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Unilever’s tea business: shedding and keeping the Lipton brand

Unilever plans to divest most of its tea business following a six-month review by placing them into a separate entity, the company said during a recent earnings call. The changes would see Unilever divesting the Lipton brand in some areas while retaining it in other markets.

Unilever announced in January it was conducting a “strategic review” of its global tea business. Now half a year later, the consumer products giant has finally reached a decision where the company is ready to divest much of the slow-growing business but keep the best parts.

As consumers have opted for more herbal varieties, black tea, which accounts for two thirds of the CPG giant’s tea segment, has fallen out of favour.

Unilever said it plans to keep its tea business in India and Indonesia, where its Lipton brand is popular, as well as the joint partnership in its ready-to-drink tea joint venture with PepsiCo.

The partnership between the two companies has PepsiCo focus on Lipton’s RTD beverages while Unilever handles the leaf tea. Each company owns a 50% stake. 

“Increase in trend of coffee consumption and fluctuating prices of raw materials caused by unpredictable climatic conditions act as the major restraint for this market,” the firm said.

“On the contrary, growth in demand for herbal tea and introduction of new flavour and variety of tea is anticipated to provide growth opportunities for the tea market.”

Allied Market Research estimates the global tea market size is valued at $55.1-billion in 2019 and could reach $69-billion by 2027, a compound annual growth rate of 6.6%.

Similar to Nestlé, Coca-Cola, PepsiCo and Kellogg, Unilever and other large food manufacturers have been boosting their portfolio with healthier and portable options while jettisoning brands that are slow growing

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