Starbucks CEO Howard Schultz Visits CNBC's FAST MONEY

Related: FAST MONEY, CNBC

Starbucks CEO Howard Schultz Visits CNBC's FAST MONEY

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Howard Schultz, Chairman and CEO of Starbucks, today on CNBC'S FAST MONEY.

MELISSA LEE: OK LETS GET TO THE BIG DEAL THAT WAS ANNOUNCED THIS AFTERNOON STARBUCKS ANNOUNCING IT WILL ACQUIRE TEAVANA IT IS AN ALL CASH DEAL THE ACQUISITION MAKES STARBUCKS THE WORLD'S SECOND LARGEST BEVERAGE COMPANY JOINING US ON THE FAST LINE IN A CNBC EXCLUSIVE FIRST ON FAST IS HOWARD SCHULTZ CHAIRMAN AND CEO OF STARBUCKS. HOWARD ITS ALWAYS GREAT TO SPEAK WITH YOU

HOWARD SCHULTZ: THANK YOU VERY MUCH

LEE: NOW THIS PURCHASE WAS A 53% PREMIUM TO YESTERDAY'S CLOSE AND I THINK A LOT OF SHAREHOLDERS WILL ASK YOU WHY THAT PREMIUM CONSIDERING TEAVANA'S SAME STORE SALES HAVE BEEN FALLING GROSS MARGINS HAVE BEEN STALLING AND THIS IS A COMPANY THAT'S GONE FROM A FORWARD PE OF 46 TO 15 NOW

SCHULTZ: WELL I THINK THE ISSUE IS NOT THE PREMIUM THE ISSUE IS THE LONG TERM OPPORTUNITY STARBUCKS IS BUYING INTO A 40 BILLION DOLLAR CATEGORY OF TEA THAT IS RIPE FOR INNOVATION AND WE BELIEVE THAT WE CAN DO FOR TEA WHAT WE HAVE DONE FOR COFFEE AND LET ME TRY AND EXPLAIN IT TEAVANA HAS 300 STORES THAT ARE MALL BASED THAT HAVE STUNNING UNIT ECONOMICS WITH SALES TO AN INVESTMENT RATIO OF 3 TO 1 THAT IS BEST OF CLASS INSIDE TEAVANA TODAY DESPITE HOW GOOD THOSE UNIT ECONOMICS ARE THEY DO NOT HAVE A BEVERAGE BUSINESS TO SPEAK OF WE THINK JUST LIKE IN THE MID 80S WHEN WE BROUGHT AN ESPRESSO BAR AND ROMANCE OF COFFEE INTO OUR STARBUCKS STORES WE CAN CREATE A VERY UNIQUE BEVERAGE OPPORTUNITY THAT WILL BUILD FREQUENCY AND LOYAL CUSTOMERS THAT'S ONE ISSUE SECOND THING IS WE STRONGLY BELIEVE WE CAN LEVERAGE THE EXISTING BEST OF CLASS REAL ESTATE ACQUISITION AND DESIGN CAPABILITY THAT STARBUCKS HAS TO BUILD URBAN NEIGHBORHOOD SITES FOR TEAVANA AROUND THE COUNTRY AND AROUND THE WORLD AND THIRDLY AND I THINK THIS IS REALLY IMPORTANT ON THE HEELS OF A RECORD Q4 AND RECORD YEAR FOR STARBUCKS IN TERMS OF THE STRENGTH OF OUR BUSINESS ONE OF THE UNDERLYING CAPABILITIES WE HAVE IS SOCIAL AND DIGITAL MEDIA THE STARBUCKS CARD AND LOYALTY PROGRAM AND THE STRONGEST MOBILE COMMERCE PAYMENT BUSINESS IN THE RETAIL INDUSTRY NOW WE WILL THREAD THOSE BENEFITS TO TEAVANA CONSUMERS IN WHICH TEAVANA CUSTOMERS WILL HAVE THE SAME SEAMLESS BENEFITS THAT STARBUCKS CUSTOMERS HAVE DRIVING AWARENESS AND TRIAL AND THEN LASTLY WE ARE IN 61 COUNTRIES AROUND THE WORLD THIS IS A 40 BILLION DOLLAR CATEGORY WE STRONGLY BELIEVE THAT WE CAN LEVERAGE OUR EXISTING PARTNERSHIPS AND CREATE TEAVANA STORES OUTSIDE NORTH AMERICA IRONICALLY TEAVANA IS KNOCKING THEM DEAD ALREADY IN THE MIDDLE EAST AND THE GULF WITH OUR SAME PARTNER THAT WE HAVE WHICH IS ALSHIA (SP?) SO ITS NOT ABOUT THE PREMIUM ITS ABOUT THE LONG TERM OPPORTUNITY TO SIGNIFICANTLY ACCELERATE AND GROW THIS BUSINESS AT A TIME WHEN WE ARE FIRING ON ALL CYLINDERS AS A COMPANY IN OUR CORE BUSINESS

LEE: SO HOWARD WHAT HAPPENS TO TAZO I KNOW THERE WERE SOME INTENT TO OPEN TAZO BARS WHAT HAPPENS TO THOSE PLANS AND IS THERE ANY RATIONALIZATION OF THE TEAVANA THOSE 300 OUTLETS IN TERMS OF REAL ESTATE?

SCHULTZ: WELL I THINK THE QUESTION ABOUT TAZO IS TAZO INSIDE STARBUCKS IS A BILLION DOLLAR BRAND AND WE BELIEVE THAT TEAVANA DOES NOT CURRENTLY HAVE A CPG BUSINESS, ANOTHER BIG OPPORTUNITY FOR STARBUCKS SINCE WE ARE ALREADY IN ABOUT 100,000 POINTS OF DISTRIBUTION IN NORTH AMERICA. OVER TIME WE WILL CREATE A TWO TIER STRATEGY IN WHICH TEAVANA AND TAZO WILL COEXIST IN TERMS OF CPG SO WE ARE ACQUIRING A 300 STORE MALL BASED BUSINESS THAT WE BELIEVE WE CAN CREATE NEIGHBORHOOD URBAN STORES THAT ARE ANALOGOUS TO WHAT WE HAVE DONE WITH STARBUCKS WE CAN CREATE A BEVERAGE BAR THAT WILL CREATE TRAFFIC AND INCREMENTALITY . WE WILL CREATE STARBUCKS BENEFITS ON TO TEAVANA AND OVER TIME CREATE A CPG BUSINESS THAT DOESN'T EXIST.

LEE: SO HOW BIG DO YOU THINK THAT TEAVANA CPG CONSUMER PRODUCTS BUSINESS COULD BE?

SCHULTZ: I COULDNT SAY TODAY BUT WE ARE BUYING A BUSINESS TODAY THAT IS IN ITS Early Stages WITH STUNNING UNIT ECONOMICS. AND ONCE IT IS POWERED BY STARBUCKS CAPABILITY WE ARE TALKING ABOUT A HUGE OPPORTUNITY DOMESTICALLY AND INTERNATIONALLY THAT WILL SERVE OUR SHAREHOLDERS WELL.

LEE: ARE YOU GOING TO KEEP ALL OF THOSE 300 TEAVANA STORES OPEN?

SCHULTZ: YES WE BELIEVE IN THE TEAVANA BRAND. THOSE STORES WILL STAY OPEN ABSOLUTELY. WITH UNIT ECONOMICS LIKE THAT WHY WOULD YOU CONSIDER CLOSING THEM

LEE: WELL IF THERE IS A STARBUCKS NEXT DOOR THEN MAYBE

SCHULTZ: THE STARBUCKS CUSTOMER AND THE TEAVANA CUSTOMER ARE TWO DIFFERENT CUSTOMERS TWO DIFFERENT NEEDS STATES THAT ARE HIGHLY COMPLIMENTARY. THE TWO WILL COMPLETELY COEXIST. THE TEAVANA STORE AND THE STARBUCKS STORE ARE NOT GOING TO BE ATTACHED OR LINKED TOGETHER.

LEE: OK HOWARD ALWAYS GREAT TO SPEAK WITH YOU. THANKS SO MUCH.




More On: Early Stages.

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