Move Over, Coffee: With Tazo Store, Starbucks Aims to Reinvent Tea

Starbucks Tea
Starbucks Tea

Is Starbucks (SBUX) about to do for tea what it's done for the cup of joe?

With the launch of Tazo, its first tea-only store, the coffee giant is aiming to turn tea into the Next Big Thing. "We want to elevate the premium tea experience and grow the tea category, just as we've done for coffee," said Holly Hart Shafer, Starbucks communications manager. The store is set to open in October in Seattle, the heart of coffee country.

Tazo--named for the Starbucks-owned brand that is also sold in supermarkets, drugstores and cafes--will offer an "immersive" and "interactive" tea-shopping experience "that's differentiated from other folks in the retail space," Shafer said.

The signature feature of the 1,700-square-foot store will be its "blending stations," a showcase for 80 varieties of loose teas, where employees will guide customers through creating their own personalized blends. The loose teas will be sold by the ounce at prices comparable to specialty grocery stores.

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In the Tazo café, customers "can slow down and learn about tea ... and can immerse themselves in a sensory-rich experience," Shafer said. "We're creating a tea playground for customers that are looking for that experience."

Tazo will also sell hand-crafted teas, bagged teas and iced teas at a tea bar, and a variety of pastries and goodies, not to mention brewing equipment and a collection of merchandise like tea cups and sets.

Tea Stores to Dot The Nation?

The time is ripe for Starbucks,which bought the Tazo brand for $8.1 million in 1999, to tackle tea, Shafer said. '"We realized there's a $95 billion global [tea] market out there, and tea is a pivotal business opportunity."

Tea has been thrust into the spotlight in recent years, fueled by the drink's perceived health benefits, the popularity of specialty teas and tea shops, and young people discovering the beverage.

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In turn, the wholesale market for tea has quadrupled from 20 years ago, growing from $2 billion in the early 1990s to an estimated $8 billion today, according to the Tea Association. Over the same period, tea houses and shops have mushroomed from about 200 outlets to 4,000 today.

Although tea stores like Teavana (TEA), the largest tea chain, with 233 stores in the U.S. and Canada, are expanding, Starbuck's move into tea is a game changer, said Joe Simrany, president of the Tea Association.

"Today, you can find Starbucks on nearly every corner," Simrany said. Down the road, he predicts, "you'll be able to find Tazo on at least every other corner."

%Gallery-154119%Starbucks already knows "the tricks of the trade of running a coffee and tea operation, and they've got the financial backing to make [expansion] happen," he said.

While there are currently no plans for more Tazo stores, you can bet those plans will change quickly if the first one succeeds.

"I'm sure Starbucks has contributed to the overall consumption of coffee in the country. They romanticized it and made it the thing to do," Simrany said. "They're going to do the same thing with tea."

Stay tuned.

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