Unilever is buying the Tazo tea brand from Starbucks

Starbucks is selling its Tazo tea brand to Unilever for $384m (£294m) in order to focus on its other tea brand, Teavana.

Unilever is buying the Tazo tea brand from Starbucks

The announcement came just before the US coffee giant revealed its fourth quarter and full-year results, which undershot analysts’ expectations.

Selling off Tazo, which Starbucks acquired in 1999, was one of a number of steps outlined in an earnings call by chief executive Kevin Johnson aimed at refocusing the business on its most profitable activities.

These also included shutting the designated Teavana retail chain, in order to focus on Starbucks stores, and closing the Starbucks US e-commerce business.

Johnson said: "We are streamlining our business and directing our investments toward businesses and operations where our growth prospects and returns are the greatest, while transitioning, whether by licensing, divestiture, or otherwise, businesses and operations where returns and long-term growth prospects are less attractive."

The company’s revenues, for the year ending 1 October 2017, were up 5% year-on-year to $22.39bn (£17.13bn) – although the comparable growth rate is higher, since the 2016 financial year consisted of 53 weeks rather than the usual 52.

Comparable store sales grew 3%, with the rest of the revenue growth coming from 2,254 net new store openings in the year.

China continues to be the strongest-performing market for Starbucks, with more than 550 new stores in that country, taking the total to almost 3,000.

More tea, anyone?

For Unilever, the deal is the second tea acquisition this autumn, following Pukka Herbs in September.

The FMCG giant was already a major player in tea, thanks to its Lipton and PG Tips brands, but both Pukka and Tazo will help it compete more effectively in green and herbal tea, which are growing in popularity.

Kees Kruythoff, president of Unilever North America, said: "With its strong appeal to millennials, Tazo is a perfect strategic fit for our US portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington’s.

"Tazo’s solid position in the fast-growing specialty tea segment, coupled with Unilever’s tea expertise, presents a fantastic growth opportunity."