|reply
I wouldn't call it very strange. No one would judge you for having a cup of tea in the afternoon, and they might even want to join in and have a cup with you. Its just not something that most people would think to do.
[+] yesimahuman|13 years ago|reply
Not that strange. Everyone I know drinks tea, and they aren't connoisseurs. It's just not a big scheduled thing.
[+] supersaiyan|13 years ago|reply
I don't understand why people buy teas from these places (teavana, teopia,etc), there all over priced, sub par tasting teas, The best teas are found in small outlet stores (chinese, indian, thai, etc); it's like going to East Side Mario for a taste of italy.
[+] citricsquid|13 years ago|reply
Consistency. If you like something from one place enough to be happy to have it again why spend your time trying to find something better when it's not guaranteed there is better? I always order burgers from McDonalds, sure there might be a better independent place but I don't have the desire to spend 6 months finding it and I know if I'm 200 miles from home I can get exactly the same thing I like with ease.
[+] firefoxman1|13 years ago|reply
I'm the same way. The best tea i've had is from little shops in chinatown and Samovar, which only has a few locations.
[+] cypherpunks01|13 years ago|reply
I've always used and liked http://adagio.com for tea - they have a really simple and easy-to-use site.
[+] dromidas|13 years ago|reply
amazon has some of the best selection of tease imo, can't get all the interesting blends but almost everything I've been shopping for was there. And i don't mean in those gross little boxes where you get baggies of random tea, but the foil lined packages or tins of loose tea from reputable companies.
[+] eekfuh|13 years ago|reply
Non-techie in me: Maybe this will make Starbucks actually have good tea... or at least more variety. (Teavana is more smelly tea than tasty tea)
[+] mmanfrin|13 years ago|reply
Wasn't that also the point of them acquiring Tazo back when?
[+] deveac|13 years ago|reply
Weird. Or really, the exact opposite of weird.

There is a Teavana in a mall near me. I've enjoyed their teas, and bought bags to brew at home, as well as a rather nice iron kettle.

Every time I walk in there I say to myself "This place is like the Starbucks of Tea."

I like premium Tea from Teavana much more than Starbuck's coffee though. As I should for the prices they charge...

[+] gadders|13 years ago|reply
For Americans that use Teavana, are you drinking this tea the English way with milk, or iced?

I remember when I first went to America as a 21 year old (I had a job door-to-door selling) and Americans, being the hospitable souls that they are, would frequently offer me tea. Unfortunately, it was the cold variety :-(

[+] donw|13 years ago|reply
Tea in the US is usually either hot without milk (sugar if you like), or iced.
[+] yardie|13 years ago|reply
Iced tea is awesome! Especially when done right, with lemon and honey. I grew up in Miami and getting iced tea on a hot (32+) day was godsent.
[+] cmelbye|13 years ago|reply
Iced and hot are both common, but putting milk in tea is not common.
[+] TechNewb|13 years ago|reply
Starbucks currently boils their tea, maybe this ignorant act will stop now??? It is why I try and not go to Starbucks for tea.
[+] graue|13 years ago|reply
Whether that's ignorant depends what type of tea you're drinking. Steeping at 212°F (boiling) is the recommendation I've always heard for nearly all black teas and herbal teas. You are correct that lower temperatures are better for most green, white and oolong teas.
[+] dreamdu5t|13 years ago|reply
Americans in general boil and over-steep their teas. It's common for people to let tea steep indefinitely.

It's sad.

[+] mredbord|13 years ago|reply
They're doing in-home coffee, merch, etc. and now a big chain of pure retail locations. Starbucks is really starting to open up alternative revenue streams. Good for them.