Starbucks' Sweet Surprise

Starbucks' (Nasdaq: SBUX  ) sweet deal with Hershey (NYSE: HSY  ) is finally coming to fruition, with products slated for a store near you, but given recent events, the product launch seems a bit more interesting.

The Starbucks-branded confections will include some unexpected flavors. The chocolates will incorporate not only coffee flavorings, but also tea flavors, using Starbucks' Tazo tea line. That's a twist many of us might not have expected. I know I didn't.

Starbucks chocolate will be available in grocery stores, mass retailers, drugstores, and club stores, at price points starting at $2.99. (The chocolates will not be making a debut in Starbucks stores themselves at this time.) They're made by Artisan Confections Co., which is a Hershey unit that also makes Joseph Schmidt, Scharffen Berger, and Dagoba organic chocolates.

In January, I noted that Hershey is in the midst of hard times, having been bitten by the high commodity prices that have squeezed many companies, including Starbucks. And when I first pondered Hershey's and Starbucks' new relationship last summer, I thought Hershey could really use a little more jazz in its product line (and I have to admit I was ignorant of Artisan Confections).

Although Artisan seems like a very promising business, since consumers seem to love options these days, it's interesting that its relationship to Hershey seems pretty well hidden on both its website as well as its parent's. Reese's may be known for getting peanut butter in somebody else's chocolate, but maybe Hershey knows its rep is for its iconic brands, and would prefer the Artisan wares to stand on their own.

It's an interesting collaboration, but given some of the recent rumblings coming out of Starbucks, you've kind of got to wonder. After all, Howard Schultz seems to be serious about keeping the coffeehouse pristine. He's even getting rid of breakfast sandwiches (last quarter, he said they stink up the joint). Meanwhile, it didn't go well the last time Starbucks messed with chocolate (remember the fate of Chantico). Hopefully there's no curse of the cocoa bean.

Of course, these chocolates do integrate coffee (and Tazo tea) flavoring and won't even show up in the coffeehouses themselves, so what harm can they do? Plus, the chocolates do sound like a high-end offering with chocolate craftsmanship. With any luck, they will help bolster the high-end, affordable luxury element of the Starbucks brand, and not end up being a bittersweet endeavor.

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10/20/2016 4:00 PM
SBUX $53.59 Up +0.44 +0.83%
Starbucks CAPS Rating: ****
HSY $95.12 Down -0.51 -0.53%
The Hershey Compan… CAPS Rating: ***