After Unilever: The Fragmented New World Order of Global Tea

Delivery

This report comes in PPT.

Key Findings

The world’s largest tea company is preparing to largely exit the category

Unilever – by far the largest company in global tea – has announced plans to divest most of its tea business by the end of 2021. This will include major global brands like Lipton and PG Tips, although it does intend to hold onto its share of its RTD joint venture with PepsiCo, as well as its tea operations in India and Indonesia.

Exit caused by a challenging environment in many of Unilever’s core markets

Unilever’s model of selling large volumes of black tea bags through grocery channels still works in parts of the developing world, but in its core European and North American markets, tea consumption is shifting towards premium and herbal tea – two areas in which Unilever has had trouble establishing itself.

The exit of Unilever leaves the competitive landscape with no central player

Assuming a single buyer is found for all the brands up for sale, the purchaser of Unilever’s tea brands will become the largest tea company in the world. Without RTD tea and the key Asian markets, its tea positioning will, however, be weaker than Unilever’s was. There is also a good chance the buyer will focus on cost cutting and profitability, and further shrink the footprint of Unilever’s old brands.

Regional players will now assume centre stage in global tea

This shake-up will increase the prominence of regional players, whose category and/or geographic focus has positioned them better for the future. The largest players will not compete directly with each other, as companies like ITO EN, Orimi Trade and Teekanne maintain their focus on their home regions.

All signs point to a more fragmented future for global tea.

Numerous trends, which include the rise of e-commerce, increasing herbal tea consumption and the dominant role China plays in global growth, point to an increasingly fractured global tea landscape. In contrast to other beverage categories, like coffee, the structural factors at play in tea are towards greater fragmentation.