Starbucks to Close All Teavana Stores

Say goodbye to Teavana—its stand-alone stores at least. Starbucks will shutter all 379 Teavana stores located in Canada and United States malls by Spring 2018. Starbucks will continue to sell Teavana products at its stores worldwide.

The closure of all Teavana stores will cost 3,300 people their jobs, but Starbucks hopes to keep those workers employed within the Starbucks family, where the company expects to see an increase of 68,000 jobs over the next five years.

Starbucks acquired Teavana in 2012 for $620 million, including its stand-alone retail stores located at upscale shopping malls, which have proved disappointing.

In a Q3 Earnings report, newly appointed Starbucks CEO Kevin Johnson characterized Teavana stores as “consistently underperforming.” He explained, “We conducted a strategic review of Teavana mall-based store business and concluded that despite our efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue.”

As more shoppers peruse virtual aisles online and large retailers like Macy’s and Sears close their stores, consumers have fewer reasons to go to the mall in the first place, leading to a decline in secondary food purchases, like that piece of pizza from the food court or that cup of tea from Teavana.

Some analysts point to consumer behavior to explain Teavana’s failure, arguing that people are simply accustomed to buying tea at the grocery store, not the mall. And we are creatures of habit, after all

While Teavana stores may not be minting much profit, the brand is a success inside Starbucks stores:

Tea is the fastest-growing category in Starbucks sales. Starbucks’ tea business has risen 40% in the US since its Teavana acquisition, and 60% over the past year in China and Japan.

Starbucks stores have been generating about four times as much Teavana revenue than Teavana mall stores were able to do. Closing these locations and shifting costs from maintaining Teavana stores to promoting Teavana products within Starbucks stores makes fiscal sense.
Johnson expects Starbucks to sell more than $1.6 billion of Teavana beverages in 2017 worldwide.

That includes the recently launched Shaken Iced Tea infusions, available in three delicious flavors:

1) Pineapple Black Tea

2) Peach Citrus White Tea

3) Strawberry Green Tea

Despite closing all Teavana stores, Starbucks remains committed to innovating within the tea market.  Said Johnson, “We have big plans for tea in Starbucks retail and CPG (consumer packaged goods) globally.”