PG Tips could be put up for sale as consumers go cold on the cuppa
Owner Unilever said sales of traditional black tea have been declining in developed markets due to changing tastes.
Thursday 30 January 2020 17:10, UK
PG Tips could be sold by its owner Unilever as consumers go cold on traditional black tea and switch to herbal brews.
The consumer goods giant has announced a strategic review of its global tea business, with brands including Lipton, Brooke Bond and Lyons.
Unilever said the division, the biggest tea business in the world, had expanded into premium, fruit and herbal markets in recent years.
"However, sales of traditional black tea, the largest segment of the category, have been in decline in developed markets for several years due to changing consumer preferences," the company said.
It said the strategic review would "consider all options" - which could include a sale of all or parts of the tea business - and was expected to conclude by the middle of the year.
Despite changes in consumer tastes, black tea remains the dominant part of its tea business, selling in 60 countries and generating €3bn (£2.5bn) in annual sales.
The announcement came as Unilever reported full-year and fourth quarter results, showing underlying sales growth of just 1.5% in the final quarter of 2019.
That was slightly better than expected but still the worst quarterly growth since at least 2009 for the group - whose diverse range of brands include Dove soap, Ben & Jerry's ice cream, and Marmite.
The results showed tea saw higher sales in value terms because of price rises but declining volumes due to "subdued" demand for black tea in its biggest markets.
Russ Mould, investment director at AJ Bell, said: "It is little wonder that Unilever's tea brands are poised over the rubbish bin after their sluggish showing left a bitter aftertaste in its latest financial results.
"With sales of products like PG Tips and Lipton under pressure in developed markets, suggesting either a move away from the traditional cuppa or less attachment to specific brands in this market, Unilever has been focusing on items such as premium tea and fruit and herbal varieties.
"However, it appears more drastic action might be required.
"The decision to launch a strategic review of its tea business reflects an attempt under CEO Alan Jope to reposition the company towards areas of higher potential, after a period in which growth has been harder to come by."
The review of the tea business comes after sold its spreads division - including Flora and I Can't Believe It's Not Butter - to buyout giant KKR, for £6bn in 2018.
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