Unilever is contemplating selling its tea division as revenues decline.
In response to slowed sales growth, Unilever P.L.C. is reviewing its global tea business, which includes the Lipton and PG Tips brands.
During a Jan. 30 conference call, Unilever CEO Alan W. Jope informed analysts that the company will explore “all options” for the business, including a full or partial sale. The evaluation will cover all areas and segments of the company, including emerging markets and the premium category, which consists of the Tazo, Pukka Herbs, and T2 brands.
The evaluation was brought about by a shift in consumer preference toward herbal tea and a decline in sales of conventional black tea in developed markets. The bulk of Unilever’s worldwide tea division’s inventory is black tea.
Mr. Jope stated, “The harsh reality is that core black tea, which is declining, remains two-thirds of our tea business.” “This trend has truly been observed in action. This is a long-term trend that has been going on for more than ten years. We just don’t see it happening, despite our best efforts to bring the core black tea back to growth.
For $384 million, Unilever purchased the Tazo brand from Starbucks Corp. in 2017. In an attempt to increase its presence, the business had earlier that year paid an undisclosed amount to acquire Pukka Herbs Ltd.in the herbal, fruit and green tea segment.
The hot tea market in the United Kingdom has lost momentum in recent years, as British consumers opt for coffee instead, said Arian Bassari, consumer analyst at GlobalData, a London-based market research firm.
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The hot tea market in the United Kingdom has lost momentum in recent years, as British consumers opt for coffee instead, said Arian Bassari, consumer analyst at GlobalData, a London-based market research firm.
The sale of PG Tips by Unilever would not be surprising, according to Mr. Bassari, considering the negative increase in U.K. hot tea sales between 2016 and 2019. Notwithstanding the United Kingdom’s long-standing (and occasionally compulsive) habit of drinking tea, this will lead to a decrease in volume consumption of 7.8 billion liters.
“Younger consumers are choosing coffee as a much-needed energy boost to power their hectic lifestyles because they are time-pressed and constantly on the go. Although tea will always be a popular beverage in the nation, younger consumers find that coffee appeals to them more than tea does.
There are other caffeinated products available in the UK coffee market that Unilever may profit from, including cold brews, nitro-infused brews, and decorative coffee.lattes and seasonal drinks.”