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The Honolulu Advertiser
Posted on: Tuesday, April 10, 2001

Starbucks finds a new cup of tea

Associated Press

PORTLAND, Ore. — Starbucks Corp. has taught the nation a thing or two about coffee. Tea, however, is a new experience for the Seattle company.

Tazo's Steve Smith, right, and Tal Johnson tell Starbucks coffee executive Jason Brotman, center, a bit about tea.

Associated Press

Enter Tazo, the line of tea blends with names like Om, Zen and Awake. Founder Steve Smith started the line in his Portland kitchen seven years ago, and Starbucks bought it for $9.1 million in 1999.

At the time, Starbucks was struggling with its Infusia tea brand, but it couldn't drop tea from the menu because "every coffee shop has tea," said Darren Huston, Starbucks' senior vice president of new ventures

Now, Tazo blends appear in every Starbucks coffeehouse.

Smith used to work for rival Stash Tea Co. After leaving the firm in 1994, he went door-to-door selling his teas, each packaged in an individual bag stamped with a flowery description of how the blend tastes.

Smith embraced bold and irregular ingredients — ginger, lemon grass, black pepper, cucumber juice, dried hibiscus flowers.

Tazo attracted attention from industry insiders for its packaging and Smith's extensive knowledge of tea, market analysts said.

"Other tea companies have tried to copy New Age stuff and cutesy packaging," said Brian Keating, a tea industry expert with Sage Group International in Seattle. "But Tazo's packaging looks like a cross between 14th-century alchemy and an exotic tea estate somewhere. It's masterful."

Smith's expertise in traditional leaf as well as herbal teas means Tazo can succeed in both markets — a rarity among tea makers and a boon to Starbucks. According to Keating, "lots of people in the tea industry know black and green tea, or they're herbal guys, but most don't know both."

Starbucks has mixed Smith's know-how with its deep pockets to turn tea into an array of flavored drinks.

"Tazoberry and Cream" — iced fruit tea and cream, topped with whipped cream — and spicy chai tea lattes are the most recent additions to the Starbucks lineup. The drinks sell for up to $4 a cup, more than some coffee drinks, while brewed iced tea and hot tea sell for up to $2.

Tea sales currently represent just 3 percent of Starbucks' overall business, but it is a fast-growing area, Huston said.

"The Tazo mantra, even before it joined Starbucks, was to be the Starbucks of tea," said Huston. "In five or 10 years, I think it could be as well-known as Starbucks coffee itself."

Tazo recently moved into a 100,000-square-foot warehouse and instantly filled it with tons of dry tea, herbs and spices imported from around the world. Some of those ingredients will soon return to overseas Starbucks coffeehouses stamped with the Tazo name.