In developed markets, tea trends have been moving ‘dramatically’ away from traditional black tea and towards herbal teas and infusions, notes the company.
Unilever CEO Alan Jupe says the company has done a lot of work in its €2.9bn ($3.2bn USD) tea portfolio (for example the acquisition of premium organic herbal tea business Pukka Herbs in 2017) but the ‘harsh reality’ remains that its core tea business is in the declining black tea sector.
Unilever’s tea brands include PG Tips, Lipton*, Pukka Herbs, specialty Australian tea shop chain T2 and Pure Leaf*.
Tea: differing fortunes
Unilever – whose sales span food, beauty and personal care and home care – saw underlying sales growth rise 2.9% in 2019 with 1.2% underlying volume growth. In foods and refreshment underlying sales grew 1.5% with volumes down 0.2%.
While it hasn’t provided a breakdown of how the tea category fared, it notes a division between the fortunes of the various tea categories. The growing segments include premium black tea, black tea in emerging markets and fruit and herbal variants, and premium herbal tea brand Pukka. Unilever’s Indian tea business also continued to see ‘strong growth’ in 2019.
Black tea in developed markets, however, has seen volumes decline due to subdued consumer demand.
The review, however, will cover its entire tea business: including premium teas. But the company says no decisions have been made and all options remain on the table.
Unrealised value in tea?
Alan Jope, CEO, Unilever, says the review will see if there are ways to unlock value in the tea business: such as different ways of organising business partnerships or ownership structures.
“In the tea market - and you're really talking here about consumer trends - there's a really quite dramatic shift from black tea to initially green tea and now we're seeing more and more herbal teas and infusions," he said, speaking in the company's earning's call.
“And we've done a lot of work to add that leg to the portfolio, both inorganically within the brands that we had, but also by building in some new brands that we've acquired.
“But the harsh reality is that two-thirds of our tea business remains core black tea, which is declining. And we have really seen this trend play out - it's not a short-term thing, it's a long-term trend, over a decade. We've had a lot of good effort at getting the core black tea back to growth, but we just don't see it happening.”
* Unilever offers Lipton and Pure Leaf as tea bags. Lipton and Pure Leaf RTD varieties come under a Unilever/PepsiCo joint venture, Pepsi Lipton International.
