Drop in tea consumption could prompt sale of Unilever’s business

The world’s biggest tea company could be about to sell some of its best known brands due to a drop in tea consumption.

Consumer goods giant Unilever, which owns Australian tea company T2, Lipton, PG Tips and Bushells, to name a few, announced a strategic review of its tea business at its full year results on Thursday.

Despite expanding into premium, fruit and herbal teas, a drop in sales of traditional black tea in recent years prompted the review.

“Unilever has a long-established position as the biggest tea business in the world … 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 company said in a statement.

Tea saw price-led growth, but volumes declined due to subdued consumer demand. Unilever CEO Alan Jope said the review company was continually evaluating its portfolio.

Unilever acquired T2 in 2013, 17 years after Maryanne Shearer and Jan O’Connor first founded the premium tea business.

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

Overall growth slightly below guidance

Despite underlying sales growth of 2.9 per cent in 2019, Unilever’s overall growth was below the guided range for the year due to a “slowdown in the fourth quarter”.

Strong growth in emerging markets and Home Care were the key highlights for the FMCG giant.

In 2020, underlying sales growth is expected to be in “the lower half of the multi-year 3-5 per cent range”.

“We are now stepping up execution against our fundamental drivers of growth,” Jope said.

“While we expect an improvement from the fourth quarter of 2019 into the first half of 2020, first half underlying sales growth will be below 3 per cent. The impact of the coronavirus outbreak is unknown at this time.”

Unilever is nearing the completion of its three-year strategic plan and expects “continued improvement” in underlying operating margin.

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