Today, Unilever, a fast moving consumer goods giant with Lipton tea, snow cream and home flavoring, released its second quarter financial report and gave the conclusion of its tea business evaluation.
It is worth noting that a considerable part of Unilever China’s tea business will be spun off, including Lipton tea bags. Now, let’s have a look.
Plan to divest most of the tea business
At the beginning of this year, Unilever confirmed that it had started to conduct a strategic assessment of its global tea business with an annual revenue of nearly 3 billion euros, including Lipton and PG tips.
At the performance meeting at the time, Alan jope, Unilever’s chief executive, also said that the final result of the assessment was not necessarily a total divestiture.
Alan jope, CEO of Unilever
Now, how Unilever operates on its tea business has finally been answered.
Unilever said today that the review provided a comprehensive assessment of the options and concluded that “we will retain the tea business in India and Indonesia, as well as the partnership interest in the tea joint venture to be ready to drink.”.
Unilever’s data show that as early as 1991, the company began to set up a joint venture with PepsiCo to operate Lipton instant tea. Subsequently, the two companies extended their cooperation to multiple markets, including China.
At today’s performance meeting for Wall Street analysts, Graeme pitkethly, Unilever’s chief financial officer, talked about why it retained the tea drinking joint venture with PepsiCo.
Pitkethly said the global instant tea market was almost twice the size of the global tea market, and the joint venture between Unilever and PepsiCo was “very successful.”.
“Unilever has brand and marketing experience, PepsiCo has expertise in bottling and distribution, and for a long time both groups have performed very well. This is also the main reason why we exclude it from the conclusion of the strategic review (divestiture) Pitkethly said.
As for other tea businesses that have not been named and retained, Unilever financial report said that it will start to divest at present, and the relevant work is expected to be completed by the end of 2021.
In other words, Unilever will divest most of its tea business. According to the financial report, the revenue of this tea business in 2019 will be 2 billion euro. That is about two-thirds of the company’s tea business revenue last year.
&Nbsp; “the remaining Unilever tea brands, regional operations and all tea plantations have exciting prospects and will maximize their potential in the operation as an independent entity.” The company said.
As for the “whereabouts” of the divested tea business, the financial times speculated today that the business may be split into a new group by the end of next year, laying the foundation for the sale or listing.
If Unilever finally chooses to sell the tea business as a whole, it may change the pattern of the global tea market.
According to Euromonitor information consulting data quoted by nikkei.com, the global sales of tea reached 45.4 billion US dollars in 2018. Among them, Unilever ranks first among the global tea companies with a share of 10.6%, which even exceeds the total shares of the second to fifth ranked companies.
Tea business in China
As the world’s largest tea company, why should Unilever divest most of its business? Behind this is the slowdown in the growth of its core categories and the decline in tea consumption demand.
At the performance meeting at the beginning of this year, Qiao Anlu mentioned that two thirds of Unilever’s tea business is black tea, but the growth of this category has slowed down for a long time, which has affected Unilever’s growth and profits.
In fact, slower growth is not just a challenge for Unilever. In a report on the company’s tea business earlier this month, Mr. Peng said that in some markets, although tea was associated with health trends, demand for tea had declined as consumers switched to handmade coffee in recent years.
So, what is the impact of the upcoming divestiture on United China’s tea business? In this regard, xiaoshidai sent an inquiry to Unilever China today, but as of the time of publication, no reply was received.
The representative noted that Unilever announced today that it would completely retain its tea business in areas other than the Chinese market. This means that China’s tea business is also within the scope of divestiture, but the Lipton instant tea cooperation with PepsiCo will not be affected.
In the Chinese market, Unilever’s tea brands include Lipton and pukka, a British organic herbal tea brand newly introduced last year.
After entering the Chinese market for many years, Lipton has developed many kinds of products. As introduced by the snack agent, Lipton’s products in China include Lipton yellow brand (including the most well-known bag black tea), Lipton Chinese tea, Lipton chezai tea, etc., as well as seasoned tea, fruit tea and herbal tea products, as well as a series of solid beverage products, including Lipton milk tea and even latte.
In addition, Lipton has established its own factories in China. According to the data, Lipton announced in 2005 the establishment of a tea packaging plant in Hefei, Anhui Province, and said that “the factory will become one of the largest tea production plants in the world”.
Later, Lipton also increased the number of Chinese tea business. After searching the public information, the snack agent found that in 2016, the United Riverton tea production base project was signed and started. The total investment of the project is 200 million yuan. By 2018, Unilever has also established a joint innovation center for tea business in Zunyi.
Second quarter results
After looking at the latest development of Unilever’s tea business, let’s learn about the second quarter report card of this FMCG.
Let’s first look at the performance of the Chinese market. Unilever said the Chinese market was its first market to be affected by the epidemic. In terms of performance, Unilever China recorded a median double-digit decline in the first quarter, but recovered to a median growth in the second quarter.
“The severity of the blockade measures introduced in the first half of the year varies in our markets, with some of them having a greater impact on the supply and purchase of goods, particularly in India and China,” the company said
Overall, Unilever’s basic sales fell 0.1% in the first half of the year. Among them, the basic sales of food and beverage business decreased by 1.7%, of which the sales volume led to a decline of 2.5%, while the price factor led to a growth of 0.8%.
Under the food and beverage sector, the parts that rely on outdoor scenes are more affected by the epidemic.
Unilever’s sales of outdoor ice cream fell nearly 30% due to the closure of outdoor consumption channels in most of the world’s markets and the reduction of people’s travel, according to Unilever’s financial report. In addition, Unilever’s catering service sales fell by about 40% due to the suspension of hotels, restaurants, cafes and bars.
Over the same period, businesses related to intra household consumption recorded high growth. The company said that its retail food business achieved double-digit growth, driven by the strong performance of Carrefour and haolemen.
In the first half of the year, Unilever’s home consumption of ice cream sales also increased by 15%, of which the growth in the second quarter rose to 26%, greatly offsetting the decline in sales through outdoor consumption channels. Menglong and Ben and Jerry’s brands continued to grow strongly.
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