Teavana Business Update

Since Starbucks first store opened in Pike Place Market in 1971, tea has been a part of its history. Acquiring Teavana in December 2012, the company expanded its tea credentials and ability to deliver great tasting, high-quality tea in Starbucks stores, while delivering a unique and personalized customer experience through more than 350 Teavana specialty retail locations across North America.

Since the acquisition three years ago, customers have embraced the up-leveled tea experience and product innovation shared through Starbucks stores and the personalized loose leaf tea experience offered through Teavana specialty retail stores. This past fiscal year, Teavana-branded handcrafted tea beverages generated nearly $1 billion in sales through Starbucks stores in the U.S.; up 12 percent over the previous year. And tea, once again, added a point to comp in Q1FY16, continuing the growth momentum of the past few years. The tea category in Starbucks stores is growing double-digits across the U.S. and Canada store portfolio, with Starbucks well on its way to building the Teavana business to over $3B over the next 5 years.

As Starbucks continues to evolve the business, the company has made the decision to convert three tea bar locations in New York to full Starbucks stores and close the Beverly Hills location, which is adjacent to a Starbucks store. Teavana’s University Village store in Seattle, Washington will continue to operate and bring innovation to the tea category and to Starbucks beverage pipeline.

These changes to the Teavana specialty retail portfolio of more than 350 stores will allow the company to focus on new product innovation and elevating the Teavana tea experience through its Starbucks stores, reaching more customers with its expansive store footprint. Additionally, Teavana will focus on evolving a customized tea experience throughout specialty retail by bringing exotic blends, great flavors, wellness and innovation to customers globally.

Partners (employees) in these four locations are being treated with the utmost care and have received personalized transition materials and in-person conversations with their managers to explain this decision. Starbucks will help partners find new positions at Teavana or Starbucks stores in the area.

Teavana continues to be a strategic priority for Starbucks, recognizing the significant opportunity that tea presents as a $125 billion global category. The company will continue to expand Teavana globally, bringing Teavana-branded, handcrafted tea beverages to CAP and EMEA in FY16. Starbucks will continue its efforts to reimagine and reinvent the way customers consume and appreciate specialty loose leaf tea and tea at home, ensuring it is exceeding customer expectations and leading the tea category, just as the company has done with coffee.

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