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Unilever brews a strategic review for tea business
Posted on Thursday, 30 January 2020 11:27
Unilever announced its full year results earlier today and said it was reviewing a range of alternatives for its global tea operations, two months after denying media reports that the Anglo-Dutch powerhouse was looking to sell this business.

The exploration of options is part of the group’s plan to evolve its portfolio to higher growth spaces.

Completion of the review, under which all potential outcomes will be considered, is expected in mid-2020.

The division comprises global brands Lipton, Brooke Bond and PG Tips and has recently expanded into premium, fruit and herbal products.

Unilever observed there has been a decline in the sales of traditional black tea in developed markets such as the UK for several years due to a change in consumer preferences.

Bloomberg cited trade publication the Gorcer as saying in the country there were almost 900.00 million fewer cups of tea drunk over the 12 months to May 2018 as people are switching to coffee and herbal alternatives.

The business being reviewed generates around EUR 3.00 billion of sales for Unilever.

In the year ended 31st December 2019, the company recorded turnover of EUR 51.98 billon, a slight improvement from EUR 50.98 billion in the previous 12 months.

Net profit declined 38.4 per cent to EUR 6.03 billion in 2019, compared to EUR 9.79 billion in 2018.

Two months ago, Unilever denied on the record that it was exploring a sale of the tea unit after media reports, including the Telegraph, suggested it was considering offloading it.

Shares in the consumer goods group rose 1.7 per cent to GBP 45.14 at 10:55 today, giving the group a market capitalisation of GBP 117.37 billion.

According to Zephyr, the M&A database published by Bureau van Dijk, there were 57 deals targeting coffee and tea manufacturers announced worldwide in 2019.

In the largest of these, China’s Xiangpiaopiao Food raised CNY 860.00 million (USD 123.96 million) through an issue of convertible bonds.

US-based Green Grass Foods, Japan’s Hikawa and South Korea-headquartered Mcnulty Korea, among others, were also targeted last year.

© Zephus Ltd