Starbucks (NASDAQ:SBUX) recently agreed to pay $620 million in cash to acquire Teavana (TEA) ("Teavana" or the "Company"), a specialty retailer of loose-leaf teas, tea wares, and tea related merchandise in North America. Teavana tells its customers that its teas are pesticide free. As consumers of Teavana's high-priced teas, we decided to investigate such claims. What we found is shocking. Independent laboratory tests show that Teavana's teas contain pesticides in amounts that exceed U.S. and EU regulatory limits. In our opinion, not only are lawsuits from the Federal Trade Commission and class-action attorneys inevitable, but once Starbucks learns that they have been deceived into paying a premium price for a tarnished consumer brand, they will walk away from the acquisition. The following is a summary of our full report, available at our website.
SELLING THE HEALTHY LIFESTYLE
Teavana's brand is built on the perception that Teavana's teas are healthier than other teas because they are pesticide free. The Company states in its SEC filings that it rigorously tests every batch of tea under EU pesticide standards.
We placed 80 phone calls to Teavana retail stores in 19 states and to its toll free customer support line. We called as a customer inquiring about the quality of Teavana's tea. In 98% of the phone calls we placed, Teavana's salespersons declared without qualification that the Company's teas were pesticide free. Only one sales associate told us that the Company's teas may contain pesticides, and one other salesperson told us that she did not know the pesticide content of the teas.
But do not just take our word for it. On our website, we posted a video in which you can listen to a selection of our phone calls with Teavana salespeople around the country. Salespersons from Alaska to Texas and New York to
