Starbucks and Tea Sales
Tea is the second most consumed beverage in the world after water, but Starbucks
Corporation, the coffee company and coffeehouse chain founded in Seattle, has had
difficulties getting consumers to pay the same premium price for tea that it gets for
coffee. When Starbucks bought Teavana Holdings, an Atlanta-based tea company
for $620 million in 2012, Starbucks Executive Chairman Howard Schultz promised,
“we will do for tea what we did for coffee.” That goal has yet to be achieved.
Starbucks first started taking tea seriously in 1999, when the corporation purchased
the Tazo tea brand in 1999 for $8.1 million. In 2017, Starbucks sold the Tazo brand
to Unilever for $384 million to concentrate on the Teavana brand.26 However,
Starbucks announced plans in 2017 to close most of its Teavana stores due to low
sales. Starbucks still hopes to create a “tea culture” within its cafés.
Several reasons are cited for the willingness of people to pay more for coffee than
tea in the U.S. First, coffee lends itself to complicated premium drinks that use
combinations of flavors, dairy or dairy substitutes, and sweetener. Second, tea often
comes in a tea bag, which may not be associated with premium prices. Finally, the
coffee industry may simply have been better at marketing coffee as a premium
beverage.
The tea industry has developed some tactics that it hopes will increase the prestige
of tea. These include creating tea drinks that cannot easily be replicated at home;
developing new flavors, particularly those that are perceived to have health benefits;
spending more on training staff to brew tea properly; and highlighting tea’s long and
rich history. Perhaps these strategies can help increase the sales of premium tea
drinks at Starbucks.
a. Based on the definition of marketing research, do you think that marketing
research can help Starbucks increase its sales of tea? Explain. b. Marketing research is used in all areas of the marketing mix, including
determining target markets and conducting research of products, pricing,
promotion, and distribution. Which of these areas do you think would be
most useful for Starbucks to use to increase tea sales? Explain. c. In thinking about the components of a marketing information system, which
components would you suggest that Starbucks use? Why?