Starbucks Turns to Tea

The Seattle-based coffeehouse chain, in the midst of closing hundreds of stores across the country, has expanded its tea offerings, adding three Tazo tea lattes and two black tea-fruit juice steamed and iced varieties to its menu.

Starbucks said the new offerings provide healthier options. In 2008, the company put sugar-free and no-fat lattes on its menu, launched fruit smoothies and introduced healthier breakfast items.

"The same way we transformed American coffee culture, we want to deliver an exceptional tea experience for customers with our new Tazo Tea Lattes and tea Infusions," said Michelle Gass, Starbucks' executive vice president for marketing.

Tea accounts for about one in 10 drinks consumed at Starbucks, which bought Tazo Tea Co. in 1999, she said.

Consumption is boosted by studies that suggest tea has health benefits, according to research firm Packaged Facts, which expects tea sales to hit $15 billion by 2012, about twice what they were in 2007. Specialty tea, about 36% of the U.S. tea market, is expected to expand to more than 50% of all tea and ready-to-drink sales.

McDonald's Corp., based in Oak Brook, introduced a sweet iced tea at its U.S. stores last year.

Chicago-based Argo Tea has grown by following Starbucks' footsteps. The first Argo opened in 2003 across the street from a Starbucks. Last fall, a Merchandise Mart store opened next door to a Starbucks.

Argo, which sells hot and iced tea, sandwiches and pastries, plans to open its 13th location, at O'Hare International Airport -- next to a Starbucks.

The expansion of the Starbucks' tea line can increase the tea-drinking market, said Kari Ginal, marketing director at Argo, which is eying the New York market for expansion in 2009.

"That just provides more strength behind our tea-focused positioning," Ginal said. "We're excited. The more people that become tea drinkers and tea fans, the more they'll love our stores and our signature drinks."

From the January 5, 2009, Prepared Foods e-Flash