Kempner: How Starbucks killed a Ga. couple’s tea empire

Too much caffeine does funny things to even the best of minds.

Like when the espresso-sipping leaders at Starbucks said the revolution they sparked in coffee would happen with tea, too.

In 2012, the Seattle-based giant struck a $620-million deal to buy Teavana, a mostly mall-based tea retailer that was built from scratch by Atlanta couple Andy and Nancy Mack.

A measly five years later, Starbucks has announced it will close all 379 Teavana stores in the coming year. That includes seven in metro Atlanta (Lenox Square, Phipps Plaza, Cumberland Mall, Perimeter Mall, Mall of Georgia, Northpoint Mall and Town Center at Cobb).

Teavana – originally envisioned as a melding of tea and nirvana — isn’t living up to its name for the bean folks.

The problem, as outlined by Starbucks, isn’t tea; it’s malls.

Yeah, them again.

But first, a nod to the local folks who quietly built Teavana.

Andy and Nancy Mack’s tea empire began 20 years ago with a single Buckhead store along Peachtree Road. It originally went by the name Elephant Tea Co. Andy Mack, a former restaurant industry manager, wanted to recreate tearooms the couple enjoyed in Europe.

A few months after opening, he told a writer for The Atlanta Journal-Constitution, “Coffeehouses have done so much to raise people’s awareness of coffee. We want to do the same for tea.”

The Macks, eventually boosted by outside funding, later aimed almost exclusively on putting new shops in malls.

A chill tea shop

I found it odd to stumble upon a chill tea shop embedded alongside clothing stores and sneaker retailers. The focus was on selling tea you take home to make, rather than pay to savor on the spot. For me, delayed gratification is a dicey undertaking.

But the Macks know more than I do, because the concept grew dramatically. And, unlike lots of entrepreneurs, the couple managed to pay for the growth while retaining a big chunk of ownership.

Then Starbucks came calling.

“We believe the tea category is ripe for reinvention and rapid growth,” said Howard Schultz, Starbucks’ CEO at the time. Buying Teavana “positions us to disrupt and lead, just as we did with espresso starting three decades ago.”

Hey, the guy managed to convince the masses to pay $4 for a cup of coffee, so at the time it was easy to believe he could pull off almost anything.

Schultz talked about opening Teavanas outside malls as well as selling its teas in Starbucks.

But most Teavanas stayed locked in mallville, where many retailers have been getting clobbered and consumers have lost that loving feeling.

(Five stand-alone tea bars were opened but four were later converted into a Starbucks and the fifth one was closed.)

Earlier this year, Starbucks warned that bunches of Teavana shops were losing ground as mall foot traffic fell off.

Actually, the stores were labeled as “persistently underperforming,” which is pretty much the same as saying “Here’s a box. Clear off your desk. The nice security guard will escort you out.”

Gloomy outlooks

Starbucks’ new CEO, Kevin Johnson, told analysts recently that “Despite our efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue.”

You might also wonder whether Starbucks stores that are also in malls might face the same pain.

But apparently Starbucks executives are banking on the coffee hubs remaining more of a draw, pulling in consumers even if it requires traipsing through a mall.

And Starbucks officials aren’t giving up on tea.

Johnson called it “a large fast-growing category” and “overall our tea business has grown 40 percent since we launched Teavana in the U.S. over five years ago.”

“We have built the business into a well-recognized super premium global brand,” Johnson said. He’s predicting over $1.6 billion in sales of Teavana beverages in Starbucks stores over the year.

So the chain isn’t ditching the Teavana name.

Which — and here’s the happy part — means a bit of the tea nirvana the Macks dreamed of is still brewing.

Reader Comments ...

Next Up in Business

Meet Janice Bryant Howroyd, the first African-American woman to run a $1 billion business
Meet Janice Bryant Howroyd, the first African-American woman to run a $1 billion business

Janice Bryant Howroyd, 65, is founder and chief executive of Act 1 Group, an employment agency that also provides consulting and business services, including background checks and screening. She’s the first African-American woman to operate a company that generates more than $1 billion in annual revenue, according to Black Enterprise Magazine...
Winn-Dixie, once iconic grocery chain, takes another hit
Winn-Dixie, once iconic grocery chain, takes another hit

The supermarket chain that operates Winn-Dixie and Bi-Lo stores could close as many as 200 stores as part of a possible bankruptcy plan, according to news first reported by Bloomberg. Reuters reported that sources familiar with the potential bankruptcy filing said the company would close at least 100 stores. Winn-Dixie operates close to 500 stores...
Atlanta homebuilder sells out: Deeper pockets may mean faster growth
Atlanta homebuilder sells out: Deeper pockets may mean faster growth

An aggressive Atlanta homebuilder is selling itself to a Japanese-based company, seeing deeper pockets as the only sure way to grow. FrontDoor Communities, is being acquired by Virginia-based Stanley Martin Communities in a deal whose financial details have not been announced. But Stanley Martin itself sold a controlling interest a year ago to Daiwa...
Atlanta home prices up nearly 10 percent in a year
Atlanta home prices up nearly 10 percent in a year

Metro Atlanta home prices jumped 9.9 percent on average during the past year, while the supply of homes for sale crashed to what might be record lows, according to the latest report from the Atlanta Realtors Association. The median sales price last month was $245,000, up from $223,000 in January of last year, the monthly report said. Part of what&rsquo...
Hartsfield-Jackson spa plans roiled by dispute with minority partner
Hartsfield-Jackson spa plans roiled by dispute with minority partner

The XpresSpa locations at Hartsfield-Jackson International Airport are touted as oases of relaxation, where passengers and off-duty employees can leave behind the grind and relax with a massage or manicure. But, beneath the facade of tranquility, is a nasty, years-long business dispute that has cost the city of Atlanta more than $800,000 in legal fees...
More Stories