Unilever reviews tea business

By Michelle Perrett

- Last updated on GMT

Unilever reviews tea business

Related tags: Drinks

Unilever has launched a strategic review of its tea business after admitting “subdued consumer demand” for black tea.

Unilever CEO Alan Jope told Bloomberg that it was “too soon​” to say what that review might entail for the company, which owns brands such as Brooke Bond and PG Tips. 

He said that black tea was a “structural drag on Unilever growth​” and suggested the tea business “might​” be better managed in a different structure.

In its financial results, the company said that tea had generated price-led growth. However, volumes declined due to subdued consumer demand for black tea in developed markets.

Unilever added that the review was part of its strategy to “evolve our portfolio to higher growth spaces​”.

Its £3bn tea business also owns premium tea brand T2, the Australian business it purchased in 2013.

Unilever has expanded into the premium, fruit and herbal market in recent years. However, sales of traditional black tea, the largest segment of the category, have been in decline in developed markets for several years, due to changing consumer preferences.

The strategic review will consider all options for Unilever’s tea business and is expected to conclude by mid-year, it said.

It said: “We continued to focus on the growing segments of premium black tea, black tea in emerging markets and fruit and herbal variants, with our premium herbal brand Pukka performing well​.”

Meanwhile, Russ Mould, investment director at AJ Bell, said: “It is little wonder that Unilever’s tea brands are poised over the rubbish bin after their sluggish showing left a bitter aftertaste in its latest financial results​.

With sales of products like PG Tips and Lipton under pressure in developed markets, suggesting either a move away from the traditional cuppa or less attachment to specific brands in this market, Unilever has been focusing on items such as premium tea and fruit and herbal varieties​.”

The tea market both in home and out of home has come under pressure with the huge boom in coffee sales and increased premiumisation in the market.

Despite this, UK consumers drink approximately 100m cups daily, which is worth almost £36bn per year [Source: ITC].

The World Coffee Portal Allegra Project Tea UK 2019​ report, revealed that there had been significant growth in fruit, herbal and green tea compared to traditional black tea.

Twinings​ came out as the most popular out-of-home brand of consumers, followed by Yorkshire Tea​ and PG Tips​.

At the end of last year, Unilever refuted rumours​ it was planning to sell off its tea business. 

The tea industry has recently come under pressure to be more sustainable by taking the non-biodegradable polypropylene out of its tea bags. 

Last year,  Unilever removed all traces of the plastic from its PG Tips tea bags​ using material made from cornstarch. 

 

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