Teavana’s Closure Not a Specialty Tea Failure

People stand outside a Teavana “tea bar” in New York City in 2013. (Photo by Spencer Platt/Getty Images)

Starbucks points to the evaporation of American malls as a key cause for its decision to pull the plug on Teavana’s retail locations, but the parent company appeared perpetually confused as to both the merchandising and promotion strategies needed to boost sales.

From the beginning, Starbucks never appeared to resolve Teavana’s woes. Consumers consistently complained about Teavana clerks being overly pushy or undereducated about tea. Charges that the chain offered free samples of brewed teas in the stores that did not match recipes consumers were encouraged to use at home were commonplace.

With Starbucks’ capital and brainpower behind Teavana, tea industry watchers suggested the coffee powerhouse would further catalyze growth within the entire North American specialty tea segment. Yet there is little indication the soon-to-be-defunct retailer did much to raise consumer interest in tea. Unlike Whole Foods Market, which is widely considered the primary retail catalyst for natural foods retail growth, Teavana never developed the reputation as the go-to source for specialty tea.

The complex world of specialty and herbal teas requires in-depth, ongoing training for store clerks who must understand the nuances of hundreds of tea and herbal tea origins, preparation methods and nuances. A thirsty American population needs plenty of education regarding specialty tea, and to this end, Starbucks may have misgauged how far advanced consumer understanding and acceptance of all things tea was when it acquired Teavana.

The question asked by many industry experts before—and after—the Teavana acquisition by Starbucks, was often: Who will become the Starbucks of tea?

The answer, previously: Starbucks.

Now the field has changed radically with both Teavana and the smaller retail tea chain Capital Teas on shaky ground. Lesser competitors planning to build multi-unit specialty retail chains must certainly be encouraged by the decision to kill-off the Teavana retail chain—a potentially market-dominating competitor with deep financial resources.

It is important to understand the Teavana closure is largely because of its many locations in high-rent shopping malls, many of which are experiencing long-term consumer traffic declines. Coupled with an inability to consistently boost in-store sales volumes and the need to funnel capital into more fruitful projects, the Starbucks decision may well be a blessing for independent tea retailers and smaller chains hoping to expand into multi-unit operations.

There is no indication whatsoever that Teavana’s many challenges included a slowing or leveling interest in specialty tea by American consumers. In fact, Teavana’s retail wrap-up comes at a time that tea festivals worldwide are booming, the medical establishment is heaping praise on tea consumption and a stream of new tea brands is emerging.

It’s easy to read more into the Starbucks decision regarding Teavana than is prudent. The world’s leading specialty coffee chain was simply not able to unlock the keys to successfully merchandising and selling tea within Teavana’s retail locations.

While a very costly experience for Starbucks, the specialty tea industry appears bemused, if not relieved, that a marketing machine that intended to lead and dominate the retail tea galaxy has called it quits.

Brian Keating is a veteran specialty tea industry analyst and founder of Seattle-based tea think tank Sage Group. The group this autumn will publish its latest B-to-B tea industry report, which covers the rise of multi-unit retail ventures focused upon specialty tea.

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