Starbucks looks to sell TAZO tea brand to Unilever for US$384m

Starbucks is selling the TAZO tea brand and all related intellectual property, signature recipes and inventory to Unilever for US$384 million. The TAZO brand, which was established in 1994 had sales of US$112.5 million over the past year ended 30 June 2017.

TAZO's main strength lies in specialty black, green and herbal teas, as well as liquid concentrates focused in the chai latte segment. TAZO is mainly sold in grocery, mass and convenience stores. Kees Kruythoff, president, Unilever North America, said TAZO is a perfect strategic fit for Unilever's US portfolio.

“With its strong appeal to Millennials, TAZO is a perfect strategic fit for our US portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington’s. TAZO’s solid position in the fast-growing specialty tea segment, coupled with Unilever’s tea expertise, presents a fantastic growth opportunity," he added.

Kevin Havelock, president of refreshment, Unilever, said TAZO represents a strategic addition to Unilever's portfolio, which strengthens its tea portfolio towards high growth segments. He added that the specialty teas complements Unilever's global tea business, which includes Lipton, Pure Leaf, PG Tips, T2 and its recent addition, Pukka.

The acquisition follows Starbucks achieving a total net revenue of US$5,698.3 million in the fourth quarter of the fiscal year ended 1 October 2017. This is a 0.2% drop compared to US$5,711.2 million during the same period in 2016.

According to Starbucks' latest fourth quarter financial statement, the company said it will drive a single tea brand strategy and focus with its tea brand Teavana. Last year, Starbucks China CEO Belinda Wong said that the company sees a “huge potential” in China with Teavana, following the product's launch in Asia Pacific, which kicked off in China. The company also plans to increase its global footprint by nearly 50%, adding 12,000 new stores worldwide by 2021.

Net revenues for China/Asia Pacific grew 2.5% from Q4 FY16 to US$859.9 million in Q4 FY17. Excluding $56.9 million for the extra week in Q4 FY16, net revenues increased 10%, mainly driven by incremental revenues from 1,036 new store openings over the past 12 months, and a 2% growth in comparable store sales. Store sales in China increased by 7% as compared to the same period last year, driven by a 5% increase in transactions. Meanwhile, global store sales increased 3%, while sales in the US grew by 3%.

Earlier this year, the company said it is spending US$1.3 billion to buy the remaining 50% of its joint venture business in China from Uni-President Enterprises Corp and President Chain Store Corp, to make it the single largest acquisition in the company's history. As a result, Starbucks will assume 100% ownership of about 1,300 stores in east China.

“Food, beverage and digital innovation are bringing customers into our stores at the same time as ongoing operational improvements are enabling us to drive increased throughput - particularly in our busiest stores at peak - and deliver a further elevated Starbucks Experience to our customers," Kevin Johnson, CEO and president, said in Starbucks' financial statement.

In September, Starbucks announced it partnered with restaurant operator Maxim's Caterers, to fully license Starbucks operations in Singapore. The Starbucks-Maxim's partnership began in 2000 in Hong Kong, and they currently operate over 210 Starbucks stores across Hong Kong, Macau, Vietnam and Cambodia.