Opinion

How Starbucks killed a Georgia family’s tea empire

Howard Schultz, chairman and CEO of Starbucks Coffee Company, talks about Starbucks’ Teavana tea products at the company’s 2014 shareholders meeting in Seattle.
Howard Schultz, chairman and CEO of Starbucks Coffee Company, talks about Starbucks’ Teavana tea products at the company’s 2014 shareholders meeting in Seattle. AP

Too much caffeine does funny things to even the best of minds.

Like when the espresso-sipping leaders at Starbucks said the revolution they sparked in coffee would happen with tea, too.

In 2012, the Seattle-based giant struck a $620 million deal to buy Teavana, a mostly mall-based tea retailer that was built from scratch by Atlanta couple Andy and Nancy Mack.

A measly five years later, Starbucks has announced it will close all 379 Teavana stores in the coming year. Teavana — originally envisioned as a melding of tea and nirvana — isn’t living up to its name for the bean folks.

The problem, as outlined by Starbucks, isn’t tea; it’s malls.

Yeah, them again.

But first, a nod to the local folks who quietly built Teavana.

Andy and Nancy Mack’s tea empire began 20 years ago with a single Buckhead store along Peachtree Road. It originally went by the name Elephant Tea Co. Andy Mack, a former restaurant industry manager, wanted to recreate tearooms the couple enjoyed in Europe.

A few months after opening, he told a writer for the Atlanta Journal-Constitution, “Coffeehouses have done so much to raise people’s awareness of coffee. We want to do the same for tea.”

The Macks, eventually boosted by outside funding, later aimed almost exclusively on putting new shops in malls.

A CHILL TEA SHOP

I found it odd to stumble upon a chill tea shop embedded alongside clothing stores and sneaker retailers. The focus was on selling tea you take home to make, rather than pay to savor on the spot. For me, delayed gratification is a dicey undertaking.

But the Macks know more than I do, because the concept grew dramatically. And, unlike lots of entrepreneurs, the couple managed to pay for the growth while retaining a big chunk of ownership.

Then Starbucks came calling.

“We believe the tea category is ripe for reinvention and rapid growth,” said Howard Schultz, Starbucks’ CEO at the time. Buying Teavana “positions us to disrupt and lead, just as we did with espresso starting three decades ago.”

Hey, the guy managed to convince the masses to pay $4 for a cup of coffee, so at the time it was easy to believe he could pull off almost anything.

Schultz talked about opening Teavanas outside malls as well as selling its teas in Starbucks.

But most Teavanas stayed locked in mallville, where many retailers have been getting clobbered and consumers have lost that loving feeling.

(Five stand-alone tea bars were opened but four were later converted into a Starbucks and the fifth one was closed.)

Earlier this year, Starbucks warned that bunches of Teavana shops were losing ground as mall foot traffic fell off.

Actually, the stores were labeled as “persistently underperforming,” which is pretty much the same as saying “Here’s a box. Clear off your desk. The nice security guard will escort you out.”

GLOOMY OUTLOOKS

Starbucks’ new CEO, Kevin Johnson, told analysts recently that “Despite our efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue.”

You might also wonder whether Starbucks stores that are also in malls might face the same pain.

But apparently Starbucks executives are banking on the coffee hubs remaining more of a draw, pulling in consumers even if it requires traipsing through a mall.

And Starbucks officials aren’t giving up on tea.

Johnson called it “a large fast-growing category” and “overall our tea business has grown 40 percent since we launched Teavana in the U.S. over five years ago.”

“We have built the business into a well-recognized super premium global brand,” Johnson said. He’s predicting over $1.6 billion in sales of Teavana beverages in Starbucks stores over the year.

So the chain isn’t ditching the Teavana name.

Which — and here’s the happy part — means a bit of the tea nirvana the Macks dreamed of is still brewing.

Matt Kempner writes for The Atlanta Journal-Constitution: mkempner@ajc.com.

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