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Can Starbucks Do For Tea What It Has Done For Coffee?

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Starbucks, which revolutionized the coffee industry, is now taking on tea. It has opened its first tea bar, and it's creating mixed tea beverages, some even more complex and customized than the coffee beverages we all know.

This first store, on Madison Avenue in Manhattan, has minimalist decor: grey soft seats, charcoals, chestnut browns. Teavana teas line one wall. Beakers filled with colored liquids greet you at the entrance.

The coco caramel sea salt tea latte is delicious, but at 350 calories it's not an everyday drink. Cliff Burrows, regional group president of Starbucks and Teavana, says tea isn't new for Starbucks. "Our original logo from 1971 was coffee, tea and spice," he says. "But tea has always been secondary to the coffee business that we have grown around the world."

The Tea Association of the United States says tea has been growing in popularity and, in the U.S., the wholesale value of tea has grown from $2 billion to $10 billion over the last 20 years. There are some 4,000 specialty tea rooms and retail stores. Less than a year ago, Starbucks bought Teavana with its 100 teas and retail shops.

Bob Goldin, executive Vice President of Technomic, a leading food service industry research and consulting firm, says it was a smart decision. "Tea consumption globally is actually far larger than coffee," he notes, "so I think they see this as another opportunity to capture the away-from-home-beverage market, and do for tea what they have done for coffee."

I ask Charlie Cain, a vice president at Starbucks, if this move will destroy the independent tea store. Absolutely the contrary, he contends.

"In 1991 there were 1,600 coffee shops," he says. "By 2005, there were 14,000 independent coffee shops ... we think the same thing is possible for tea."

But it's a little more complicated. Austin Hodge owns Seven Cups of Tea in Tucson, Ariz., which specializes in Chinese teas. Last year, it was named by Travel + Leisure magazine one of the best places to have tea.

Hodge says Starbucks' decision will change the world tea industry. It will be good for Seven Cups, he says, "because we can compete with Starbucks and Teavana when it comes to quality, so we are in a good position." But he says, "for smaller companies that are selling the same level of tea that Starbucks is selling it's going to be a tough time."

Burrows, of Starbucks, says he hopes people will come to the Manhattan store to find a mellow moment, but on the first morning, that's a tall order. "It's a little noisier than I expected," says Jana King. "The article I read said it was going to be a zen-like experience. "

But when I go back a few days later, it is quieter, maybe not zen-like, but closer. Of course, I wonder, will the $1 cup of tea, which you can still find on the streets of New York City, go the way of the $1 cup of coffee?

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