Unilever announced in January that it may sell the world’s largest portfolio of tea brands.
The company said its strategic review includes Lipton Yellow Label, PG Tips; American favorites TAZO and Pure Leaf, upstart Pukka Herbs and Australia’s T2. Tea in packages and bottles accounts for $3.2 billion of the $56.5 billion in annual revenue earned by the company. Unilever, a British-Dutch venture, owns more than 400 brands of which 13, including Lipton, generate more than $1 billion in annual sales.
Unilever c.e.o. Alan Jupe said the “harsh reality” is that black tea consumption in developed countries—the core of Unilever’s tea business is declining.
“Two-thirds of our tea business remains core black tea, which is declining. And we have really seen this trend play out – 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,” he told analysts during the company’s quarterly earnings call.
Jupe said no decisions have been made but cited long-term consumer trends.
“There’s a really quite dramatic shift from black tea to initially green tea and now we’re seeking more and more herbal teas and infusions,” said Jupe. Sales of the company’s food and refreshment beverages grew 1.5% on lower volumes. Jupe, a Scottish businessman, succeeded Paul Polman as c.e.o. in January 2019.
Tea remains a growth category globally with projections to $73 billion by 2024, but sales growth in the packaged segment in developing countries. Jupe noted that growth rates and overall sales of Unilever’s “Red Label” Brooke Bond brand remains strong in India.
The category is highly fragmented. PepsiCo may see the sale as a good way to broaden its portfolio as soda sales continue to stagnate. Twinings parent Associated British Foods is another possible buyer.