Starbucks and Anheuser-Busch InBev have joined forces to produce and distribute the first ready-to-drink teas under the Teavana line, angling to tap a $1.1 billion-and-growing tea market.
The partnership, jointly announced on Thursday, will combine Starbucks’ (SBUX) expertise in concocting teas with AB InBev’s (BUD) strengths in production, bottling and distribution. AB InBev also has strong relationships with retailers that it works with to distributes its beers like Budweiser and Stella Artois, and the companies say the world’s largest beer maker will lean on those long-standing wholesaler relationships to get strong retail support.
The line of ready-to-drink bottled tea is expected to debut in the first half of 2017 and will be distributed at supermarkets and convenience stores.
Although much has been made about Starbucks’ foray into serving alcohol at the company’s retail stores, the Teavana ready-to-drink line will be completely non-alcoholic. The new Teavana drinks will aim to tackle the premium ready-to-drink market, which Starbucks claims grew at a compound annual growth rate of 16% over the past five years.
“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,” said Starbucks Chairman and CEO Howard Schultz in a prepared statement. “We are excited to work with Anheuser-Busch to unlock the premium ready-to-drink market and further grow demand for the Teavana brand.”
AB InBev CEO Carlos Brito, meanwhile, said his brewer was “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.”
The $615.8 million acquisition of Teavana late in 2012 was one of several bets Starbucks has placed on new beverage categories beyond the coffee industry, as it aims to become a more diversified beverage giant. Starbucks has in recent years experimented with more tea brands, juices, smoothies and other beverages both in its stores and at grocery and other retail locations.
Starbucks has already made great strides expanding the Teavana brand. The company’s U.S. stores have sold more than $1 billion of handcrafted Teavana drinks in the past year alone, representing 11% year-over-year sales growth.
The move to bring Teavana to the ready-to-drink market is another way Starbucks can expand the company’s business to retail outlets beyond Starbucks-branded stores it operates. For AB InBev, the deal represents an opportunity to sell more than just alcoholic beverages. The company works closely with more than 500 independent wholesalers across the U.S., while also owning and operating distributors across a handful of U.S. cities, including New York, Boston, Los Angeles and San Diego.
Following Thursday’s announcement, Starbucks and AB InBev expects to finalize the definitive details of the pact by the second half of this year.