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Starbucks announced yesterday that it is selling its Tazo tea brand to Unilever and plans to launch a credit card with Chase, as it looks to compensate for a fiscal quarter that was disappointing.

Bloomberg reports that while total same-store sales were up two percent, its same-store sales in Asia also were up only two percent, or fifty percent less than had been projected by analysts.

According to the story, “The slow sales reflect a broader problem for the world’s biggest coffee chain. After saturating much of the U.S. with cafes, it needs overseas markets more than ever to maintain growth. While Chinese demand for coffee is still surging, it’s getting harder for the company to find blockbuster opportunities.” In the US, sales reportedly were hit by “the effects of hurricanes Harvey and Irma — which mauled Texas and Florida during the quarter and forced Starbucks to close a total of 1,100 locations.”

The Tazo sale to Unilever will generate $384 million for Starbucks, which bought the brand 18 years ago for $8.1 million. While Starbucks is shutting down its Teavana stores, it said it wants to focus exclusively on the Teavana brand in its cafes.

The story goes on: “The company expects to launch a Starbucks-branded credit card with Chase this winter. A prepaid card will come later. The company said both cards will allow customers to earn Starbucks rewards. when they spend.These types of cards, known as a co-branded card because they feature the brand of a bank and another company, have been popular for decades since they help strengthen customer loyalty.”

Reuters reports that “analysts have warned that the Seattle-based company is being ‘middled’ by rising competition on the value and quality fronts and that it must bolster sales of higher-priced specialty drinks and breakfast sandwiches. CEO Kevin Johnson told Reuters in an interview that there was no evidence Starbucks was being hit by competition. ‘We are not going to be squeezed in the middle,’ he said.”

Starbucks opened 603 new stores around the world during the quarter, and now has more than 27,000 locations in 75 countries.
KC's View:
First of all, I’m absolutely convinced that Starbucks’ problems can be traced to its decision to end its subscription coffee program. ( I’m still annoyed.)

I do think that Starbucks is an interesting position. It keeps building stores, even though it’s had problems in the past tied to having too many stores. It is focusing more on high-end offerings, which leaves it vulnerable to competition from the middle, not to mention at risk if the economy has any problems. And I wonder if there’s a point at which its focus on being a lifestyle brand may be detracting from its ability to deliver on its core value proposition.

Which partially is why I don’t understands why they’d give up on subscription customers like me.