Something New on the Starbucks Menu

The coffee giant buys Teavana for $620 million.


Starbucks said Wednesday that it will pay $620 million in cash to buy Teavana Holdings Inc., which sells high-end loose leaf teas in 300 shopping malls across the country, according to an article in the Huffington Post. They hope to grow Teavana's footprint beyond the suburban mall with stand-alone shops around the world, while adding tea bars where customers can buy hot and cold drinks, the website reports.

The deal marks Starbucks latest push to expand beyond its cafes, because the company is facing intensifying competition from fast-food chains offering specialty coffees, said the site.

The Teavana deal also positions Starbucks for stronger sales in parts of the world where tea is more popular than coffee, said the report. Teavana recently opened its first store in the Middle East with Alshaya, which is Starbucks joint venture partner as well, the article said.

CEO Howard Schultz said Teavana will also move into the consumer packaged goods category, meaning it will also be sold in supermarkets, according, said the report.

According to Huffpo, Brian Sozzi, chief equities analyst for NBG Productions, said the deal gives Starbucks a "high/low" positioning in a fragmented tea market, similar to the company's two-pronged approach in the coffee arena with its Starbucks and Seattle's Best cafes.

Teavana shares jumped by $5.32, or 52.5 percent, to close at $15.45, while Starbucks shares fell $1.47, or 2.9 percent, to $48.84, the website reports.

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