Alan Jope is sipping a cup of herbal tea. “A few years ago [this] would have been inconceivable,” said the 55-year-old Scottish chief executive of Unilever. “I hope my mates don’t see me.”
The conversion of Mr Jope, who calls himself a “long-term black tea drinker”, is a sign of a broader trend: across several wealthier countries, the traditional brew is falling out of favour. In the UK, US and Russia, retail sales volumes of black tea dropped by at least 10 per cent in the five years to 2019, according to Euromonitor.
As head of the world’s largest tea seller, Mr Jope is more concerned than most about the cooling market.
This week he announced a strategic review of Unilever’s tea division, which generated €2.9bn of sales last year. The move could result in a partial or total sale of the unit as the consumer goods company fights to accelerate growth.
As the maker of the Lipton and PG Tips brands, Unilever has suffered from declining appetite in developed countries for a standard black brew, whether it be the UK’s “builders’ tea” or US iced tea.
“Two-thirds of our [tea] business is in black tea, and most of that is in the developed world . . . Despite strong brands and putting great people to run our tea business for many years, it has been for decades a drag on Unilever’s growth,” Mr Jope said.
The UK, where the tea trend arrived in the 1600s, pushed large-scale production of the plant in India during the colonial period. British drinkers are among the top three countries in the world by consumption per head. But that centuries-old enthusiasm is waning.
“Across the consumer goods companies we are seeing some of the historic categories like tea changing more in the past five years than they had changed in a couple of decades beforehand,” said Richard Webster, partner at Bain & Company.
Market researchers said the traditional brew was losing popularity as younger consumers turned to the growing coffee market or to fruit and herbal tea, where Euromonitor said sales grew over the past five years in every region.
Younger buyers want “hydrating beverages”, according to Ilaria Abagnale, research analyst at Euromonitor. “At the same time, the health trend is pushing sales of organic products, especially in France, Sweden and Portugal, and superfoods, such as ginger and turmeric,” she added.
Edward Eisler, who founded high-end UK-based brand Jing Tea, based on the culture of loose tea in China, said he believed the western market would move in a similar direction, with consumers regarding different teas as they do varieties of coffee or wine.
“Mass-marketed standardised black is not answering the needs of the consumer around taste and quality and origin and sustainability . . . it’s as if we are still drinking Blue Nun,” he said, referring to the sweet German wine popular in the 1980s.
With 10.4 per cent of the highly fragmented global retail market in black tea, according to Euromonitor, Unilever has been hit hard by the change in tastes — its Lipton brand alone has about 7 per cent. No other company comes close. Tata Global Beverages, the Indian group that owns Tetley, commands 2.3 per cent globally, as does Associated British Foods, owner of the Twinings brand.
Unilever has been particularly hurt by a shift to more upmarket brands. While retail sales volumes of black tea dropped in the five years to 2019 — by 15.3 per cent to 71,400 tonnes in the UK — the value sold rose over the same period, as many buyers traded up to premium versions. That left established mid-market brands struggling.
ABF’s Twinings brand last year overtook Unilever’s PG Tips as the most popular brand in the UK, according to Nielsen. Innovations such as “cold infusions” offered by the likes of Twinings can fetch six times the price per bag of standard black tea, Tom Newman, senior analyst at Nielsen, said.
Unilever has chased new trends by buying the herbal tea brand Pukka and the speciality tea brand Tazo in 2017, but both are dwarfed by the size of Lipton.
Barclays analysts estimate the value of the company’s whole tea arm at €4bn-€5bn, though they said: “We see few willing buyers for a declining black tea business.”
The Anglo-Dutch group said it would not necessarily sell the entire division, but could sell parts or enter new partnerships. Unilever already has a joint venture with Pepsi for ready-made Lipton drinks such as iced tea.
Analysts at Jefferies suggested the company could sell its developed market tea holdings while retaining those in emerging markets such as India, where black tea sales are growing in both volume and value.
Despite noting a “demographic problem” with the ageing buyers of black tea in developed markets, Mr Jope said: “We have very strong brands that other people might find very attractive as part of their business.”
The traditional product retains some loyal customers. Sem’s Cafe, a budget south London restaurant serving burgers and English breakfasts, stocks nine herbal and fruit teas but says 9 out of 10 tea orders are still for the classic brew. Who opts for the alternatives? Nej Batir, son of the proprietor, said: “Not the builders, that’s for sure.”
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