The Tea Market Goes Venti

With the acquisition of Teavana, a retailer of loose tea, Starbucks is getting serious about a next step:

The tea industry as a whole has seen remarkable market growth in the last few years. According to the Tea Association of the USA, the domestic market has grown from $1.84 billion in 1990 to $8.2 billion in 2011. That’s conservative: the Sage group suggests the domestic tea market is three times larger. Whatever your metrics, this is a good time to be in tea. Palates are developing, and good tea is valued enough in the United States to make importing it a worthwhile endeavor. At the same time, blended teas, hardly new to the market, have grown in popularity. They are a canvas for self-expression, an opportunity for western tea purveyors to claim craftsmanship.

With U.S. tea markets opening up so rapidly, Starbucks’ acquisition makes total sense. Teavana has a huge operation built up already, a supply chain, and a distribution network. And they know tea. Starbucks can use what it has learned about global domination, and start serving $4 specialty tea drinks.