I have to register some disagreement with point #3 from @dwjbolton –

This is the “Tipping Point” for tea retail.

Yes and no. The tipping point for tea retail is something else. Tea hasn’t arrived yet and its not as close as some would argue. The tipping point is actually farther out (as many as 10+ years? – but possibly closer with Starbucks Teavana acquisition) and there is an existing analog for it which I’ll explain my opinion on below.

I agree that Teavana’s model isn’t quite perfect, and neither is DavidsTea, Tazo or the others. Teavana is the one I’m most familiar with so I’ll address that one. Teavana doesn’t really want to sell tea to tea drinkers, their model is designed around recruiting new tea drinkers. Their locations are too remote and prices too high for tea drinkers. I define tea drinkers as those who drink tea everyday. People like me (and male) who drink tea several times a day, every day. Teavana is a luxury brand, but only a brand, but only because I can get as good, or better tea online (and therein lies the problem – I have to buy it online.)

Tea will have finally arrived when decent loose tea (specialty tea in industry parlance) is widely available in grocery stores. To the extent that it would be unthinkable for grocery stores not to stock it. Yes, some stores do, but those are specialty stores like Whole Foods. Loose tea needs to be seen as a commodity again and sold as such. The mass consumer convenience legacy of the teabag that took the world by storm in the 1950’s needs to die.

There needs to be a change in the industrial perceptions of specialty tea – first, the concept needs to evolve and change. Loose tea in general grocery stores will not happen as long as the industry holds onto the concept of specialty tea. As long as loose tea is seen as special, it is then a luxury and the startups continue to work on that line and profit in the existing market – not branching out Blue Ocean Strategy style

What does Starbucks and Teavana have to do with this?

The reason that every grocery store in America these days sells bulk, loose, whole bean coffee is because of the cultural impact Starbucks had on America. Most of us can remember a time when whole bean coffee was not available in grocery stores, especially bulk coffee that you can get from a bulk dispenser and even grind it fresh in the store.

This occurred as a reactionary movement against Starbucks expense and inconvenience. Starbucks changed coffee and people liked it, but in time, they demanded the ability to make that quality at home and they revolted against Sbux high prices. I grew up in Southern California, right in the middle of the Anti-Starbucks movement. Going to a Starbucks was bad and patronizing small coffee shops was the norm. Remember the phrase, “Real friends don’t let friends drink Starbucks”? That came out of SoCal. At the same time, grocery stores where expanding the coffee aisle, offering fresher, bulk coffee. People could get their fix, but now they could make an outstanding cup at home – and getting that coffee was as simple as going to the grocery store.

That is the analog for the tipping point in tea retail. It’s not that Starbucks bought Teavana, it’s that Starbucks is the only company with the resources to push Teavana and the other luxury brands of tea forward into everyone’s mindset. The tipping point will come after the expansive growth of fancy corporate tea and it will be an evolving demand for the ability to run to the grocery store, pick up some good, loose tea and brew up a pot at home. Starbucks/Teavana is only the catalyst for that eventual tipping point.

Starbucks will make tons of money in the years to come on this deal, but the eventual winners will be smaller companies that optimize their logistics chains to get loose tea in grocery stores to meet the growing demand that that the Starbucks/Teavana monolith creates. Those smaller companies, taking that Blue Ocean approach and the consumers are going to be the real winners, but it is still many years away.