Starbucks' new caffeine addiction: tea

Starbucks wants to make the teashop as ubiquitous as its namesake cafes.

The Seattle-based company said on Wednesday it would pay $620 million in cash to buy Teavana Holdings Inc., which sells high-end loose-leaf teas in 300 shopping malls.

The plan is to increase Teavana's footprint beyond the suburban mall with stand-alone shops around the world, while adding tea bars where customers can buy hot and cold drinks.

The deal marks Starbucks' latest push to expand beyond its cafes, with the company facing intensifying competition from fast-food chains offering specialty coffees.

This year Starbucks bought small bakery chain La Boulange for $100 million, and last year it added fresh-juice maker Evolution to its stable for $30 million.

The Teavana deal also positions Starbucks for stronger sales in parts of the world where tea is more popular than coffee.

Teavana recently opened its first store in the Middle East with Alshaya, which is also Starbucks' joint venture partner.

Chief executive Howard Schultz noted in an interview that Starbucks cafes had modest beginnings as well.

The company's 11 locations only sold coffee by the pound in 1987, with its dizzying menu of specialty drinks and baked goods evolving over time.

Schultz said the company would use that experience to transform Teavana and tap into the $40 billion global tea market.

Starbucks already owns the Tazo tea brand, which it purchased in 1999.

The company plans to open its first Tazo teashop on Friday.

Starbucks has described the Tazo shop as a place where customers can buy specialty drinks, packaged chocolates and dozens of loose leaf teas - not unlike the shops it is now envisioning for Teavana.

Schultz said Teavana will also move into the consumer packaged goods category, meaning it will also be sold in supermarkets.

Brian Sozzi, chief equities analyst for NBG Productions, said coffee and tea have distinct cultures and that Teavana stores won't feel like the company's cafes.

Starbucks cafes are defined by their rush-hour bustle in the mornings. Schultz said Teavana stores will feel like "a shrine to tea".

Teavana shares jumped by $US5.32 ($A5.15), or 52.5 per cent, to close at $15.45. Starbucks shares fell $1.47, or 2.9 per cent, to $48.84.

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