Unilever’s tea business under review amid “subdued” demand for black tea in developed markets

30 Jan 2020 --- Under Unilever’s strategy to “evolve” its portfolio to higher growth spaces, the British-Dutch food giant has announced a strategic review of its global tea business. These include long-established brands such as Lipton, Brooke Bond and PG Tips. In its financial report for the full-year 2019, the company highlights that tea saw price-led growth, however volumes declined due to subdued consumer demand for black tea in developed markets. The strategic review will consider all options for Unilever’s tea business and is expected to conclude by mid-year.

“We are continuing to evaluate our portfolio and have initiated a strategic review of our global tea business. We are now stepping up execution against our fundamental drivers of growth. These are to increase penetration by improving brand awareness and availability; implement a more impactful innovation program; improve our performance in faster growing channels; drive purpose into all our brands; and fuel growth through cost savings,” says Alan Jope, CEO of Unilever.

Unilever has expanded into the premium, fruit and herbal tea market in recent years.Unilever has a long-established position as the biggest tea business in the world. The company has expanded into the premium, fruit and herbal market in recent years. Unilever continues to focus on the growing segments of premium black tea in emerging markets and fruit and herbal variants, with its premium herbal brand Pukka noted to be performing well.

“In 2020, our underlying sales growth is expected to be in the lower half of the multi-year 3 to 5 percent range and will be second-half weighted. While we expect an improvement from the fourth quarter of 2019 into the first half of 2020, the first half underlying sales growth will be below 3 percent,” explains Jope.

Commenting on the impact of China’s recent viral outbreak, Jope adds, “The impact of the coronavirus outbreak is unknown at this time. As we near the completion of our three-year strategic plan, we expect continued improvement in underlying operating margin and another year of strong free cash flow, remaining on track for our 2020 goals.”

Developments in food and beverage categories
Underlying sales in Unilever’s Foods and Refreshment category saw growth of 1.5 percent, with volumes down 0.2 percent and pricing of 1.7 percent. The group’s ice cream business grew, despite recording a decline in volumes due to a strong comparator from a “particularly good European summer” last year. Growth was further supported by plant-based and “better-for-you” offerings, including Magnum Vegan and Ben & Jerry’s low-calorie Moophoria variants.

In dressings, Unilever’s Hellmann’s brand grew, with the US business returning to growth in the second half of the year. The Hellmann’s vegan mayonnaise variant is now on shelves in over 20 countries while Sir Kensington’s premium ranges of mayonnaise and salad dressings have now more than doubled in size since the acquisition.

Price-led growth in Unilever’s savory products was supported by Knorr’s portfolio in scratch cooking and the launch of snacking ranges, which address the convenience trend. Knorr launched the Future 50 Foods report in partnership with the WWF, highlighting the next generation of plant-based foods that can boost nutritional value while reducing environmental impact. Also, newly-acquired brand The Vegetarian Butcher entered a partnership with Burger King to offer the Rebel Whopper across 25 countries in Europe.

In other significant developments last year, Unilever invested €85 million (US$94 million) in a new Foods Innovation Centre at the Wageningen University & Research (WUR) campus in the Netherlands. The facility, dubbed “Hive” for its location among the nation’s leading academic research centers, start-ups and external partners, is where the company will lead its international food innovation programs for brands such as Knorr, Hellmann’s, The Vegetarian Butcher and Calvé.

By Benjamin Ferrer

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