starbucks’ coffee is world-famous and for good reasons. The company is known to introduce several new flavors of its caffeine related beverages each year and is also well-loved by fans as the stores offer quick and reliable service. In 2012, the company announced that it would be buying out a tea retailing outlet named Teavana, which had stores across many parts of the country and was developed by a couple from Atlanta.
Many felt that Starbucks would revolutionize the tea industry as well when it acquired Teavana for $620 million. However, just five years down the line, the company may be rethinking their investment.
In the second quarter earnings report, the company CEO Kevin Johnson said that Teavana outlets had been underperforming consistently, and would thus be closed down by the end of spring 2018.
Starbucks shutting down Teavana
There are 379 Teavana outlets across the country after Starbucks took up an expansion bid of the store. However, the mall-based stores have not been performing well enough for the company. Johnson revealed that his company had tried to uplift the Teavana chain by ensuring customer friendly merchandises and even new store designs. However, he now feels that the Teavana brand will not be taking off in the near future, no matter what the company does.
After closing Teavana, Starbucks would likely suffer from a short term financial debacle, but in the long-term, the earnings will improve and generate better profits.
Apart from this, closing down the Teavana outlets will also effectively mean shutting down the “all-other segments”. This segment has been operating at a loss since its inception after the acquisition of Teavana in 2012.
In the second quarter, Teavana operated at a loss of $102 million. This also caused a net loss of 0.6 percent to the company’s total income in the Q2 2017.
So, in the long run, Starbucks will likely profit from closing down most of the 379 outlets by next year.
Future of the Teavana brand
While the outlets will be closing down, for now, it does not mean that Starbucks will completely remove the Teavana products from the markets. The brand itself is a strong presence and has also shown promise in the foreign markets.
The company will instead start selling the Teavana products in its stores and grocery partners.
Starbucks has also partnered with Anheuser-Busch InBev to distribute ready to drink Teavana teas. These teas are already performing quite well in the market. In fact, it was revealed that around 2.5 million units of the ready to drink Teavana tea have been distributed in just the last 5 months.
