Starbucks announced that it will close down all of its Teavana stores and try to increase its popularity on China. The US based company has suffered major losses recently. Many are connecting it to the reduction of foot traffic in different US malls. Starbucks would now focus on trying to improve its position in the Chinese market.
Starbucks crafted the plan in order to reduce further losses on its shares in the American market. The company intends to reacquire 50% stake from different joint ventures in the Chinese region. They already own about 1500 stores in China with a great possibility of having more stores to be added in the region.
Teavana experienced its demise after the decrease on customers. Starbucks chief executive Kevin Johnson said in his statement that a significant amount of Teavana stores have been performing poorly. There are about 379 Teavana stores across North America. Fans of the drink line should not worry as Starbucks would continue to sell Teavana bottled products on its Starbucks stores.
Starbucks bought Teavana in November 2012 for a fee of $650 million. At the time Starbucks acquired Teavana, majority of its stores are located inside the mall. Due to the introduction of online shopping there are a lot of changes on the way Americans shop. Malls are now considered to be obsolete and almost no one goes there anymore. Since Teavana relies heavily on the foot traffic of shopping malls, they have also taken a hit on this change on shopping culture.
Teavana have been tried to be revamped by Starbucks through having more promotions and as well as doing renovations on its stores. Despite this efforts made, Teavana remains to have low income thus the decision to close down all of its stores. According to Kevin Johnson, they target to close all Teavana store by 2018.
Expansion on Chinese market
Starbucks could potentially regain its losses through shifting their efforts on expanding in China. Since coffee enthusiasts in China are growing, this could be a great opportunity for the Seattle based company. As of now, there are about 1500 stores in the country. The company plans to aggressively expand its stores to 5000 by the year 2021.
Obtaining the full shares in the Chinese region signifies the confidence that the company has over the market. As Starbucks try to regain the 8% loss they suffered last year in the American market, they buy out 50% shares from their Chinese partners. Starbucks intend to pay off JV partners Uni-President Enterprises Corp and President Chain Store Corp for their remaining shares in order to have full control of the company over the area. They announced that they will pay about $1.3 billion for the remaining shares. However, the company plans to let go of their shares to JV partners in Taiwan in order for them to fully control the company. The deal is set to be signed by early next year.
Starbucks has been adding news stores daily in mainland China. They want to add more stores to other provinces of the country especially in Shanghai, Nanjing (area famous for the Nanjing massacre) and the Jiangsu province. Starbucks is said to be the biggest coffee chain in China. They captured 60% of the Chinese coffee market.
Due to this outrageous growth they’re experiencing, they even decided to set out a Research and Development facility in order to create a menu that would be able to cater to the local’s tastes. Chinese consumers tripled within 4 years and still have the potential to expand further. This gives Starbucks a lot of opportunity to be able to cash in their investments.