Up Front Teavana Expands to India
Teavana tea bars are closing in New York City.
Starbucks will introduce its Teavana brand overseas in 2016. Starbucks c.e.o. Howard Schultz told reporters in India that Teavana loose leaf tea will be sold in 80 coffee shops jointly operated with Tata Global Beverage.
“We see a major business opportunity here,” he told reporters, “In 2016, we intend to bring our specialty tea brand Teavana here.” Starbucks will have a major business in India that is much larger than what it is today, he said. “The number of stores will rival many of the large markets that we have around the world,” said Schultz, who intends to open 500 new shops a year in China, where the company has 2,000 stores in 100 cities.
Market researchers predict India will welcome Teavana style “blended tea.” Fruit and floral inclusions are relatively unknown in the market. In preparation for the move Starbucks announced it will close four of its Teavana Fine Tea + Tea Bar locations. The reason is strictly business: In comparison to standard retail metrics the tea bar concept proved lacking. Three New York City shops and the tea bar in Beverly Hills will become coffee shops and a fifth, in Seattle, will remain open to test Teavana retail concepts. None of Teavana’s mall locations are impacted.
“These changes to the Teavana specialty retail portfolio will allow the company to focus on new product innovation and elevating the Teavana tea experience through its Starbucks stores, reaching more customers with its expansive store footprint,” according to the company. “Additionally, Teavana will focus on evolving a customized tea experience throughout specialty retail by bringing exotic blends, great flavors, wellness and innovation to customers globally,” reads the release.
“The tea category in Starbucks stores is growing double-digits across the U.S. and Canada store portfolio, with Starbucks well on its way to building the Teavana business to over $3 billion over the next 5 years,” according to the company. Teavana operates more than 350 retail stores in North America. Metrics for each are carefully monitored. The most important metric for publicly held retailers is year-to-year same store comparisons known as “comps.”
Last fall when Starbucks announced it was closing its Chicago Tea Bar Teavana spokesperson Christina McPherson explained the decision “as part of the normal course of business. We’re always evaluating the stores’ portfolio, and we decided to close the Southport tea bar.”
This is shorthand for “failing to meet performance minimums.” A typical chain tea store grosses between $850 and $1,000 per square foot of retail space. A Teavana store located in a Tier-1 mall with its small staff and limited shelf space earns $850,000 to $1 million annually. Starbucks drive-thru locations earn closer to $1.5 million per store. Expansive tea bars in pricy neighborhoods like those in New York and Chicago drag down the corporate average, performing well below the metrics necessary for Starbucks to please stockholders anticipating annual comparable same-store increases of 5% and 6%. “With their approach becoming a little dated in these fast-moving times and with companies like DAVIDsTEA and T2 as the competition this is all the more apparent,” writes Camellia Sinensis co-founder Kevin Gascoyne.
“I think they were due for some new transformative blood and serious innovation for this project. They should have hit the market hard with more confidence, an inspired concept and impressed us with the product before they told us the game plan,” said Gascoyne, who added that promising a 1,000 units worldwide “was ambitious to say the least.” Starbucks, which is valued at $85 billion, operates 23,571 retail stores in 70 countries. But even mighty Starbucks has not discovered the secret to scaling its beautiful and innovative tea bars and tea cafes. — By Dan Bolton