Starbucks Announces TAZO Sale to Unilever

Starbucks Misses Q4 Sales Estimates Sells Tazo To Unilever For $384 Million

Starbucks Misses Q4 Sales Estimates, Sells Tazo To Unilever For $384 Million

The deal, which also hands the Dutch-British company Tazo's signature recipes, intellectual property and inventory, leaves Starbucks Corp. with its Teavana tea brand.

The coffee company bought Tazo for $1.8 million in 1999, five years after it was founded. Tazo is sold primarily in grocery, mass and convenience channels in the United States and Canada, and it is offered in formats including packaged teas, K-Cup pods and bottled ready-to-drink teas.

In addition to Tazo, Unilever owns beverage brands Lipton and Brisk, both of which make tea products.

According to Unilever, Tazo had sales of $112.5 million over the past year.

With its strong appeal to millennials, TAZO is a ideal strategic fit for our U.S. portfolio that includes exciting new brands such as Seventh Generation, Dollar Shave Club and Sir Kensington's.

"With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever".

The transaction is expected to close during the fourth calendar quarter of 2017, with complete transition between the two companies by the end of calendar year 2018, subject to regulatory approval. And the company committed to returning US$15 billion to investors over the next three years through dividends and stock buybacks. The company expects to launch a Starbucks-branded credit card with Chase this winter.

The coffee company reported fourth-quarter revenue at $5.7 billion, slightly less than the same quarter in 2016, which was $5.71 billion. Net revenue was US$5.7 billion, short of the estimate of US$5.8 billion. After excluding the effects of hurricanes Harvey and Irma - which mauled Texas and Florida during the quarter and forced Starbucks to close a total of 1,100 locations - same-store sales growth was 3%. Globally, Starbucks posted 2% growth in same-store sales, missing expectations.

Starbucks also adjusted its long-term annual global same-store sales growth target to 3% to 5%, compared with its previous target of mid-single digit growth.

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