In the video below, Motley Fool CEO Tom Gardner sits down with Starbucks CFO Troy Alstead during a recent visit to Starbucks Corporation (NASDAQ:SBUX) headquarters in Seattle. In this portion of the video, they discuss what Alstead believes is one of the biggest growth opportunities for Starbucks: the recent acquisition of Teavana. Alstead points out that tea is the second most consumed beverage in the world, after only water, and is a good complement to Starbucks’ core coffee business.
A full transcript follows the video.
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Troy Alstead Interview (Part 6/19)
Troy Alstead: Another item certainly in that top three or four would be Teavana. And tea as a general category, again, with Teavana being a piece of that, tea is the second most consumed beverage in the world, second only to water. Consumed more than coffee is, and it’s in the core, in the heritage of Starbucks Corporation (NASDAQ:SBUX). It was part of the original name of our company, Starbucks Coffee, Tea, and Spices, and yet it’s been a category that we have not put enough focus into. We have a fantastic brand in Tazo, but we recognize we have opportunity both through our stores and through the CPG channels and globally to really reignite what tea means to us.
Tea is wonderfully complementary to coffee. If you think about the U.S. consumer, coffee is about that morning experience. It’s get up and go, it’s moving fast, it’s on your way to work, it’s on the way to taking the kids to school. Coffee is more of a morning experience in the U.S.
Tom Gardner: Tea is at four o’clock when you’re watching Downton Abbey.
Alstead: There it is. Tea is a slower, Zen-like experience for people. It tends to skew to the afternoon. It skews to the evening. It skews to the weekend.
Tom: Is Teavana going to be mostly separate locations from Starbucks Corporation (NASDAQ:SBUX)? Will there be any combined locations or will there be a significant presence inside of Starbucks’ locations for the Teavana brand?
Alstead: Tom, it will be both and more. There’s opportunity to leverage the premium nature of Teavana into Starbucks’ stores, and we will do that. To use the deep capabilities that that Teavana team has around tea sourcing and blending, the wonderful things they do, brought together with our capabilities around beverage innovation, around store execution and to bring that capability into the Starbucks store, and we think add some layers of growth within Starbucks Corporation (NASDAQ:SBUX) and to help us drive day-parts, which are also a critical part of our strategy.
Another leg of that Teavana growth and where value comes to shareholders, is to help the Teavana concept grow, expand, evolve a bit and grow from here. So yes, we will have the stand-alone Teavana concept keep growing. What they’ve built over the years is a fantastic, high-capital-returning, great unit economics, Teavana model. What we believe we can do is marry up all those assets they have, again with our beverage capabilities, with our store-design capabilities, with our operating capabilities, leverage that up in a way that they just couldn’t as a small company, and begin to evolve the next generation of Teavana stores that will define growth and add to our growth for we think years to come.
Tom: Do you have a sense of how many Teavana locations there could be five years from now, 10 years from now, or that’s not really…
