Unilever Moving in on Niche Tea Market, to Acquire Tazo from Starbucks

Unilever to acquire Tazo from Starbucks

Unilever, the Rotterdam, Netherlands-based consumer goods giant announced Thursday that the company would buy Tazo, the specialty tea brand, from Starbucks in a deal valued at $384 million.

The deals looks like a near-perfect one for both companies. Starbucks has been going through a rough patch as sales growth in its US stores have slowed down, and the company is increasingly looking into international markets for future growth. As such, cutting a bit of fat that will allow them to keep their focus on larger pies – like its Teavana business, which brought in $1.6 billion in annual sales compared to the $112 million made by Tazo – makes a lot of sense.

“Over the past five years, we have established Teavana as our primary global brand focused on the premium tea segment. With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever,” said Kevin Johnson, president and chief executive officer, Starbucks. “We continue to see significant growth in our tea business through our Teavana brand, and this transition supports our strategy to elevate the premium tea experience for our customers.”

For Unilever, small, targeted acquisitions that can promise future growth make a lot of sense. Spending $384 million when you have more than $5 billion cash on hand is not going to hurt. Unilever also recently bought Pukka Herbs, an organic herbal tea maker in September, 2017.

This is what Unilever said after its acquisition of Pukka Herbs:

“According to Euromonitor 2016, Pukka is the fastest growing organic tea company in the world. The herbal, fruit and green tea market is currently worth €1.6bn* which trends suggest will become even more prominent globally in the future.”

Now throw in Tazo, which sells specialty black, green and herbal teas, and you can clearly see that Unilever is trying to strengthen its already-strong tea portfolio with products that are attractive to the current generation.

Unilever already owns tea brands like Lipton, Pure Leaf and PG Tips, but the recent buyouts clearly show that the company is adding small brands that can cater to fast-growing niche segments like green, herbal and other specialty teas.

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