By Tripp Mickle and Julie Jargon 

Anheuser-Busch InBev NV and Starbucks Corp. have reached an agreement that will see the brewer produce, bottle and distribute Starbucks ready-to-drink tea in the U.S.

The Belgium-based brewer will manufacture and market Starbucks's Teavana. Beginning in 2017, the brewer's distribution network will sell Teavana to convenience stores and supermarkets across the U.S.

The move will help Starbucks broaden its reach beyond coffee, a push the company has been making in recent years to find new avenues of growth. Ready-to-drink tea is one of the fastest-growing beverage categories in the U.S., with consumption rising by 6.1% in 2015, according to data service Beverage Marketing Corp.

The agreement will help AB InBev's production and distribution network. Producing tea will help the brewer make use of capacity at its manufacturing plants at a time of declining beer volumes. Beer shipments have fallen 12% since 2008 to 94,100 million barrels, according to Beer Marketer's Insights. The tea also will help its distribution network, after its recently lost its nearly decadelong distribution agreement for Monster Energy.

"This arrangement will bring together the strengths of two great companies, each with a long history of successful brand-building," said AB InBev Chief Executive Carlos Brito in a statement.

Starbucks in 2012 bought Atlanta-based tea retailer Teavana Holdings Inc. for $620 million in cash, its biggest acquisition. Starbucks Chief Executive Howard Schultz at the time said his company would try to bring a Starbucks-like experience to Teavana, a mall retailer that sold most of its tea in loose-leaf form for home consumption. "We will do for tea what we did for coffee," Mr. Schultz told The Wall Street Journal at the time.

In a statement, Mr. Schultz said working with AB InBev would allow Starbucks to "unlock the premium ready-to-drink (tea) market and further grow demand for the Teavana brand."

Starbucks has increasingly been moving into supermarkets and convenience stores with packaged products in an effort to broaden its reach and reduce its reliance on its cafes, which also have begun selling more food and noncoffee beverages.

The Seattle-based company has relied on other manufacturers in the past to make and distribute certain products. The company introduced products in grocery stores in 1996 with its bottled Frappuccino drinks, made by PepsiCo Inc.

But it later learned that handing over control of a brand to an outside party doesn't always work. Starbucks took over sales of its bagged coffee business in supermarkets from Kraft Foods Inc. in 2011 after Starbucks alleged the food company was selling outdated packages and not securing enough shelf space. Kraft denied the allegations and in 2013, after it was renamed Mondelez International, was awarded $2.23 billion in damages from an arbitrator.

Mike Esterl contributed to this article.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Julie Jargon at julie.jargon@wsj.com

 

(END) Dow Jones Newswires

June 02, 2016 17:09 ET (21:09 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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