November 6, 2017

Unilever announced it has agreed to acquire leading specialty tea brand Tazo Tea, including its intellectual property, related recipes, and inventory from Starbucks for $384 million.

Launched in 1994, Tazo sells packaged teas, K-Cup pods, and bottled ready-to-drink (RTD) specialty black, green, and herbal teas as well as liquid concentrates through grocery, convenience, and mass retail channels, posting $112 million in sales over the past 12 months.

Tea is the second most consumed drink in the world after water. Between 2009 and 2016 the global tea market has seen a compounded annual growth rate (CAGR) of 5.6 percent, according to the report, Tea Market: Global Industry Trends, Share, Size, Growth, Opportunity, and Forecast 2017-2022 issued by IMARC Group. This growth has pushed output to reach 5.6 million tons last year, and has generated expectations that production will top 7.2 million tons by 2022.

Furthermore, the rapidly growing specialty teas account for 48 percent of the total US$1.6 billion (as of FY2016) at-home tea category. Drilling deeper, Tazo, which is primarily sold in the U.S. and Canadian markets, will be a highly compatible addition to Unilever’s portfolio of tea companies that includes Lipton, Pure Leaf, PG Tips, T2, and recently acquired Pukka, while pulling in millennial consumers.

“With its strong appeal to millennials, Tazo is a perfect strategic fit for our U.S. portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington’s,” said Kees Kruythoff, president of Unilever North America. “Tazo’s solid position in the fast-growing specialty tea segment, coupled with Unilever’s tea expertise, presents a fantastic growth opportunity.”

Starbucks, meanwhile, said that it has pursued the divestment of Tazo, which it acquired in 1999 for $8.1 million, in order to free its hand to focus investment the growth of its Teavana brand, despite its decision to close its mall-based Teavana cafes.

Despite slowing traffic at its Teavana mall cafes, tea sales at Starbucks has seen double-digit growth on a global scale, and over the past 12 months the chain has sold $1.6 billion of Teavana beverages in its stores; launched a line of RTD premium Teavana Craft Iced Teas through its partnership with Anheuser-Busch InBev, and plans to enter the packaged tea segments next year. In the longer term, the company has its sights set on Teavana becoming a $3 billion brand in the next five years.

“Over the past five years, we have established Teavana as our primary global brand focused on the premium tea segment. With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever,” said Kevin Johnson, president and chief executive officer, Starbucks in a company release. “We continue to see significant growth in our tea business through our Teavana brand, and this transition supports our strategy to elevate the premium tea experience for our customers.”

For Unilever, the Tazo acquisition is the latest in a string of deals aimed at invigorating its line-up in order to generate returns for its investors after fending off an attempted $143 billion takeover by Kraft Heinz earlier this year. Aside from its acquisition of Pukka in June, the group also acquired mission-driven maker of non-GMO, natural and sustainable condiments, Sir Kensington’s for $140 million in May of this year, and expanded its presence in the organic food space in October with the acquisition of Brazilian organic food company Mãe Terra.

-Lynda Kiernan