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Starbucks Expands Sparkling Drink Range With Teavana Iced Tea

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In a bid to capitalize on the growing demand for sparkling beverages, Starbucks Corporation (SBUX - Free Report) has launched Teavana Sparkling Craft Iced Tea — one of the first premium sparkling ready-to-drink iced tea drink.

Sparling Beverage enthusiasts can choose from two varieties — Blackberry Lime Green Tea and Unsweetened Peach Nectarine Green Tea. This product is the latest addition to the Teavana Craft Iced Tea portfolio which already consists of six sweetened and unsweetened still flavors. It will now be available in select Northeast and Midwest grocery stores and made available nationwide in 2019.

Sparkling Beverage Market Strong

The sparkling beverage market is growing as an increasing number of Americans are becoming health conscious and refraining from carbonated and sugary drinks. Starbucks has been gaining significantly from beverage innovation over the years. With this new product, Starbucks is likely to cash in on the growing demand.

According to IRI data, the sparkling water category revenues grew 16.1% over the course of a year. The sparkling water category surged 70% between 2011 and 2016 and is expected to touch $3.1 billion by 2022, according to Euromonitor. Per Beverage Market Corporation, per capita consumption of bottled water will cross 50 gallons in the next few years.

Therefore, expanding into the sparkling beverage space can prove to be beneficial for Starbucks. The company is focused on pursuing a single tea brand strategy. It also aims to put emphasis on its Teavana super-premium tea brand by making investments toward growth, innovation and development of Teavana brand teas in Starbucks stores.

Also, given the decelerating performance in the United States, introducing products in line with consumers’ preference is pertinent for driving revenues. The  Americas segment (accounting for 70% of total revenues) posted 3% comps growth in fiscal 2017, down from 6% growth in fiscal 2016. In the first six months of fiscal 2018, the segment delivered 2% comps growth, down from 3% in the year-ago period.

Price Performance

Starbucks’ shares have lost 6.3% in the past year, against the 4.3% rally of its industry. Moreover, this Zacks Rank #3 (Hold) stock’s fiscal 2018 earnings estimate revisions is not impressive, as it remained stable over the past 60 days.

Stocks to Consider

A few better-ranked stocks in the same space are BJ's Restaurants, Inc (BJRI - Free Report) , Dine Brands Global, Inc (DIN - Free Report) and Domino's Pizza Inc (DPZ - Free Report) . BJ's Restaurants sports a Zacks Rank #1 (Strong Buy), while the other two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ's Restaurants is expected to see 41.8% earnings growth for 2018.

Earnings for Dine Brands are expected to grow 23.1% in 2018.

Domino's Pizza’s 2018 earnings are projected to grow 55.2%.

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