A-B has inked a preliminary deal with Starbucks to produce, bottle, and distribute through its wholesaler network a premium tea, Teavana Ready-to-Drink (RTD) tea in the U.S., with an expected launch date occurring in the first half of 2017. Teavana is the specialty premium loose leaf non-alc tea brand Starbucks purchased in 2012 and sells through its stores (but not currently at other retailers).
A-B says 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 sales. Says the release: "Starbucks will contribute Teavana's tea expertise, retail activation, and consumer engagement capabilities. While, A-B will lead production, bottling and distribution to retailers nationwide in partnership with its network of wholesalers."
CONTEXT. As A-B chief João Castro Neves told BBD today, A-B has been "working hard" to get their "relationships with wholesalers to a better place." Particularly after the loss of Monster to Coke, João said the Wholesaler Panel has expressed the desire to secure a strong and growing non-alc partner with good margins, good name recognition, and volume potential to "leverage the system's scale." Another caveat -- learned from the Monster situation -- the partnership should be long-term.
THE DEAL. João said Starbucks was a natural fit as a company he's admired his entire career. The Teavana brand is a big seller and growing business in their stores, but isn't sold at retail like some of Starbuck's other offerings like Frappuccino, which is bottled and distributed by PepsiCo bottlers. So why wouldn't Starbucks go with Pepsi with the Teavana brand? Pepsi already has several RTD tea products with their Lipton lines (and Starbuck's Tazo line as well). Enter A-B.
PREMIUM PRICED. Expected pricing is in the premium tea range, about $2.69 a 12 oz bottle at retail for single serves (with a 18 to 24% gross margin). The product is expected to be a strong c-store contender and it "gets us back into the non-alc part of the cold box in a big way," said Wholesaler Panel chair Philip Mullin of Adams Beverages to BBD, referring to the painful loss of Monster. Another benefit of the brand being owned by Starbucks (other than the instant brand recognition of a powerful global brand) is that the brand isn't likely to be sold to a Coke or Pepsi and get yanked from the A-B system. Seems like a pretty good deal. My prediction: A-B distributors will run circles around Pepsi bottlers in getting distribution and keeping shelves filled, particularly at c-stores. Starbucks doesn't know what they got.
A-B and Starbucks expect to finalize definitive agreements by the second half of this year and rollout in early 2017. It's not clear at press time whether distributors will have to pay for the brand, or pay a marketing co-op fee, etc. Stay tuned…..
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Until tomorrow, Harry
"Life can only be understood backwards; but it must be lived forwards." - Soren Kierkegaard
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