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Starbucks Facing Tough Test as It Tries to Sell Tea to China

Published on Mar 29 2016 9:58 AM in Drinks tagged: China / Starbucks / Drinks

Starbucks Facing Tough Test as It Tries to Sell Tea to China

Starbucks  is taking its Teavana to China, aiming to prove a coffee chain can sell tea in a country that drinks more of it than any other place.

Teavana-branded tea will be sold for the first time in Starbucks stores in China in the fiscal year that ends in September, the company said Wednesday in a statement issued during its annual shareholders meeting in Seattle. The company already sells some green- and iced-tea drinks in the Asian nation.

“It’s very complementary to our coffee business,” Chief Operating Officer Kevin Johnson said in an interview. “With Teavana - similar to what we’ve done with coffee - we’ve established a very premium brand.”

It’s clear why Starbucks is looking to expand with Teavana: Globally, tea sales are more than $100 billion. Starbucks, which has boosted revenue by expanding beyond its core coffee drinks, purchased Teavana in 2013. Last year, Starbucks’s tea sales jumped 17 percent to almost $1 billion, led by growth in iced tea.

Local Competition

In China, Starbucks will face established local tea brands that dominate the market. Consumers in the world’s most populous nation have flocked to bubble milk teas such as U-Loveit, and Starbucks has tried to compete with its green-tea lattes and iced teas mixed with black currant and raspberry juice. Other fast-food chains, including KFC, have tried to draw young customers and the health conscious with herbal teas in China.

Starbucks also is looking to take Teavana to the UK, France and Germany this year, Johnson said.

At the meeting, the company made other announcements:

The number of US Starbucks rewards members grew to more than 12 million, up about 1 million during the past quarter. Starbucks will introduce cold brew ready-to-drink beverages across U.S. grocery stores this summer with partner PepsiCo Company will continue to supply Starbucks K-Cups in a partnership with Keurig Green Mountain Inc. and will roll out new latte K-Cups this summer. Starbucks plans to introduce single-serve capsules that fit Nespresso machines in the UK and France this summer. The company is introducing a prepaid Visa card this year that allows customers to earn rewards with purchases.

"We’re really elevating the Starbucks brand in all channels,” Johnson said.

News by Bloomberg, edited by Hospitality Ireland

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