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Starbucks to sell tepid Tazo tea brand to Unilever for US $384 million

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Coffee shop chain said on Thursday it will sell its tea brand to Unilever for $384m to focus on its line, amid disappointing quarterly results.

Starbucks to sell tepid Tazo tea brand to Unilever for US 4 million
The transaction is expected to close in the fourth quarter, pending regulatory approval, the companies said

“With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever,” President and CEO, Starbucks, said in a statement.

Johnson further added, “We continue to see significant growth in our tea business through our Teavana brand, and this transition supports our strategy to elevate the premium tea experience for our customers.”

The transaction is expected to close in the fourth quarter, pending regulatory approval, the companies said.

Starbucks paid US $8.1 million for Tazo in 1999, five years after it was founded. Sold mostly at supermarkets, bib-box and convenience stores, its line-up includes packaged teas, K-Cup pods, and ready-to-drink bottles.

Starbucks also reported earnings for its fiscal fourth quarter of 2017 on Thursday, which left investors underwhelmed as it delivered worse-than-expected sales figures.

For the three months ending October 1, net revenue of US $5.7 bn was flat compared with the same period a year earlier.

Net income attributable to Starbucks fell 1.6 per cent year-over-year to US $788.5m, missing expectations for income of US $794m, while earnings per diluted share remained flat at 54 cents, in line with analysts’ forecasts.

Comparable sales growth, a key industry metric, came in at 2 per cent, falling shy of the 3.3 per cent gain Wall Street was looking for. The company attributed the performance in part to Hurricanes Irma and Harvey. Stripping out the impact of the storms, comparable sales would have been up 3 per cent, Starbucks added.