Feb 1, 2020
Unilever is conducting a “strategic review” of its global tea business that could include sale. The tea division, which includes the popular Lipton brand, generates annual sales of about $3.3 billion, according to The Wall Street Journal.
The review comes as consumers opt for more herbal varieties and make less black tea, which accounts for two thirds of CPG giant’s tea segment.
According to Unilever, the trend is fading and it’s not a short-term thing. It’s a long-term trend over a decade.
Allied Market Research estimated the global tea market size was valued at $52.1 billion in 2018 and is estimated to reach $81.6 billion by 2026, a compound annual growth rate of 5.8%. Growth in demand for herbal tea and introduction of new flavor and variety of tea is anticipated to provide growth opportunities for the tea market.
Unilever has tried to increase its presence in faster-growing categories within tea, highlighted by its 2017 purchase of organic herbal tea maker Pukka Herbs and the acquisition of Tazo Tea from Starbucks for nearly $400 million that same year. Four years earlier it also snapped up premium tea maker T2, known for its African Rooibos and Honeybush Tea as well as Organic Turmeric Ginger Ninja Loose Leaf Tea.
All of that premiumization activity still is not able to make a difference because of the size of the black tea category for Unilever.
Tea remains one of the most popular beverages in the world due to a number of health benefits, including potent antioxidants, the potential to reduce cell damage or lower cholesterol levels. But consumers, especially younger generations, are looking for even more flavors and increasingly turning to options like botanicals.
Whether or not Unilever decides to sell all of its tea business, a portion or retain it, the fact that it is considering a move after denying that any such move was in the works, could signify that the European company believes further declines in the segment will continue and it’s unwilling to invest the time or capital to turn it around.