AB Partners with Starbucks to Produce Bottled Tea

The ever-churning angles of big beer business have taken on a new facet – AB will now produce and distribute a bottled tea under Starbucks' Teavana brand, scheduled to launch mid-2017.

Though Starbucks has traditionally partnered with Pepsi Co. for such endeavors, the soft drinks conglomerate has an existing partnership with Unilever's Lipton tea brand, prompting the company to look elsewhere. AB isn't new to the $1 Billion market either, having previously paired with Jimmy Buffet's Margaritaville property to produce Paradise Key, a flavored iced tea brand. For more, check out the full release below:

ST. LOUIS AND SEATTLE– June 2, 2016 (St. Louis) – Anheuser-Busch and Starbucks (NASDAQ: SBUX) today announced that they are working together to produce, bottle, distribute and market the first Teavana Ready-to-Drink (RTD) tea in the U.S., with an anticipated product launch in the first half of 2017.

Premium RTD tea is the fastest-growing segment in the RTD tea category, which grew at 16% CAGR over the past five years and generates $1.1 billion in sales2. Together, Starbucks and Anheuser-Busch will bring their complementary strengths to bear to capitalize on the significant growth opportunity. Starbucks will contribute Teavana’s tea expertise, industry-leading retail activation, and consumer engagement capabilities, and Anheuser-Busch will lead production, bottling and distribution to retailers nationwide in partnership with its long-standing and well-established network of wholesalers.

Starbucks and Anheuser-Busch plan to introduce new Teavana RTD non-alcohol premium tea beverages across U.S. channels. The new RTD product line will integrate the handcrafted nature and epicurean flavors drawn from Starbucks and Teavana’s retail favorites to offer consumers premium layered flavors. Starbucks retail stores nationwide serve premium, handcrafted Teavana brewed and iced teas, which is a high growth category at Starbucks. Within the past year, U.S. Starbucks locations have sold more than $1 billion of handcrafted Teavana tea beverages, representing 11 percent growth in year-over-year sales3.

“Tea has been an important part of Starbucks heritage since we opened our doors as Starbucks Coffee, Tea and Spices in the Pike Place Market in 1971,” said Howard Schultz, chairman and chief executive officer, Starbucks. “When we acquired Teavana in 2012, we saw a unique opportunity to do for tea what Starbucks has done for coffee and expand the Teavana brand across many customer experiences and products. We are excited to work with Anheuser-Busch to unlock the premium ready-to-drink market and further grow demand for the Teavana brand.”

“This arrangement will bring together the strengths of two great companies, each with a long history of successful brand-building,” said Carlos Brito, Chief Executive Officer, Anheuser-Busch InBev. “Starbucks’ expertise and leadership in premium tea, combined with our world-class production capabilities and strong U.S. distribution footprint, will position this new product well in what is an exciting and growing category. We are delighted to be in a position to offer this great product to our wholesalers and believe, with their support, we are ideally structured to maximize the sales opportunity for Teavana RTD tea across the U.S.”

Philip Mullin, Chairman of the Anheuser-Busch Wholesaler Advisory Panel added: “Throughout Anheuser-Busch’s history, wholesalers have played a crucial role in the introduction of new products to the market. This arrangement with Starbucks comes at a very exciting time given the considerable growth in the premium RTD tea category, and I expect this news will energize wholesalers throughout our network.”

According to the Tea Association of the U.S., 80 percent of tea consumed in America is iced tea and tea overall has a global category size of $125 billion, with Americans drinking 800 million cups of tea per week. This relationship positions Starbucks and Anheuser-Busch to claim market share in the more than $1 billion premium RTD tea category.1

Following today’s announcement, Anheuser-Busch and Starbucks expect to finalize definitive agreements by the second half of calendar year 2016.

1 Euromonitor International Soft Drinks in the U.S. study published March 20152 Beverage Marketing Corporation report September 20143 Based on net sales of handcrafted Teavana tea beverages from Q2FY15 to Q2FY16 in Starbucks U.S. retail stores