Starbucks acquires Teavana for $620 Million | Hacker News Reader

Starbucks acquires Teavana for $620 Million

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92 pointssaadmalik0157 comments

Teavana always had me torn. They found a sustainable formula for popularizing tea. That's good!

But they are very expensive and their sales staff sell on commission which I find uncomfortable.

I find myself in the position where I'm glad they exist but I never recommend anyone to actually go there.

I have similar views: I like that people seem to be caring about tea, though I don't find much to like in this particular shop. Nonetheless, several people who know I like tea have pointed me at them, so Teavana must be doing good marketing, to the extent that people who aren't that into tea think of it as something to recommend when they hear an acquaintance likes tea.

I personally mainly shop mail-order from Upton Tea Imports (http://www.uptontea.com). When I compare their selection and pricing to Teavana's, I don't see a lot of reason I would want to switch. But maybe that's like comparing newegg.com to Radio Shack: not really going after the same market segment.

I like the newegg / RadioShack comparison...it seems rather apt.

I think Teavana promotes a certain lifestyle around their tea, and that's one of the reasons they are rather expensive compared to the competition. Marketing definitely plays a large part: if you are not an avid tea drinker and looking for a gift you're probably not going to know the local places to go (or the mail-order sites to visit).

Love the experience at Teavana until someone talks to me. The sales staff are very pushy to the point where shopping there is uncomfortable.

Same here. It looked like a great place when I first went in, until I got the high-pressure sales treatment, then I decided I'll never go back.

I also found Teavana's teas to be adulterated with unnecessary flavors and ingredients that aren't natural to the tea. I instead prefer to go to their cousin store, Lupicia, which are usually located in the same malls. The difference is that Lupicia tries to preserve the tea's natural flavors instead of trying to "enhance" them with fruity flavors.

I'm not an incredible tea fan, but Lupicia has a special place in my heart, and the customer experience is probably better because Lupicia doesn't pay commissions -- ergo, no need to hard-sell.

I love TeaVana, though I'll admit I mostly order via the website. Their stores do annoy me.

Their stuff is expensive, but it's good. And really how much is expensive tea per glass? 25 cents? Not enough that I care.

And they have all sorts of great mixes. I probably wouldn't order just straight tea there. But the tea quality at TeaVana is much higher than the coffee quality at Starbucks.

If you're ordering online anyway, you might want to give adagio.com a look. I've been ordering from them for a few years and have always been pretty happy.

Even for people not interested in tea, it's worth taking a look at their site. They have one of the nicest, most user-friendly e-commerce designs I've ever come across. It's full of little things like making the tracking information for your orders available directly from the top navigation bar, and it's all presented in a visually pleasing way.

Mountain Tea: http://www.mountaintea.com/ is excellent.

I started drinking tea after reading "A Hacker's Guide to Tea": http://news.ycombinator.com/item?id=1934051 a couple years ago. That article was written by the guy who ran the Chicago Tea Garden, but he closed a couple of months ago.

I used them until they stopped giving away the tins with the orders. They then promised me a few free tins with the next order, and never delivered, so I gave TeaVana a try.

Honestly I just think TeaVana has better tea, even though I prefer Adagio's website, and the fact that they have decaf green teas.

Unless it's changed pretty recently Adagio stores your password in plain text. If you use the 'forgot my password' link on their login page they mail you your current password.

edit: Just tried it, they still do.

Wow, that's fairly surprising (and disappointing) given how clued-in they seem to be from a UX perspective. Thanks for the heads up.

EDIT:

For whatever it's worth, I just emailed them asking what the deal is here. Hopefully it's something they plan on fixing.

I totally agree. The stores are attractively laid out, and I did manage to get a nice in-cup loose leaf tea infuser, but I disliked my entire experience in the store. The hard sell treatment I got was really unwelcome and the tea itself was way over priced. I won't go in to another one and I don't recommend anyone go there.

As an aside, I'm very confident Starbucks will acquire Blue Bottle Coffee in the next 18 months-2 years.

By raising venture funding they are signaling they are looking for some kind of shareholder return/exit. The quality of the coffee, plus the "no-laptops" approach to their official cafes would make a great "luxury"/"high-end" marque and differentiator for Starbucks in markets where they are already saturated or want to attract greater wallet spend (SF, NY, etc).

Look at what they did with Seattle's Best but the opposite end.

Why would Starbucks buy Blue Bottle?

SBUX is already a luxury brand. Just because their coffee is not particularly good compared to Blue Bottle's, don't forget that SBUX is still charging $3-$4 for a typical cup.

SBUX can't scale Blue Bottle across their distribution channel, which is enormous. So anything they did to introduce the Blue Bottle brand would dilute their own brand.

Meanwhile, a cup of coffee at Blue Bottle might not even be perceptibly more expensive than a cup at SBUX.

Finally, Blue Bottle has minimal brand penetration across the US. You know about them if you live in Williamsburg in NYC, but lots of people in our Manhattan office had never been to Blue Bottle last time I was in town. They're obviously nowhere in Chicago. Are they even in Los Angeles? They're not in Seattle, or Austin, or Atlanta, or Mpls.

An SBUX acquisition of Blue Bottle seems like a mostly-downside, lose-lose proposition.

(I'm only arguing because it's an interesting question, not because I'm sure I'm right).

(Interestingly, Intelligentsia in Chicago has higher revenues and apparently higher year-over-year growth than Blue Bottle, the same number of locations, and no external funding. Maybe SBUX will buy them! Intelligentsia also ran Clover machines before Starbucks' ill-fated takeover).

(Finally: Ritual, in the Mission, is really good; I think better than Blue Bottle.)

Intelligentsia is all over the place. In addition to their retail presence in LA and Chicago, they run barista training labs in their NYC and Atlanta sales offices. In NYC, you can readily find their coffee in grocery stores and coffee shops. Their 2009 acquisition, Ecco Caffe, co-branded their beans with a popular eight location chain in Manhattan, and now is being absorbed into the main brand. Everything I see points to them having a solid but cautious national strategy.

If I were SBUX I would be drooling over the prospect of buying Intelligentsia, even if just to leverage their reputation for award winning baristas or gain intelligence on their wholesale customers. I'm just not sure that Intelligentsia is particularly inclined to sell at a reasonable price.

If SBUX just wanted to acquire a quality craft roaster, there are a myriad of options to choose from-- Ritual, to be sure, or any of a number of worthy candidates we've probably barely heard of.

> SBUX is already a luxury brand

Not for an SF, LA and NY market (+ other worldwide destinations). In the same way that BMW is a luxury brand, except to those who want to buy Ferrari and Bently. These people have even more money to spend and are not receptive to Starbucks.

> SBUX can't scale Blue Bottle across their distribution channel, which is enormous.

Wouldn't be all stores, would be separate stores for select markets. They could definitely scale - Blue Bottle just raised $22m in funding - what do you think they intend to do with it if not scale in some way?

> So anything they did to introduce the Blue Bottle brand would dilute their own brand.

Well in addition to above, I wouldn't put it past a company like Starbucks to perform an acquisiton which horribly dilutes said brand. Such as La Boulange, speaking of which...

> Finally, Blue Bottle has minimal brand penetration across the US. You know about them if you live in Williamsburg in NYC, but lots of people in our Manhattan office had never been to Blue Bottle last time I was in town. They're obviously nowhere in Chicago. Are they even in Los Angeles? They're not in Seattle, or Austin, or Atlanta, or Mpls.

Neither is La Boulange, really. Very small footprint outside of California. Yet Starbucks purchased them for $100m this year, mainly to use the brand to brand their baked goods.

> (Interestingly, Intelligentsia in Chicago has higher revenues and

That's not what Starbucks are looking to acquire in the same way they're going to shut down La Boulange (in the way we currently know it)

> In the same way that BMW is a luxury brand, except to those who want to buy Ferrari and Bently. These people have even more money to spend and are not receptive to Starbucks.

Starbucks / Blue Bottle makes even more sense considering that BMW is already a driver's car. The driving experience is at best marginally better by going to Ferrari. Whereas Starbucks is anything but a coffee drinker's coffee. People go there more for a caffeinated treat vs being into coffee per se. If Starbucks started producing the lighter roasts and more subtle flavors that coffee drinkers value, it wouldn't work with the heavy cream and sugar. So the whole Blue Bottle philosophy dovetails nicely. That said, they'd need to keep the association under wraps to avoid frightening away the coffee snobs.

SBUX actually costs more than Blue Bottle in NY. And, sorry to say, most wealthy consumers in New York and LA and, for that matter, Blue Bottle's home turf in SF are plenty receptive to SBUX.

La Boulange is a bakery, not a coffee chain, just like Clover is a product, not a retail chain.

The issue isn't that Blue Bottle can't scale at all, it's that SBUX would need them to be operating at an untenable scale almost immediately. $20MM? SBUX blows through almost $2bn per quarter.

Their premise is that they source hard-to-find high-quality beans. Which creates natural limits to scale. Farmers who sold you 10,000 lbs of coffee beans last year cannot sell you 10,000,000 lbs this year just because you have more capital.

I think Blue Bottle has more ambitious plans. Have you been to any of the coffee shops in SF (maybe more in the Outerlands) that serve Blue Bottle? They usually have it decal'ed into their front window and the brand displayed prominently. With their precise brewing process and recognizable brand, I think they want to franchise "store-within-a-store"s and get people selling their coffee sourced from their beans made with their equipment without having to pay rents or any of the costs of operating locations.

There's too much dissonance between the two brands and their models for sourcing, roasting, and preparing coffee are entirely different. It's hard to see the synergy from such an acquisition. The only thing Starbucks could possibly offer Blue Bottle would be distribution channels for bottled iced coffee (New Orleans or Kyoto style), and I suppose that's nothing to sneeze at.

As an aside, the fact that you're making such a claim speaks volumes to how well Blue Bottle markets itself. They seem much bigger than they actually are, due to high profile locations and a loyal fan base. In actuality, they have less than 12 cafe locations in 2 major cities. Those, combined with all their wholesale accounts probably still doesn't come close to the number of Starbucks in Manhattan alone.

I did some quick googling, but didn't pick anything obvious up:

Blue Bottle Coffee has 'high-end' coffee shops that disallow laptops?

If so, any reasoning behind this?

There are Blue Bottle franchises and Blue Bottle cafes - notably Mint Plaza (off 5th), Ferry Building, and Linden Ally (also Emeryville @ their roast plant).

Mint Plaza, their flagship cafe, is modeled very up-scale and is about the enjoyment of coffee. The tables are not laptop friendly (narrow), no power, and just like all their other cafes, offer no wifi.

I heard one of the owners/managers explain it was because drinking at a Blue Bottle coffeeshop is about enjoying the coffee and the experience, not an alternative for an office

Strong cut-to-the-chase possibilities: increasing customer turnover (important for retail hospitality businesses), minimizing overhead.

Richer people all have 3g iphones and ipads. ;-)

I have loved Teavana ever since they opened a store in the mall near me. I hope they start using the teas that Teavana has to beef up the selection in Starbucks stores. Tazo is decent but the variety is lacking and they miss out on the complexities of flavor and aroma that specialty teas have.

I will be a happy customer when I can go get a Himalayan young black tea with the same ease I can get a bag of Colombian dark roast beans.

Afternoon hot tea is considered normal in other countries and it's a very strange concept in America. Hope this changes that...

I wouldn't call it very strange. No one would judge you for having a cup of tea in the afternoon, and they might even want to join in and have a cup with you. Its just not something that most people would think to do.

Not that strange. Everyone I know drinks tea, and they aren't connoisseurs. It's just not a big scheduled thing.

I bet these guys (http://www.argotea.com/) had something to do with Starbucks decision to gobble up another tea company.

I don't understand why people buy teas from these places (teavana, teopia,etc), there all over priced, sub par tasting teas, The best teas are found in small outlet stores (chinese, indian, thai, etc); it's like going to East Side Mario for a taste of italy.

Consistency. If you like something from one place enough to be happy to have it again why spend your time trying to find something better when it's not guaranteed there is better? I always order burgers from McDonalds, sure there might be a better independent place but I don't have the desire to spend 6 months finding it and I know if I'm 200 miles from home I can get exactly the same thing I like with ease.

See, I am the exact opposite. I will never eat at a chain restaurant unless I have no other choice. I will spend an hour looking for a new place to try rather than settle on a chain that I know will be mediocre at best. This has annoyed my brother on more than one occasion when I decided to drive across town to try a new burger place.

that's a good point, never thought of it that way.

I'm the same way. The best tea i've had is from little shops in chinatown and Samovar, which only has a few locations.

I've always used and liked http://adagio.com for tea - they have a really simple and easy-to-use site.

amazon has some of the best selection of tease imo, can't get all the interesting blends but almost everything I've been shopping for was there. And i don't mean in those gross little boxes where you get baggies of random tea, but the foil lined packages or tins of loose tea from reputable companies.

Non-techie in me: Maybe this will make Starbucks actually have good tea... or at least more variety. (Teavana is more smelly tea than tasty tea)

Wasn't that also the point of them acquiring Tazo back when?

Tazo teas don't have the reputation of being high-end enough to fetch the prices teavana teas do. I drink some of them, but boy, they ain't cheap.

I mean Teavana, but in hindsight that same comment applies to Starbucks as well.

Except Tazo is pretty pedestrian, the General Foods International Coffees of tea.

http://dailyshotofcoffee.com/candied-coffee/

Weird. Or really, the exact opposite of weird.

There is a Teavana in a mall near me. I've enjoyed their teas, and bought bags to brew at home, as well as a rather nice iron kettle.

Every time I walk in there I say to myself "This place is like the Starbucks of Tea."

I like premium Tea from Teavana much more than Starbuck's coffee though. As I should for the prices they charge...

For Americans that use Teavana, are you drinking this tea the English way with milk, or iced?

I remember when I first went to America as a 21 year old (I had a job door-to-door selling) and Americans, being the hospitable souls that they are, would frequently offer me tea. Unfortunately, it was the cold variety :-(

Tea in the US is usually either hot without milk (sugar if you like), or iced.

Iced tea is awesome! Especially when done right, with lemon and honey. I grew up in Miami and getting iced tea on a hot (32+) day was godsent.

Iced and hot are both common, but putting milk in tea is not common.

I take mine like a builder - milk, and two sugars.

Starbucks currently boils their tea, maybe this ignorant act will stop now??? It is why I try and not go to Starbucks for tea.

Whether that's ignorant depends what type of tea you're drinking. Steeping at 212°F (boiling) is the recommendation I've always heard for nearly all black teas and herbal teas. You are correct that lower temperatures are better for most green, white and oolong teas.

True, I should have clarified I was talking about green tea, as it's the only tea I drink.

Americans in general boil and over-steep their teas. It's common for people to let tea steep indefinitely.

It's sad.

When I went to a starbucks in NY recently (I'm British), I ordered a medium-sized tea, and got given a tent-sized teabag sufficient for a very large teapot. It made the tea extremely nasty, presumably in aid of a quantity=quality impression.

>It's sad.

It's also the result of ignorance. I did this for a long time because a) nobody around me knew differently and b) I never thought to ask if it should be done differently. So I simply thought I didn't like tea. Only after reading "A Hacker's Guide to Tea": http://news.ycombinator.com/item?id=1934051 did I realize what I was doing wrong.

They're doing in-home coffee, merch, etc. and now a big chain of pure retail locations. Starbucks is really starting to open up alternative revenue streams. Good for them.

wow, they got a lot of locations!

http://www.teavana.com/retail/united-states

http://www.teavana.com/retail/canada

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