Starbucks starts peddling the other caffeine drink: tea

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Seattle is now home to the second incarnation of Starbucks' latest foray — a posh tea bar that seeks to apply the global coffee giant's retail recipe to what it says is actually the world's most popular caffeinated beverage.

Teavana Fine Teas + Tea Bar opened Tuesday at University Village, just a few weeks after the first location debuted in New York's Upper Eastside.

The tea bars, where clients can order tea lattes, as well as small plates and elaborate pastries, are being launched nearly a year after Starbucks bought Teavana Holdings for about $616 million, its largest acquisition ever.

They mark a departure from Teavana's roughly 350 traditional mall stores, which focus on selling high-quality, loose-leaf tea and related products.

The venture underscores Starbucks' need for diversification to maintain its high rate of growth. Teavana, as well as other recent acquisitions such as juice-bar chain Evolution Fresh and baked-goods maker La Boulange, "could represent the next leg of growth for the company," RBC Capital Markets analyst David Palmer said in a research note.

In its 2013 fiscal year ended Sept. 30, Starbucks had the highest revenue in its history, about $15 billion. But yearly profit was nearly wiped out last week when the company lost a longstanding dispute over the breakup of its grocery-distribution contract with Kraft Foods.

With the tea bars, the company aims to combine its savvy in store design and customer service with Teavana's strong brand recognition and sourcing expertise in the world of tea — a drink Starbucks Chief Executive Howard Schultz has called "the second-most-consumed beverage behind water."

The University Village tea bar also highlights the company's aggressive siting strategy: Starbucks runs four other stores at the shopping center — an Evolution Fresh juice bar and three cafes.

The Teavana tea bar replaces Starbucks' own short-lived Tazo Tea store at the same location.

Charlie Cain, Starbucks' vice president for U.S. and Americas retail, said in an interview that it made more sense for the company to have the heftier, more upscale Teavana brand be the flagship of its tea retail strategy.

The tea bars seek to "combine the strength" of both Starbucks and Teavana, he said.

The Tazo brand will remain Starbucks' brand for packaged tea, available in grocery stores and at Starbucks locations.

Cain said the tea bars would give the company a better shot at afternoon customers: Most coffee shops are busy in the morning, while tea bars fill up in the afternoon.

Eventually, Cain said, there could be about 1,000 Teavana tea bars and stores Currently, Starbucks has about 11,000 company-owned and licensed U.S. locations.

At the University Village store, tea afficionados can order carbonated drinks that bring out the flavors of exotic teas, such as jasmine silver needle white tea, as well as Asian-inspired dishes such as glass noodle salad. Cain said tea drinkers crave more "eclectic" food offerings than those available in Starbucks coffee shops.