Starbucks said it is selling Tazo to Unilever for $384 million in order to focus more on developing its Teavana tea brand. It is sold primarily in grocery, mass and convenience channels, available in packaged teas, K-Cup pods, and bottled ready-to-drink teas.
This acquisition is the latest in a series of deals by Unilever, an Anglo-Dutch consumer giant, to add smaller, healthier brands to expand its portfolio in a fast-growing specialty tea segment.
The sale of the Tazo Tea brand to Unilever plc (ADR) will include all of its recipes, inventory and intellectual property that now belongs to Starbucks Corporation.
Tazo was founded in 1994, and purchased by Starbucks in 1999 for $8.1 million.
"With its strong appeal to millennials, Tazo is a ideal strategic fit for our US portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington's", said Kees Kruythoff, president, Unilever North America. The company sold $1.6 billion in Teavana products in the last year, and believes the business can grow to $3 billion within the next five years.
The coffee company reported fourth-quarter revenue at $5.7 billion, slightly less than the same quarter in 2016, which was $5.71 billion. The company expects to launch a Starbucks-branded credit card with Chase this winter. Analysts had expected a rise of 3.3 percent, according to FactSet. The company also reported narrower operating margins and earnings per share of 54 cents. On the basis of non-GAPP, Starbucks earnings per share were 55 cents, which was in line with estimates from Wall Street.
Starbucks global same store sales were up 2% following a gain of 2% in the amount each customer was spending and an increase of 1% in transactions.
In the long-term, the company is targeting annual global comparable-store sales growth of 3 percent to 5 percent and annual consolidated net revenue growth in the high-single digits. But its same-store sales came lower than expected and, in the USA, fell far short of its historic 5% growth rate.