In case you didn’t know (–awkward pause–), Starbucks is more than a coffee shop. The upscale shops, located on what seems like every corner, sells just about everything a fast-paced business professional might want, from assorted trinkets to pastries, smoothies and several other specialty drinks – even the “dynamic” drink of tea. Yes, that’s right, tea is apparently DYNAMIC.
When I first heard the news of Starbucks’ most recent acquisition of Teavana, I immediately thought, “wow, $620 Million for Tea. That must be some damn tasty tea.” Teavana is a specialty retailer founded in 1997 that offers just about anything tea related you could think of. The company maintains stores throughout the US and a handful of franchised stores in Mexico.
Well, turns out it’s more than just the taste of Teavana products that makes this deal such a good play for Starbucks.
Was Teavana ready for an acquisition?
Over the years, Teavana has done a superb job building what we’ll call the Four Pillars of Acquisition.
- Real Estate – Teavana holds more than 200 company-owned stores throughout the US, many of which are located inside shopping centers.
- Brand Equity – Teavana has worked for years to establish and polish their brand. The company has created a culture around product quality and customer service, two extremely important long-term attributes for any company.
- Existing User Base – With more than 184,000 likes on Facebook and 30,000 followers on Twitter, Teavana has an emerging, very loyal customer base.
- Product IP & Knowledge – Teavana offers more than 100 varieties of specialty teas as well as several types of proprietary merchandise that others DO NOT offer.
Why did Starbucks decide to acquire Teavana?
Why did Starbucks ultimately decide to pull the trigger and acquire Teavana? There are a few key reasons…
- Control the Supply Chain – Starbucks is relying more and more on their option to offer customers in-house products, which helps them to focus on quality control and efficient delivery times. They understand that adding new, complimentary product offerings can reap huge benefits down the line.
- Expand the Brand – Teavana’s brand culture is very similar to Starbucks, making the possibility of a successful long-term acquisition outcome more likely. Starbucks has generally done a great job in the past acquiring similar, like-minded brands that fit in with the unique culture at Starbucks.
How can you better prepare your company to be acquired?
Ask yourself the following questions to see if your company might be a candidate for future acquisition.
Q: Why you might consider an acquisition?
A: Agreeing to be acquired is the quickest way for your company to grow. You’ll almost immediately have more access to capital and other important resources that you might not otherwise have standing on your own. An acquisition may also shore up an existing product weakness for either the buyer or your company.
Q: Is your company in good financial standing?
A: Make sure your company finances are healthy and in order. Consider the following very carefully:
- Be ready to provide necessary financial documents during due diligence.
- Having accurate financial status reports is critical during this process.
Q: Is the time right?
A: Watch market signals from competitors with complimentary products. Keep an eye out for the following:
- Has a competitor recently gone public?
- Is a competitor opening up new market segments or are they looking to expand into your area?
Q: Are you growing your customer base?
A: The more steadily you have been growing market share, the more of an acquisition candidate you are. Adding real estate (brick/mortar locations) in key demographics locations, building a large tribe of social media advocates as well as maintaining a retail presence online all contribute to a “sellable” user base.
Leave a comment and tell us how you’re preparing for a future acquisition. As always, we would love to hear from you!
Check out some more interesting facts about past Starbucks acquisitions below.
When you look at some of the acquisitions Starbucks has made in the past, you begin to quickly realize a history of prudent, methodical purchase strategy designed to add complimentary products that help streamline the company’s supply chain. Some past acquisitions include: