Unilever launches review of tea business

British-Dutch consumer giant Unilever said Thursday it is reviewing its global tea business including Lipton and PG Tips after sales went off the boil, while eyeing the “unknown” impact of the new coronavirus outbreak.

Sales of black tea, source of the humble cuppa, have dipped in the developed world as consumers instead lap up fruit and herbal teas, the firm said as it released its annual results.

Chief executive Alan Jope, marking a year at the helm of the company, said Unilever had launched a “strategic review of our global tea business”, adding that “all options remain on the table” including a possible sale.

“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,” Jope said in a call with investors.

Unilever says it is the world’s biggest tea company with brands that also include Brooke Bond, Bushells and the premium brand Pukka, which it said was “performing well”.

“The harsh reality is that two-thirds of our business remains core black tea which is declining. It’s not a short-term thing it’s a long term trend, over a decade,” said Jope.

“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.”

Asked if some of the tea business could be sold, Jope replied: “This strategic review means we want to investigate how we can best create value for stakeholders, we have not reached a conclusion, all options remain on the table.”

The firm, whose products also include Ben and Jerry’s ice cream and yeast spread Marmite, reported a 38.4 percent slump in profits to six billion euros in 2019 after a disappointing fourth quarter, although profits for 2018 had however been boosted by the sale of its spreads business.

The company said there had been a “significant slowdown during 2019 in South Asia” and “some market softening” in China.

“The impact of the coronavirus outbreak is unknown at this time,” the Unilever statement said.

The novel coronavirus which first emerged in the Chinese city of Wuhan has so far claimed 170 lives while more than 7,000 people have been infected, according to Chinese authorities.

In food, the firm said it was also pushing plant-based and vegan options including for Magnum ice cream, Knorr foods and Hellmann’s mayonnaise.

Unilever also forecast that sales growth for 2020 would be in the “lower-half” of its multi-year projection of between three and five percent, falling further below that for the first half of the year.