Almost one year after the acquisition of Teavana, a company that offers new tea enthusiasts and tea connoisseurs alike its "Heaven of Tea" retail experience, Starbucks (NASDAQ:SBUX) finally gets enough insight about the tea beverage market and tea-drinkers to open its own Tea-bar.
On 24 October, 2013, Starbucks opens its first Tea-bar. Tea-bar is an exclusive tea shop, which offers handcrafted tea beverages, premium loose leaf teas and beautifully made tea merchandise. Tea-bar also offers a range of food items, including pastries and breakfast items, delicious salads, flatbreads and small plates, and macaroons, shortbreads and other desserts to complement tea flavors, but no coffee.
So, "all tea no coffee" shows that how serious is the company about its entry in the tea beverage market. It wants to create a place just for tea lovers so that it can focus exclusively on the tea beverage market and gets further insights about the industry as well as the customer behavior and demand. Since the last one year, the company also invests resources to further improve Teavana brand image and its customer experience so that it can establish Teavana as its flagship brand. And now, it has made Teavana a brand strong enough to attract the customers to its planned chain of Tea-bars.
Though tea has been the part of the company's offering ever since 1971, but it never gets the exclusive attention, until a year ago when the company acquires Teavana. Since then, Starbucks is working on the ways to enter the tea- beverage market by gaining industry insights, studying customer behavior, finding right locations, etc.
Tea beverage market is big and growing:
According to the industry data (listed below), tea beverage market is huge and is growing at a rapid pace, particularly in the U.S. market.
Euromonitor estimates that the global tea beverage market represents a $90 billion global market opportunity. Further, Tea Association of USA estimates that in the U.S. the tea-beverage market has been growing at about 16% since last few years.
This huge market coupled with the rapid growth in the U.S. market gives every reason of a company like Starbucks, which specializes in the beverage retailing to enter the market.
As said by the Starbucks's chairman, president and chief executive officer. "As the second most-consumed global beverage behind water, tea presents a $90 billion global market opportunity, and we are excited to celebrate the first retail example of how our two companies are coming together."
The entry of the company in the tea-beverage market is excellent news for the tea lovers as well as the investors. Starbucks is the ultimate leader in customer experience, and this well-known fact will attract customers to its Tea-bars. Moreover, Teavana's deep expertise in tea sourcing and blending should make sure that the company will meet the desire success in the tea beverage market.
The company is not taking anything for granted, as it is advancing carefully and after proper planning. From acquisition of Teavana to the opening of first Tea-bar the company never looks in a hurry. It wants to expand further with additional stores over the course of the next year but a lot will depend on the customer response that will lead to further changes and innovations. Strategically, the company is on the right path as it is not mixing up Starbucks and Teavana brands and building them as the separate brands for customers who have different choices and tastes.
I am of the view that in the times to come, the tea beverages will play a major role in the company's growth, particularly in the U.S. market where limited competition and the rapid growth will be big positive for the company. In Asian markets where tea is a most preferred drink the competition will be much more, but the popularity of tea beverages will allow the company to open tea bars at rapid pace. Taking everything into the account the company's entry into the tea-beverage space will act as an important growth catalyst for the company in the future, and it looks like a very positive development for the investors as the company is surly entering the largest-beverage segment after water.
Disclaimer: Investments in stock markets carry significant risk, stock prices can rise or fall without any understandable or fundamental reasons. Enter only if one has the appetite to take risk and heart to withstand the volatile nature of the stock markets.
This article reflects the personal views of the author about the company and one must consult its financial adviser before making any decision.