The Impact of the Expansion of Starbucks Into the Tea Market

Starbucks coffee has decided to expand its business by opening up its first Teavana teahouse in Manhattan. They hope to be able to open at least an additional 1,000 stores in and outside of the U.S. For many of their tea loving customers, this is a welcomed change.

Starbucks wanted the new store to feel much different than their usual stores. The main focus was to create a very zen feeling. They accomplished this through low lighting, a contemporary design, and a tea shrine. The result is an atmosphere that many of their customers want to linger in instead of grabbing their purchased item and leaving.

Starbucks’ decision to expand into the tea market was a way to economize. The only other beverage that people drink more than water is tea. Expanding into this market involved the least amount of cost because of this. Expanding into a different market such as energy drinks would involve more cost and therefore would not be economizing.

This decision that Starbucks made involves a cost. As they are focusing on creating new stores specifically for selling teas, less focus will be put on the coffee shops that they currently have. This means that they will not be able to put as much attention on creating and improving their products for their current coffee shops potentially leading to a decrease in profits.

Starbucks strategically placed their first teahouse in Manhattan. Many of its products are on the more expensive side and they therefore, place the store around other appropriately expensive stores such as Lululemon and Dean and Deluca that their customers most likely shop at. This helps to ensure that their customers will purchase their products because of the incentive of the teahouse’s close proximity to them.

Starbucks is able to create wealth through voluntary trade by this decision. They can now accelerate the opening of more teahouses because they are halting the construction of their typical coffeehouses. This allows them to ensure that their teahouses will be of a high quality which would in turn increase the probability of them having success and large profits than if they tried to focus on both of their businesses at once.

The consequences of this decision by Starbucks lie in the future. As Starbucks expands into the tea market, it could influence other local coffee shops to become more tea-oriented as well. This would allow them to be able to better compete and not be put out of business by larger chains such as Starbucks.

Starbucks is a very popular business. As they continue to expand into the already popular 90 billion dollar tea market, their customers will most likely be influenced into buying more tea. As the popularity of Starbucks’ tea increases, it could potentially become as or more popular than their coffee.

The author’s view that Starbucks’ teahouses will become very popular is correct. Tea is already a popular beverage and the fact that Starbucks in putting its own spin on it will probably just make it even more popular. This article relates to class because we have discussed the things that would shift the demand curve. In this case, if society’s income increased, the demand for Starbucks’ new tea products would increase as well as they are a more expensive product. In the future, Starbucks will most likely have equal focus on both their coffees and teas once they have had enough time to establish their teahouses.