Starbucks to serve tea with $620-mn Teavana Holdings

Starbucks Corp yesterday said that it will buy tea store operator Teavana Holdings Inc for $620 million in cash, in a bid to expand beyond its core coffee business.

With the acquisition, Seattle-based Starbucks, the world's largest coffee chain, is trying to repeat the success of its coffee and espresso business, into the rapidly growing $40-billion global tea market.

''We believe the tea category is ripe for reinvention and rapid growth. The Teavana acquisition now positions us to disrupt and lead, just as we did with espresso starting three decades ago,'' said Howard Schultz, Starbucks chairman, president and CEO.

''This complements our existing Tazo brand and gives us the unique opportunity to create a two-tiered market position.''

The acquisition comes a few months after it announced that it would take its Tazo tea brand into retailing.  Starbucks bought Tazo tea for $8.1 million in 1999, which generates $1.4 million in sales annually.

Teavana is a specialty retailer offering more than 100 varieties of premium loose-leaf teas, authentic artisanal teaware and other tea-related merchandise through 300 company-owned stores in the US, Canada and Mexico and through its website.