Today in Manhattan Teavana opens its first tea bar since Starbucks (SBUX) purchased the chain for $620 million last year. Featuring a decidedly more mellow atmosphere, the store is the first glimpse at Starbucks CEO Howard Schultz's vision to build a global tea empire.
It's easy to scoff at the notion of a nationwide chain of stores selling items like Monkey Picked Oolong Tea for $24.98, but there are a few things you should know before you bet against Starbucks. Number one on the list is that you never, ever bet against Howard Schultz when it comes to selling Americans beverages.
Not only did Schultz turn coffee from a $0.25 cup of mud served at diners into $8 specialty drinks people line up for at more than 16,000 locations worldwide, but he actually did it twice. After building the company the first time, Schultz retired for eight years only to come back in 2008 after becoming dissatisfied with what the company had become in his absence.
Schultz is the Steve Jobs of coffee; at least.
Another factor in Starbucks' favor is that tea is the second most consumed beverage in the world behind water. Americans may not mind drinking Snapple and Lipton teas, but that's only because they don't know what they're missing. Tea is a $90 billion market globally. As the company cuts back on the number of Starbucks locations, it plans on opening at least 1,000 "zen-like" Teavana's in North America alone.
Can Schultz redefine tea the way he did coffee? He doesn't see why not. Investors have learned to give Schultz the benefit of the doubt when he issues such predictions.
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