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Burned by TEA? Blame 'Efficient' Market, Not Starbucks (Update 1)

Establish a solid urban presence in affluent markets. Compare LULU's store location list to Teavana's.

LULU is in all of the big cities -- in the urban core. Manhattan. San Francisco. Seattle. Portland. Vancouver. The company saturates tony neighborhoods in these types of places with a unique atmosphere and relatively high-end, premium products. That should have been TEA's strategy from day one.

But they did the exact opposite.

Starbucks is already everywhere Teavana is. In malls and such, Starbucks locations might be able to drive additional traffic to the nearby Teavana store via cross promotion, but I can't see that approach making a major impact.

If Starbucks just makes changes to Teavana in the places where it presently situates itself, I am not on board.

Starbucks needs to make an urban push with Teavana. Bring it to the people like Lululemon does.

Starbucks only paid $620 million for Teavana. It could put a lot more money into shutting down the lowest-performing stores and replacing them with urban locations.

Just my initial thoughts.

I am an unabashed SBUX bull.

If anybody can make magic out of Teavana -- as it stands or as some new iteration -- Starbucks can. Howard Schultz and his team have earned the benefit of the doubt.

Either way, this is empire expansion at its finest. Nitpicking aside, it hardly changes my long-term opinion of the stock.

Update

During an afternoon conference call Wednesday, CEO Howard Schultz told analysts that Starbucks "will do for tea what it did for coffee" around the world. He also noted that he has no plans to slowdown expansion of Starbucks stores. Instead, it's all about growth.

He said, Starbucks will add tea bars to Teavana locations, while expanding to urban neighborhoods.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.
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