Starbucks to Sell Tazo, Sales Dip

Javier Stokes
November 4, 2017

"We continue to see significant growth in our tea business through our Teavana brand, and this transition supports our strategy to elevate the premium tea experience for our customers", says Starbucks CEO Kevin Johnson. The brand, which is sold mainly in conventional grocery and convenience retail channels, produces a range of tea products, including packaged tea, K-Cup pods and bottled ready-to-drink (RTD) beverages.

The sale of the Tazo Tea brand to Unilever plc (ADR) will include all of its recipes, inventory and intellectual property that now belongs to Starbucks Corporation.

Starbucks purchased Tazo in 1999 for $8.1 million.

"With its strong appeal to millennials, TAZO® is a flawless strategic fit for our United States portfolio", Kees Kruythoff, President of Unilever North America, said in a statement.

The coffee company reported fourth-quarter revenue at $5.7 billion, slightly less than the same quarter in 2016, which was $5.71 billion. The brand pulled in $112.5 million in revenue over the previous year and UL believes that there is room for more growth.

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On the company's quarterly call, Starbucks said it would launch a co-branded Chase Visa credit card this winter. And the company committed to returning US$15 billion to investors over the next three years through dividends and stock buybacks.

Same-store sales in the region rose 2% in the quarter ending October 1, short of the 3.2% predicted by analysts. Consensus Metrix expects same-store sales to rise 3.2% globally, and 3.3% in the key Americas segment.

Starbucks adjusted earnings per share were 55 cents which were in line with analysts' expectations. It is sold in Starbucks outlets and grocery stores in the US and Canada.

Over the long-term, the café chain is targeting global comparable sales annual growth of between 3% and 5% and annual growth in consolidated net revenue of the high-single digits. Net revenue was $5.7bn, short of the estimate of $5.8bn. TAZO had sales of $112.5 million over the past year.

The Seattle-based coffee giant made the announcement moments before it released its fourth-quarter earnings Thursday.

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