Share “Starbucks has a new caffeine addiction: tea”

Starbucks has a new caffeine addiction: tea

Associated Press Modified: November 14, 2012 at 5:45 pm •  Published: November 14, 2012
Advertisement

Schultz said Teavana will also move into the consumer packaged goods category, meaning it will also be sold in supermarkets.

Brian Sozzi, chief equities analyst for NBG Productions, said the deal gives Starbucks a "high/low" positioning in a fragmented tea market, similar to the company's two-pronged approach in the coffee arena with its Starbucks and Seattle's Best cafes.

While the Starbucks cafes may serve as a blueprint for Teavana's growth, Schultz noted that coffee and tea have distinct cultures and that Teavana stores won't feel like the Starbucks cafes people are so familiar with.

Starbucks cafes, for example, are defined by their rush-hour bustle in the mornings. Tea shops have a more serene, cerebral feel. When walking into a Teavana store, Schultz said people feel as if they've "stepped into a shrine to tea."

Teavana shareholders will get $15.50 per share cash in the Starbucks deal, which is expected to close by the end of the year. Starbucks says it will add a penny per share to its 2013 earnings. Analyst Sozzi noted that the deal is an "opportunistic purchase" for Starbucks, since Teavana had its initial public offering last year with shares priced at $17.

Teavana shares jumped by $5.32, or 52.5 percent, to close at $15.45. Starbucks shares fell $1.47, or 2.9 percent, to $48.84.