Unilever to review global tea business as sales growth slows

Unilever has launched a strategic review of its tea business, including the PG Tips and Lipton brands, as Chief Executive Alan Jope looks to boost group sales that grew at their slowest in a decade in the past quarter.

The company said the review was triggered by slowing sales of traditional black tea in developed markets as consumers shift toward herbal tea. Black tea is the dominant part of Unilever’s tea business, said finance chief Graeme Pitkethly, selling in 60 countries and generating 3 billion euros ($3.3 billion) in annual sales.

“We will look at all options for the business,” Pitkethly said, adding that this could include a partial or full sale.

Thursday’s results announcement cap a tough year for a group that has registered stuttering growth in India and China, two of its biggest emerging markets, and intense competition in North America and Europe, drawing investor scrutiny of strategy under Jope.

Six months after taking the helm in January last year Jope announced his attention to target sustainability rather than topline growth. The CEO said he would streamline Unilever’s vast portfolio by focusing on what he described as “brands with purpose”, adding that these were its fastest-growing assets.

The so-called brands with purpose, including Dove, Knorr and Persil, contributed almost two thirds of revenue and drove 75 percent of sales growth in the first half of 2019, the company said. Among those that don’t cut it Jope has identified Marmite, Magnum Ice Cream and Pot Noodle.

But there have been no disposals as yet, though rivals Nestle and ABInBev have each sold food operations worth billions of dollars over the past year to refocus on their core businesses.

“We are pleased to see some progress on the disposals strategy,” Liberum analyst Anubhav Malhotra said of the review of the tea business.