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Teavana In The Supermarket: Opportunities & Threats

BY: Firsd Tea CATEGORY: Coffee|News COMMENTS: No Comments

Starbucks recently announced the expansion of its Teavana tea brand into the $1.2 billion packaged tea category at U.S. grocery stores.

The initial move is designed to bring 6 of Teavana’s more popular, premium teas to consumers for enjoyment at home. Considering some estimates put nearly 90% of all US hot tea being consumed at home, this would seem a wise strategic move. But it could have costs.

THE ANNOUNCEMENT

The announcement from Starbucks that premium Teavana teas will be coming to grocery stores. The first 6 flavors to arrive will be:

  • Youthberry: a white tea blend with mango, orange, hibiscus and rose petals
  • Peach Tranquility: a caffeine-free herbal tea with peach, lemon, verbena, and chamomile notes
  • Citrus Lavender: a caffeine-free herbal tea with orange, pineapple, lavender, and sage notes
  • Jade Citrus Mint: a green tea with lemongrass and spearmint
  • Imperial Spiced Chai: a blend of Chinese oolong, yerba mate, and rooibos with cinnamon, pineapple, papaya and orange peel
  • Earl Grey Créme: black tea with natural flavors, lavender, and bergamot oil


It is worth noting the ratio of types of teas represented here. Instead of a menu dominated by black teas, this starting lineup slightly favors herbal teas. Black, green, white and oolong teas are equally represented with 1 each. This golden ratio has been analyzed before, and certainly bucks the trend that 86% of all US tea consumed is black.

SIGNS OF STRUGGLE

There have been several signals that Starbucks is struggling to reach growth expectations, and this move aims at gaining some of the lost momentum. Even as Starbucks sales growth dwindled, tea sales helped stem the decline. Around the same time, Starbucks decided to close all 379 of its Teavana stores, and more recently the company set a goal to close 150 of its weakest stores in 2018, three times the number of poor performers it usually shutters per year.

The coffee behemoth has also partnered with Nestle to bring Starbucks coffee to grocery, restaurants, and catering services via Nespresso and other brands. If you can’t move it through the cafe, move it elsewhere.

THE COST OF CHANGE

Expanding from the cafe to the grocery store does 2 things:

1. It can weaken the premium status of the brand. Starbucks was the brand you less expected to see on the grocery shelf. Additionally, Starbucks catering and office coffee services (OCS) was the service if you wanted a true Starbucks experience. Pretty soon, consumers across the country will see Starbucks on the grocery shelf alongside all the other grocery brands. The office will no longer have to fight for budget approval between Nescafe and Starbucks coffee systems. On the flip side, any tea drinker who goes into a Starbucks cafe and orders a Teavana tea may increasingly get the feeling they are overpaying for a cup of tea they could just as easily pulled from a supermarket shelf. Cafe customers who paid for a special experience now get grocery store tea.

2. Teavana has to go head-to-head with every tea on the grocery shelf. If you look at the vast array of tea on many supermarket shelves, you’ll see what Teavana is up against. Will enough shoppers choose premium Teavana over others teas that range as low as $3 for a 50-count of traditional black tea bags? On the other hand, Teavana’s presence may raise the standard, pushing lower-quality teas off the shelf in favor of more functional and premium teas.

THE OPPORTUNITY

Great news for private label. The more ubiquitous Teavana becomes, the less unique it becomes, and the less premium it feels. Now more than ever, private label teas offer the chance to create a distinct, valuable experience with tea. Signature beverage creations and premium, popular teas will produce a custom tea experience. The core elements of a value-added private label tea program include:

Premium (or semi-premium) teas and tea ingredients
A properly curated tea menu
Effective packaging and brand message


But it has to be done right. A tea program should include, or consider including:

ICED TEA- For example, Dunkin fruit teas combine fruit juice and fruit bits with iced green/black teas. This approach allows versatility and multiple use of teas and juices

HOT TEAS – Depending on locale, hot teas offer greater growth potential. Lackluster sales in hot teas are often related to poor selection and lower quality tea. Dunkin is currently exploring the potential of premium pyramid tea bags.

SIGNATURE DRINKS – often iced, and with layers of color. Butterfly pea flower and Chinese matcha are great ingredients for crafting healthy and attractive signature drinks.

PROPER STORAGE AND PACKAGING – improper storage causes teas to lose freshness and become tainted when they absorb odors. Whether teabags or pre-portioned packs, the right packaging simplifies preparation, reduces waste, preserves freshness, and makes cleanup faster.

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