Two beverage industry titans are teaming up to enter the $1 billion ready-to-drink premium bottled tea segment.
On Thursday, Starbucks and Anheuser-Busch InBev announced a partnership to manufacture and distribute a ready-to-drink bottled tea under the Starbucks-owned Teavana brand, which Starbucks acquired in 2012 for $620 million. The product is slated to launch in the first half of 2017.
The division of labor for the joint venture will see Starbucks “contribute Teavana’s tea expertise, industry-leading retail activation, and consumer engagement capabilities,” while Anheuser-Busch “leads production, bottling and distribution to retailers nationwide,” the companies revealed via press release.
“Tea has been an important part of Starbucks heritage since we opened our doors as Starbucks Coffee, Tea and Spices in the Pike Place Market in 1971,” said Starbucks CEO Howard Schultz. “When we acquired Teavana in 2012, we saw a unique opportunity to do for tea what Starbucks has done for coffee and expand the Teavana brand across many customer experiences and products. We are excited to work with Anheuser-Busch to unlock the premium ready-to-drink market and further grow demand for the Teavana brand.”
Schultz discussed the alliance further in a conference call Thursday afternoon, saying that the company elected to look outside of its longstanding relationship with PepsiCo – the companies sell both bottled coffees and Starbucks-owned Tazo teas jointly — for the launch of RTD Teavana due to PepsiCo’s existing Pepsi-Lipton Tea partnership with with Unilever. Schultz also championed the power of Anheuser-Busch’s distribution capabilities, pointing to A-B’s ability to access more than 300,000 retail accounts on a weekly basis.
“[We’ll have] more points of distribution than we have with Frappuccino, which is well over $1 billion in sales,” Schultz added. “There is a great demand for this product and we are sitting on a very large category.”
Also on the call was Anheuser-Busch CEO Carlos Brito, who indicated that the partnership with Starbucks to produce a premium bottled tea represented the company’s shift towards higher-end craft products.
This isn’t the first time AB-InBev has tried to make a run at the premium tea or the non-alcoholic beverage segment overall. In 2009, under its 9th Street Beverage incubator, the company launched Paradise Key, a tea brand it developed with Jimmy Buffet property Margaritaville. AB-InBev has also had a longstanding relationship with Monster Energy that has eroded as that company has moved its products into the Coca-Cola distribution network.
The loss of the valuable Monster franchise has hurt many Budweiser distributors who missed the high margins of the energy drink brand.
Meanwhile, this is the second major announcement from Starbucks this week that has the potential to have a major effect on the beverage industry; earlier, the company said it would begin serving cold brewed coffee more widely at its cafes as a way to get traffic from that fast-growing category as well.
The company’s press release can be found below:
ST. LOUIS AND SEATTLE– June 2, 2016 (St. Louis) – Anheuser-Busch and Starbucks (NASDAQ: SBUX) today announced that they are working together to produce, bottle, distribute and market the first Teavana Ready-to-Drink (RTD) tea in the U.S., with an anticipated product launch in the first half of 2017.
Premium RTD tea is the fastest-growing segment in the RTD tea category, which grew at 16% CAGR over the past five years and generates $1.1 billion in sales2. Together, Starbucks and Anheuser-Busch will bring their complementary strengths to bear to capitalize on the significant growth opportunity. Starbucks will contribute Teavana’s tea expertise, industry-leading retail activation, and consumer engagement capabilities, and Anheuser-Busch will lead production, bottling and distribution to retailers nationwide in partnership with its long-standing and well-established network of wholesalers.
Starbucks and Anheuser-Busch plan to introduce new Teavana RTD non-alcohol premium tea beverages across U.S. channels. The new RTD product line will integrate the handcrafted nature and epicurean flavors drawn from Starbucks and Teavana’s retail favorites to offer consumers premium layered flavors. Starbucks retail stores nationwide serve premium, handcrafted Teavana brewed and iced teas, which is a high growth category at Starbucks. Within the past year, U.S. Starbucks locations have sold more than $1 billion of handcrafted Teavana tea beverages, representing 11 percent growth in year-over-year sales3.
“Tea has been an important part of Starbucks heritage since we opened our doors as Starbucks Coffee, Tea and Spices in the Pike Place Market in 1971,” said Howard Schultz, chairman and chief executive officer, Starbucks. “When we acquired Teavana in 2012, we saw a unique opportunity to do for tea what Starbucks has done for coffee and expand the Teavana brand across many customer experiences and products. We are excited to work with Anheuser-Busch to unlock the premium ready-to-drink market and further grow demand for the Teavana brand.”
“This arrangement will bring together the strengths of two great companies, each with a long history of successful brand-building,” said Carlos Brito, Chief Executive Officer, Anheuser-Busch InBev. “Starbucks’ expertise and leadership in premium tea, combined with our world-class production capabilities and strong U.S. distribution footprint, will position this new product well in what is an exciting and growing category. We are delighted to be in a position to offer this great product to our wholesalers and believe, with their support, we are ideally structured to maximize the sales opportunity for Teavana RTD tea across the U.S.”
Philip Mullin, Chairman of the Anheuser-Busch Wholesaler Advisory Panel added: “Throughout Anheuser-Busch’s history, wholesalers have played a crucial role in the introduction of new products to the market. This arrangement with Starbucks comes at a very exciting time given the considerable growth in the premium RTD tea category, and I expect this news will energize wholesalers throughout our network.”
According to the Tea Association of the U.S., 80 percent of tea consumed in America is iced tea and tea overall has a global category size of $125 billion, with Americans drinking 800 million cups of tea per week. This relationship positions Starbucks and Anheuser-Busch to claim market share in the more than $1 billion premium RTD tea category.1
Following today’s announcement, Anheuser-Busch and Starbucks expect to finalize definitive agreements by the second half of calendar year 2016.
1 Euromonitor International Soft Drinks in the U.S. study published March 20152 Beverage Marketing Corporation report September 20143 Based on net sales of handcrafted Teavana tea beverages from Q2FY15 to Q2FY16 in Starbucks U.S. retail stores
About Anheuser-Busch
For more than 160 years, Anheuser-Busch and its world-class brewmasters have carried on a legacy of brewing America’s most-popular beers. Starting with the finest ingredients sourced from Anheuser-Busch’s family of growers, every batch is crafted using the same exacting standards and time-honored traditions passed down through generations of proud Anheuser-Busch brewmasters and employees. Best known for its fine American-style lagers, Budweiser and Bud Light, the company’s beers lead numerous beer segments. Budweiser and Bud Light Lime Lime-A-Rita were named Brands of the Year for the Beer and the Spirits, Malt Beverages and Wine categories, respectively, by Ace Metrix® in 2014. Anheuser-Busch is the U.S. arm of Anheuser-Busch InBev and operates 19 local breweries, 21 distributorships and 23 agricultural and packaging facilities across the United States. The company committed to investing more than $1.5 billion in its U.S. brewing, agriculture, packaging and distributing operations by 2018. Its flagship brewery remains in St. Louis, Mo., and is among the global company’s largest and most technologically-capable breweries. Visitor and special beermaster tours are available at its St. Louis and five other Anheuser-Busch breweries. For more information, visit www.anheuser-busch.com.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high-quality arabica coffee. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at news.starbucks.com or www.starbucks.com.
About Teavana
Teavana offers high quality teas and a unique in-store experience to new tea drinkers and tea connoisseurs alike. Acquired by Starbucks (NASDAQ:SBUX) in 2012, Teavana immerses customers in a full tea experience where they can learn more about the ritual and enjoyment of tea with products available in more than 350 Teavana specialty store locations, www.Teavana.com, as well as in Starbucks stores across the U.S. and Canada. Teavana offers premium tea accessories and an array of loose leaf teas. For more information, visit www.teavana.com, become a member of our bold tea community at https://www.facebook.com/teavana or follow Teavana on Twitter for our latest updates at https://www.twitter.com/teavana andhttps://www.instagram.com/teavanatea.