Tazo, the $1.4 billion specialty tea division of Starbucks, will unveil its first branded storefront this fall at University Village, an upscale outdoor mall in Seattle, Wash.
"The heart of the experience will be a blending station," explains Holly Hart Shafer, a Starbucks spokesperson on the Global Communications staff. Customers entering the store will pass by merchandise and view pastries under glass as they would in a conventional Starbucks location. Yet other parts of the experience will be uniquely Tazo.
“The Tazo retail store will provide customers with a sensory-rich, informative experience of discovery and personalization,” according to Charles Cain, Tazo VP of Merchant and Operations. “We’ll offer an interactive retail experience with tea, a curated collection of tea merchandise, and a tea bar with a wide range of beverage options and food pairings. We see an opportunity to introduce the casual American tea drinker to something unlike anything they’ve experienced before,” he said.
The blending bar offers an opportunity to make their own unique blends with the aid of a Tazo “tea partner” selected for their combination of expertise, enthusiasm and customer service.
“We want to create a playground of tea for our customers, making our Tazo teas accessible for a fun, interactive experience,” Cain said. ”For example, the blending station will offer customers the opportunity to personalize their tea with flavor inclusions, such as lemon, hibiscus and more,” he said.
"This is the place to mingle, to discuss and actively engage customers’ interest in tea. Some will sit and stay for a cup others will blend and buy a pouch of loose-leaf and leave," said Hart Shafer. "The experience will be similar to that at wine tasting bars."
The store will be staffed with 12 workers with a high tea IQ, she said. Three typically will be on duty at a time taking orders, operating the brewing and latte making equipment, preparing iced teas and filling and weighing pouches of dry tea. Pastries, packaged chocolate, snacks and treats are on offer along with merchandise such as teapots, electric kettles, ceramic cups, travel mugs and tea-inspired utensils.
Loose-leaf teas include a selection of single-origin and orthodox along with blended teas and a large variety of herbals. Honey and infused sugars, natural sweeteners and popular tea additions are available for sale and to mix at the condiment station.
Tea will be sold by the ounce at “very competitive” prices that range from $2 to $15 per ounce, says Cain. Tazo’s tea selection, the work of veteran buyer Keith Hutjens, is well regarded. Since its founding the popular blends have been unusual and complex.
“American consumers have blurred the lines in what they call tea. At the end of the day they are seeking beverages made from high quality ingredients, whether blending a mix of pure Camellia sinensis or chamomile or lemon grass, they simply want great taste," says Cain. “You lose track of that in a tea bag. Gathering around the tea bar with the sight and smells from jars of ingredients makes it more accessible, experiential." The tea will not be hidden away or behind the counter as in so many shops, he said.
One of the great opportunities is gifting.
Consumers already view tea as a personal gift that reflects the recipient’s preference for styles and cultures. “Here you can make it your own,” he said.
The original Starbucks, opened in 1971, featured tea, coffee and spice but there will be no mermaid sign in front of the Tazo store, said Hart Shafer. Tazo is expected to reposition the brand away from its “mystical” origins, to emphasize the quality of ingredients and authenticity of origin. One third of the teas on offer will be single-origin. Stores will be distinguished as a stand-alone brand among the “emerging brands” in the Starbucks portfolio. “We see it as a huge multi-channel opportunity,” said Hart Shafer.
Seattle’s Best Coffee, Tazo Tea and Evolution Fresh, a juice retail concept that recently opened, are all billion dollar multi-channel brands, she explained.
Plans now call for only one store, which will replace a Lululemon which is moving in September to a larger space in the shopping center. However, Starbucks is committed to broaden its retail reach beyond the iconic cafes, which number 11,000 in the U.S. and almost 18,000 worldwide.
At the company’s annual meeting in Seattle, Annie Young-Scrivner, chief marketing officer of Starbucks, told the crowd: “Tea is huge. Starbucks is reinventing a traditional beverage.”
“When they see an opportunity, Starbucks starts small and then does things big,” said Cain. “We need consumer feedback and to test the market. The company is exploring a lot of channel strategies to determine what is right for tea in the market,” he said. At this point “we are not wed to any particular strategy.” The store will not be a food service café but an extension of the Starbucks vision of personalized beverages.
“The Tazo tea store is a continuation of our efforts to bring the artistry and heritage of tea to life for our customers," said Cain. “Our mission is to raise consumer expectations for their tea experience the same way that Starbucks did for coffee,” he said.
“These are truly exciting times for the North American tea markets,” said George Jage, Founder & Director of World Tea Media. “For a long time I have speculated that Starbucks will launch a tea-centric retail platform. Merely by converting 3% of its existing Starbucks locations in the U.S., it could eclipse the largest tea chain, Teavana, theoretically overnight,” said Jage.
“Tazo is a massive brand often overshadowed by the coffee side of the business, but alone is generating $1.4 billion in revenue for Starbucks … I will definitely be keeping a watchful eye on the success of their new concept store and anxious to see their future growth,” he said.
Bob Phibbs, a retail consultant and author, said stand-alone tea shops are a smart idea. “Teavana has been expanding and an experimental store is something a large brand can do without much downside. Lipton tried this back in 1997 but I don't think it went anywhere,” said Phibbs.
“Seeing how customers would mix and match much like a soft serve ice cream store is right on trend. The big question still out there is… is there enough demand for designer/gourmet tea houses? I'm still not convinced anyone has gotten the vibe right in the stores. Tea is quiet, reflective and pensive vs. Coffee which represents energy, exotic areas of the world and travel – though I'm sure tea makers will disagree,” he said. “I hope to see Tazo/Starbucks getting it right so others might follow,” said Phibbs, who is known as the Retail Doctor®
Wall Street reaction to the news was generally positive. Seeking Alpha, a stock watching website called the decision “another example of the company keeping the pedal to the metal in areas outside of its ubiquitous coffee chain.” Another post suggested Teavana Holdings ”appears to be at risk” according to analysts. “William Blair sees enough differentiating factors with the company's (Teavana) products to back the name. Also at work is the notion that in the past the sudden presence of a big name in a consumer market has actually helped premium specialty companies by educating consumers.”
Public response to the news was positive. A report on The Bottom Line, a business feature on MSNBC included a poll asking readers: “What do you think of Starbucks' plan to open a tea shop?”
As of 9 a.m. Thursday morning with 9,621 responses. There were 6,962 (72%) in favor, “Great idea, I’d love to see one in my town” and 828 opposed, calling it a “Bad idea, I think they should stick to coffee” with 1,846 (19.2%) indicating “I’d have to try it before deciding.”
The “casual American tea drinker” presents a unique growth opportunity for this industry here in North America, explains Cain. “For us, we’ve never seen it as a 'coffee or tea' proposition. We believe the opportunity is to provide personalized experiences with both beverages. Yes, there are customers that will only drink coffee, and others that only drink tea. But by and large, we’ve heard and seen that the majority of consumers are open to, and excited about, both tea and coffee in different ways and at different times,” he said.