- Unilever said Thursday it is buying the Tazo tea brand from Starbucks for $384 million, the company said in a statement. The deal is expected to close this year.
- Tazo was founded in 1994, and acquired by Starbucks in 1999 for $8.1 million. The tea brand is sold in packaged tea, K-Cup pods and bottled ready-to-drink teas.
- The coffee giant is expected to focus on its Teavana brand, investing in its growth both in store and in outside channels.
Starbucks' sale of Tazo to Unilever appears to be a win-win for both sides. Starbucks gets to sell the brand while it’s still popular for a tidy profit, and focus its attention on the upscale tea market. Unilever is able to build its stable of specialty tea brands. This purchase is a highly logical one for consumer-goods giant. Unilever already has global tea brands Pure Leaf and PG Tips under its umbrella, and a partnership with PepsiCo for Lipton. Slower-growing black tea makes up roughly 80% of its portfolio.
In an effort to expand its green and herbal tea business, Unilever has been expanding its offerings with its current brands, while buying fast-growing upstarts. Earlier this fall, it announced plans to purchase U.K. herbal tea brand Pukka. Unilever’s interest now in Tazo follows with its tea expansion game plan.
Tazo will likely flourish under its new ownership. Unilever has extensive experience in the tea business, and a clear interest in growing it. It will be interesting to see how the company uses this past history and current assets as it expands. There are possible synergies that could come into play, such as sourcing tea leafs for multiple brands from one farm or region. Unilever already has established distribution with retailers, making it easier to add new lines into the mix.
Unilever also should see a quick return on its investment in Tazo, which had sales of $112.5 million during the past year. Consumer demand for tea is growing. The total U.S. wholesale value of the tea industry has more than quadrupled — from $1.8 billion in 1990 to more than $10.8 billion in 2016. As soda sales continue to fall, interest in alternative, healthy beverages has picked up. Unilever knows what its doing by investing in the humble tea leaf.