Starbucks just took a huge step to take over the tea business, with an unlikely partner.
The coffee giant announced on Thursday that it is partnering with Anheuser-Busch InBev to launch a Teavana ready-to-drink tea in the US. The new product line will debut in the first half of 2017, on the shelves of the roughly 300,000 stores in AB InBev's distribution network.
"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," Starbucks CEO Howard Schultz said in a statement. "We are excited to work with Anheuser-Busch to unlock the premium ready-to-drink market and further grow demand for the Teavana brand."
Starbucks reports that in the past year, the chain has sold more than $1 billion of Teavana beverages at locations across the US, an 11% growth in year-over-year sales.
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Starbucks teams up with unlikely partner to enter a $1 billion business
CHENGDU, SICHUAN PROVINCE, CHINA - 2015/09/13: Coffee cup on table in a Starbucks cafe. Starbucks is streamlining the ordering process so customers are able to get that cup of coffee faster than usual. (Photo by Zhang Peng/LightRocket via Getty Images)
A cappuccino coffee sits in a Starbucks Corp. Reserve cup, used for specialist coffee, on the counter at a Starbucks coffee shop in London, U.K., on Friday, Oct. 16, 2015. Coffee futures fell the most in seven months after Colombia announced measures that will increase exports, spurred by the plight of farmers in the country who are dealing with drought conditions linked to the El Nino weather pattern. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
BEIJING, CHINA - 2014/12/24: A paper coffee cup and Starbucks logo. Starbucks will continue its expansion in China in 2015 and double its China store count to 3,000 by 2019. In its first-quarter fiscal report, the coffee giant shows optimistic expectation for its robust expansion plans in 2015. (Photo by Zhang Peng/LightRocket via Getty Images)
A Starbucks employee writes a message on a cup of freshly brewed coffee at a local store in Washington, DC on December 26, 2012. Starbucks stirred the political pot Wednesday by urging its baristas to write 'come together' on its cups as a way to pressure US lawmakers to compromise on a deal to avert a year-end fiscal crisis. Starbucks chief executive Howard Schultz said the American coffee giant was recommending its first-ever message on the side of tall, grande and venti (small, medium and large) drinks sold at its Washington stores as a way to help break the capital's gridlock on the so-called 'fiscal cliff.' Lawmakers and the White House have less than a week to work out a deal aimed at preventing tax hikes from hitting all Americans and a series of deep, mandated spending cuts from kicking in beginning January 1. AFP PHOTO/Eva HAMBACH (Photo credit should read EVA HAMBACH/AFP/Getty Images)
FILE - In this March 18, 2015 file photo, Larenda Myres holds an iced coffee drink with a "Race Together" sticker on it at a Starbucks store in Seattle. Starbucks baristas will no longer write "Race Together" on customers' cups starting Sunday, ending as planned a visible component of the company's diversity and racial inequality campaign that had sparked widespread criticism in the week since it took effect. (AP Photo/Ted S. Warren, File)
Justin McCartney of Hampton, Va., holds up a cup with the words "Come Together" written on it outside a Starbucks cafe in Washington, Thursday, Dec. 27, 2012. Starbucks is using its coffee cups to jump into the political fray in Washington. The world's biggest coffee chain is asking employees at cafes in the Washington area to scribble the words "Come Together" on cups for drink orders on Thursday and Friday. CEO Howard Schultz says the words are intended as a message to lawmakers about the damage being caused by the divisive negotiations over the "fiscal cliff." (AP Photo/ Evan Vucci)
A Starbucks coffee cup is seen in this photo taken August 12, 2009. AFP Photo/Paul J. Richards (Photo credit should read PAUL J. RICHARDS/AFP/Getty Images)
A customer holds their cup of coffee at the Starbucks in Chagrin Falls, Ohio on Wednesday, Aug. 2, 2006. Starbucks Corp. releases third-quarter earnings after the closing bell. (AP Photo/Amy Sancetta)
A cup of Starbucks tea is seen in Washington, Thursday, Nov. 16, 2006. Starbucks Corp., the largest specialty coffee retailer, will report its earnings for the fiscal fourth quarter on Thursday, Nov. 16, 2006. (AP Photo/Ron Edmonds)
MIAMI - JANUARY 18: In this photo illustration, the new Starbucks 31-ounce Trenta size ice coffee is seen on the right next to a tall cup of Starbucks coffee on January 18, 2011 in Miami, Florida. Starbucks rolled out the newest member of its lineup of drinks which is available only for Tazo shaken iced teas, iced tea lemonades and iced coffees. (Photo illustration by Joe Raedle/Getty Images)
TOKYO, JAPAN - SEPTEMEBR 26: Starbucks Coffe Company's news product 'Starbucks Discoveries'(Espressso (L), Latte (R)) are seen during a preview party on September 26, 2005 in Tokyo, Japan. 'Starbucks Discoveries' is the company's first chilled cup coffee product which will be available at convenience stores on September 27 in Japan with the same coffee beans used at Starbucks stores. (Photo by Junko Kimura/Getty Images)
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Currently, the premium ready-to-drink tea business generates $1.1 billion in sales, a quickly growing part of the global $125 billion tea industry. It is a category that Starbucks and AB InBev believe Teavana is perfectly positioned to tap into.
"We know... that there is a great demand for this product," Schultz said on Thursday on a call with reporters.
According to Schultz, the popularity of tea, especially premium and iced tea, among young consumers indicates an opportunity to grow the category at a faster rate than coffee. Executives at AB InBev, a company with far more experience in beer than tea, agree.
"We see an amazing opportunity in tea, when you look at tea on a global basis, but especially in the US," said AB InBev CEO Carlos Brito.
Schultz indicated that the line of tea would be similar to Starbucks' ready-to-drink bottled Frappuccino line, which the company launched in partnership with PepsiCo in 1996. PepsiCo and Starbucks' ready-to-drink coffee and energy drinks make up a $1.5 billion business — and Schultz believes Teavana could be even bigger than the bottled Frappuccino.
"Just think of it this way — throughout our stores, millions of customers every day have a chance to see our Teavana brand every day, [and to] taste it," said Schultz.
Starbucks' decision to team up with AB InBev, not PepsiCo, may raise some eyebrows. Schultz justified the decision to partner with the beer giant by pointing to company's experience in distribution, corporate values, and relationships between executives, as well as Pepsi's own place in the tea business with Lipton.
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Starbucks teams up with unlikely partner to enter a $1 billion business
Hot coffee (regular or decaf), regular: $0.99
McCafe premium roast coffee, small: $1.00
Smooth roast coffee, small: $1.00
Coffee (smooth, rich, or decaf), small: $1.59
Hot coffee, small: $1.59
Coffee (original blend, dark roast or decaf): $1.59