The new line will “integrate the handcrafted nature and epicurean flavors drawn from Starbucks and Teavana’s retail favorites to offer consumers premium layered flavors,” said the partners, who will bottle, distribute and market the teas, with an anticipated product launch in the first half of 2017.
“Starbucks will contribute Teavana’s tea expertise, industry-leading retail activation, and consumer engagement capabilities, and Anheuser-Busch [which has a large distribution network that has recently lost some volume after Monster switched its distribution to the Coca-Cola Company] will lead production, bottling and distribution to retailers nationwide in partnership with its long-standing and well-established network of wholesalers.”
A spokeswoman would not say whether they would be in glass or plastic bottles.
Howard Schultz: We saw a unique opportunity to do for tea what Starbucks has done for coffee
While Starbucks started out as a coffee chain, tea has always been part of the offer, observed CEO Howard Schultz, who said Starbucks had already sold more than $1bn of Teavana brewed and iced teas in Starbucks stores over the past year, an 11% increase over the previous year.
“Tea has been an important part of Starbucks heritage since we opened our doors as Starbucks Coffee, Tea and Spices in the Pike Place Market in 1971," added Schultz.
"When we acquired Teavana in 2012, we saw a unique opportunity to do for tea what Starbucks has done for coffee and expand the Teavana brand across many customer experiences and products.”
Philip Mullin, Chairman of the Anheuser-Busch Wholesaler Advisory Panel added: “This arrangement with Starbucks comes at a very exciting time given the considerable growth in the premium RTD tea category, and I expect this news will energize wholesalers throughout our network.”
According to the Tea Association of the US, 80% of tea consumed in America is iced tea and tea overall has a global category size of $125 billion, with Americans drinking 800 million cups of tea per week. This relationship positions Starbucks and Anheuser-Busch to claim market share in the more than $1 billion premium RTD tea category, said the partners.
Wells Fargo: This is a significant opportunity for Starbucks to extend its reach into one of the fastest growing RTD segments
In a note to investors this morning, Bonnie Herzog, MD Beverage, Tobacco & Convenience Store Research at Well Fargo Securities, said: "We view this as a significant opportunity for Starbucks to extend its reach into one of the fastest growing RTD segments, the premium RTD tea category, which while a small part of the $125bn global tea industry, is growing in the mid-teens with annual sales at $1.1bn.
"Given Starbucks' expertise in teas and the sheer reach of Anheuser Busch's distribution network, we estimate Starbucks could take about a 25-30% share of the RTD premium tea segment within the first full year, driving an incremental $200-250m in revenue."
She added: "Although this will be Starbucks' first foray into retail with teas, the company is by no means a stranger to the channel as its coffees and Frappuccinos have been distributed at retail via a very successful partnership with PepsiCo.
"Further, we believe this is a huge win for Anheuser Busch given this partnership/opportunity fills a deep void the Anheuser Busch distributors have had since losing the distribution of Monster brands to Coca-Cola."