Was Teavana the Right Move for Starbucks?

Starbucks (NASDAQ:SBUX) has announced that it will expand its international beverage empire with the $620 million acquisition of Teavana Holdings (NYSE:TEA). This is the latest in a series of acquisitions Starbucks has made to expand its product line, which now includes the Tazo tea brand, Evolution Fresh juices, and Bay Bread bakery.Teavana

“We believe the tea category is ripe for reinvention and rapid growth. The Teavana acquisition now positions us to disrupt and lead, just as we did with espresso starting three decades ago,” said Starbucks president, chairman, and CEO Howard Schultz in a statement.

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With the global coffee business booming, Starbucks is demonstrating an ability to competently expand into related niches. The company is piloting juices and breakfast items, and along with Teavana will open the doors to a broader demographic.

“By contributing deep tea expertise, global sourcing capabilities and a passion for the category that is second to none in our industry, we believe we can deliver an elevated tea experience together with Starbucks,” said Teavana co-founder and CEO Andrew Mack.

While the tea market in the United States is relatively small, the global tea market is $40 billion dollars and growing. Starbucks has been pushing expansion in Asia, where most of this activity is. New store locations in India and eventually China will capitalize on a culture that is dominated by tea, but that Starbucks hopes to convert to coffee.

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