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Manhattan to get first Teavana tea bar since Starbucks deal

By Atossa Araxia Abrahamian and Lisa Baertlein

NEW YORK (Reuters) - Coffee pot, meet tea kettle.

Starbucks Corp, which has doubled down on its tea bet, is opening its first Teavana tea bar in New York City this week, aiming to do for tea, the world's second most popular beverage after water, what it has done for coffee.

"This is not your mother's Lipton tea, just as Starbucks wasn't Folgers. The difference between the quality of tea at Teavana is the difference between fresh squeezed juice and concentrate," Starbucks Chief Executive Howard Schultz said on Wednesday at a press preview at the new store on Manhattan's Upper East Side.

According to The Tea Association of the USA, tea is the most widely consumed beverage in the world next to water. But while tea is the more popular beverage, coffee is king when it comes to sales.

Global coffee retail sales were $75.7 billion in 2012 versus $40.7 billion for tea, according to market research firm Euromonitor International. Still, Starbucks said it sees tea as a $90 billion market opportunity.

Seattle-based Starbucks' $620 million purchase of tea store chain Teavana Holdings Inc last year was its largest acquisition to date.

Starbucks' Manhattan Teavana store is due to open on Thursday, and aspires to have a "zen-like" atmosphere fragrant with spices. The shop will also sell food such as chocolate brioche.

Schultz said the average purchase per customer at Teavana stores is higher than at Starbucks, where consumers typically spend $5 per visit.

The company is not concerned that Teavana will cannibalize Starbucks business because "most people who are tea drinkers are not crossing over to coffee," said Schultz.

The new tea bar's competitors include Chicago-based Argo Tea, which has cafes in U.S. cities as well as Beirut, Abu Dhabi, Doha, Dubai and Kuwait City.

When it was bought by Starbucks, Teavana had about 300 stores in the United States, Mexico, Canada and Kuwait that sold loose-leaf, exotic teas.

Starbucks said it would decide later whether to add tea bars to existing Teavana stores. Schultz said the company would likely add overseas locations while it expanded its U.S. business.

"Some of the highest volume stores are in the Middle East," Schulz said.

Tea is not new territory for Starbucks. It bought Tazo tea for $8.1 million in 1999 and built it into a billion-dollar brand through sales at Starbucks stores and grocery stores.

The company opened a Tazo tea store in Seattle last year and plans to convert it to a Teavana location that will open in mid-November.

Starbucks also has opened four Evolution Fresh juice bars since its $30 million purchase of the juice maker in 2011.

Lipton is owned by Unilever PLC and Folgers is owned by J.M. Smucker Co.

(Reporting by Atossa Araxia Abrahamian and Lisa Baertlein; Editing by Steve Orlofsky and Jeffrey Benkoe)

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