Unilever has launched a strategic review of its tea business, including the PG Tips and Lipton brands, as Chief Executive Alan Jope looks to boost group sales that grew at their slowest in a decade in the past quarter.
The company said the review was triggered by slowing sales of traditional black tea in developed markets as consumers shift towards herbal tea.
Black tea is the dominant part of Unilever’s tea business, said finance chief Graeme Pitkethly, selling in 60 countries and generating 3 billion euros (2.51 billion pounds) in annual sales.
“We will look at all options for the business,” Pitkethly said, adding that this could include a partial or full sale.
Thursday’s results announcement cap a tough year for a group that has registered stuttering growth in India and China, two of its biggest emerging markets, and intense competition in North America and Europe, drawing investor scrutiny of strategy under Jope.
Six months after taking the helm in January last year Jope announced his attention to target sustainability rather than topline growth. The CEO said he would streamline Unilever’s vast portfolio by focusing on what he described as “brands with purpose”, adding that these were its fastest-growing assets.
The so-called brands with purpose, including Dove, Knorr and Persil, contributed almost two thirds of revenue and drove 75% of sales growth in the first half of 2019, the company said. Among those that don’t cut it Jope has identified Marmite, Magnum Ice Cream and Pot Noodle.
But there have been no disposals as yet, though rivals Nestle and ABInBev have each sold food operations worth billions of dollars over the past year to refocus on their core businesses.
“We are pleased to see some progress on the disposals strategy,” Liberum analyst Anubhav Malhotra said of the review of the tea business.
The maker of products as diverse as Dove soap and Ben & Jerry’s ice cream reported fourth-quarter underlying sales up 1.5%, against an average forecast of 1.4% growth in a company supplied poll of analysts. This was its slowest quarterly growth since at least 2009.
Reporting results from Jope’s first full year in charge, Unilever said annual turnover grew 2% while underlying sales gained 2.9%. Though turnover was in line with analysts’ estimates, underlying sales growth was slightly ahead.
On its long-term outlook the company said it would step up execution and improve brand awareness and availability while also accelerating innovation.
Shares in Unilever were up 1.4% at 44.99 pounds in early trade.
Unilever shares are up 11% over the past year, slightly outperforming the FTSE 100 index, which has been roiled in recent weeks by growing concerns over the potential economic damage from the coronavirus outbreak in China.
Unilever said the impact of the coronavirus outbreak on its business remains unknown at this time. China contributes 5% to Unilever’s total sales.
The Anglo-Dutch company said it expects a stronger second half in 2020, helping it to achieve full-year underlying sales growth in the lower half of a 3-5% range.
(Content and photos syndicated via Reuters)
