Unilever to divest most of its tea business but keep parts of Lipton brand

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Unilever has announced plans to spin off most of its Lipton tea business while retaining parts of it that are doing well.

Unilever executives announced the plan, which was the result of a six-month review. Unilever plans to spin off most of its loose-leaf tea business, but retain it in India and Indonesia, as well as retain its ready-to-drink tea joint ventures with PepsiCo.

The partnership between the two companies has PepsiCo focus on Lipton’s ready-to-drink beverages while Unilever handles the leaf tea. Each company owns a 50% stake.

The rest of the tea portfolio will be spun off into a separate independent entity.

Unilever to divest most of its tea business but keep parts of Lipton brand

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The tea business that will be separated generated revenues of €2 billion in 2019. This was made in notification shared on the Nigerian Stock Exchange for and on behalf of the Board of Unilever Nigeria Plc.

The leaf tea business, in general, has been struggling, losing market share to coffee and to herbal tea. Spinning off the business puts Unilever in a position to sell it, possibly with a licensing-back deal.

Strategic review of tea

In January, Unilever announced a strategic review of the global tea business, which includes leading brands such as Lipton, Brooke Bond and PG Tips.

“The balance of Unilever’s tea brands and geographies and all of our tea estates have a very exciting future, but this potential can be best achieved we believe as a separate entity, and a process will now begin to achieve this separation, which is expected to conclude by the end of 2021,” CEO Alan Jope.

A statement from CEO Alan Jope

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“Performance during the first half has shown the true strength of Unilever. We have demonstrated the resilience of the business – in our portfolio, in a continued step-up in operational excellence, and in our financial position – and we have unlocked new levels of agility in responding to unprecedented fluctuations in demand.

We have also taken action to strengthen the strategic future of the company by announcing proposals to unify our dual-headed legal structure, progressing the strategic review of our global tea business and making new commitments to help protect the climate and regenerate nature.

From the start of the Covid-19 crisis, we have been guided by clear priorities in line with our multi-stakeholder business model to protect our people, safeguard supply, respond to new patterns of consumer demand, preserve cash and support our communities.

Our focus for the rest of 2020 will continue to be volume led to competitive growth, absolute profit and cash delivery, as this is the best way to maximise shareholder value.

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I would like to thank every member of the Unilever team for the outstanding commitment they have shown in the most difficult of circumstances.”

Overall performance

Unilever announced its results for the first half of 2020, which show that overall underlying sales declined 0.1%, with developed markets up 2.4% and emerging markets down 1.9%.

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The company reported that the underlying sales declined 0.1% with volumes declining 0.3% and price growth of 0.2% while Developed markets grew 2.4% whilst emerging markets declined 1.9%.

Unilever’s turnover decreased 1.6% including a positive impact of 1.1% from acquisitions net of disposals and negative impact of 2.5% from currency

Home Care underlying sales grew 3.2%, with 2.9% from volume and positive pricing of 0.3%. The Foods & Refreshment segment underlying sales declined 1.7%, with volumes down 2.5% and positive pricing of 0.8%.

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How about Unilever Nigeria?

According to the information contained in its 2020 half-year report, Unilever Nigeria suffered a revenue loss of 40% for the three months period ended June 2020 The company reported a revenue of N14 billion between April and June 2020 compared to N23.4 billion for the same period in 2019.

The drop in revenues negatively impacted its half-year 2020 results when compared to the same period last year. For the first half this year (January to June 2020) Unilever reported N27.3 billion compared to N42.6 billion same period last year. The drop in revenue threw the company into a loss per share of 9 kobo compared to 61 kobo same period in 2021.

Recent acquisitions

During the second quarter, we completed the acquisitions of the health food drinks portfolio of GlaxoSmithKline in India, Bangladesh and 20 other predominantly Asian markets. Acquiring the iconic brands Horlicks and Boost are in line with Unilever’s strategy to enhance its presence in healthy nutrition.

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Unilever to divest most of its tea business but keep parts of Lipton brand - Brand SpurUnilever to divest most of its tea business but keep parts of Lipton brand - Brand Spur

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Unilever to divest most of its tea business but keep parts of Lipton brand - Brand SpurUnilever to divest most of its tea business but keep parts of Lipton brand - Brand Spur

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