Teavana Innovations

Starbucks invests heavily in holiday coffee promotions mindful that the closing months of the year top all others in sales.

holiday_2015_Joy_SetThis year the chain is promoting its Teavana brand with a new holiday drink, Gingerbread Tea Latte. The chain also unveiled a complete makeover of the Teavana mall concept at the Westfield South Center in Tukwila, Wash. A similar remodel is underway at the Teavana store in Bellevue, Wash.

The stores feature brewed tea sipping stations, self-serve cylindrical bins, take-away growlers for $14.99 and micro-lot teas.

The seasonal 16 oz. gingerbread latte is made with Royal English Breakfast Tea, gingerbread flavoring and a hint of cinnamon spice. The 160-calorie drink contains 4 grams of fat and 7 grams of protein. It is the first seasonal tea offering to get top billing for the holidays.

Teavana’s extensive holiday collection features custom mugs and macaron tins, teaware and infusers and seasonal blend such as white chocolate peppermint and cheer + revelry blend. Its Joy 2015 blend contains black tea, jasmine green tea and oolong tea “with rapturous notes of apricot and florals.”
The Teavana store in Tukwila is a mature location with good foot traffic and a successful retail history dating to Feb. 2009, well before the Starbucks acquisition in 2012. It is the first of Teavana’s mall stores to do away with the “tea wall’ of tins, replacing them with tea in clear dispensers. A wall of herbals such as rooibos and chamomile is separated from camellia sinensis. Loose leaf can be weighed to order or customers can pick up a convenient pre-measured 4- to 6-oz. pouch in slots below the dispensers.

The store features “micro-lot” teas from various regions.

Cups of tea from the spigot cost $4.99. Sips are free. Customers can also purchase iced tea by the growler. Return the 32-ounce container to the store to get a lower priced refill.

Prior to acquiring Teavana the company built a Tazo concept store in Bellevue, Wash. (which will soon begin offering tea in micro-lots). A centerpiece of the store was the blending table where customers could make their own tea blends with the help of Teavana professionals. There is a large tea blending table in the Tukwila store.

holiday-img-4Teavana continues to experiment with retail concepts because no one, including Starbucks, has developed the definitive large scale format for tea retail. Tukwila seems a step closer and Starbucks has the time and resources to continue the evolution. While Teavana retains its luster among Starbuck’s newest acquisitions, the most significant contribution to the bottom line occurs at grocery with its Tazo brand and in conventional coffee shops where Teavana shaken iced teas, for example, helped drive a 10% increase in sales of tea beverages and a full point of same-store growth this spring. Retail success is always hit and miss and while Starbucks generally hits a homerun this fall Teavana abruptly closed its flagship Chicago Teavana Fine Teas + Bar. Roll out of Teavana locations continues but the momentum is in malls, not the company’s high end standalone retail shops.

The total number of locations remains below the stated goal of 500 but continues to expand. Teavana now operates more than 360 storefronts, most in tier-1 malls in the U.S. , with 42 in California, 25 in Florida, 21 in New York. There are 61 Teavana outlets in Canada and 16 in Mexico. The stores are absent from several US states and store openings occur at a much slower pace than coffee outlets. Starbucks will end 2015 with 23,250 stores in 68 countries, a net 1,800 new store openings worldwide this year (with 22 opened in the past week alone).

Financial analysts predict Starbuck’s greatest opportunities with Teavana lie outside the U.S.

“In China there is no sizeable tea-oriented food service industry,” writes LD Investments on Seeking Alpha. Despite the fact that China has more than 60,000 tea houses scattered throughout the country retail offers “a promising untapped opportunity for Teavana’s tea cafes in China, specifically in tier-1 cities like Shanghai and Beijing, considering Teavana caters to an upscale clientele. As per capita incomes rise throughout China, Teavana’s target market should grow,” according to LD Investment.

Watch World Tea News for a tea retail profile of the new Tukwila shop.

Sources: Seeking Alpha, Starbucks, Teavana