Unilever ponders tea disposal

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In a sign of Unilever’s increasing resolve to refocus its portfolio to concentrate on areas of growth under its new leadership, it is reviewing strategic options for its tea business, which includes the PG Tips and Lipton brands.

Sources claim that Unilever’s management as been openly discussing the possibility of selling the tea business with major shareholders, although it is not thought that any firm decision has yet been taken or that any adviser has yet been hired to handle the sale.

Initial reaction has been to say that such a move has credibility although it is feared that the number of potentials buyers may be limited. Analysts note at Alan Jope, who became chief executive a the start of the year, has talked of jettisoning “brands that have no purpose” and that the mass-market end of the tea market is steadily declining in the face of a move by consumer towards the premium end of the tea and coffee market and towards healthier drinks.

It is too early to ascribe a sale value to the operation and analysts warn that it is difficult to see a long queue of buyers developing as although the business is a strong cash generator, the long term visibility of revenues has deteriorated. The most frequently mentioned candidate to buy the business is Pepsi, which bought Costa coffee in August 2018 and has a joint venture agreement with Unilever over the Lipton brand.

There has been periodic speculation that Unilever will look to sell off a number of legacy foods brands or even exit the food business altogether to focus on its household and personal care portfolio. But there is no suggestion in the current report that such a radical step is imminent and Unilever declines to comment.

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