Unilever Nigeria Plc has concluded plans to scrap some parts of its Lipton tea business while retaining the viable ones.
The company’s executives announced the plan, which was the result of a six-month review, on Wednesday. “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.”
According to information obtained by Financial Street, the partnership between the two companies will have PepsiCo focus on Lipton’s ready-to-drink beverages while Unilever handles the leaf tea. Each company owns 50 per cent stake.
The rest of the tea portfolio will be spun off into a separate independent entity. The tea business that will be separated generated revenues of €2bn in 2019. This was made known in notification shared on the Nigerian Stock Exchange on behalf of the board of Unilever Nigeria.
The leaf tea business, in general, has been struggling, losing market share to coffee and herbal tea. Spinning off the business puts Unilever in a position to sell it, possibly with a licensing-back deal.
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, geographies and all of our tea estates has a very exciting future,” said the Chief Executive Officer, Alan Jope.
According to him, performance during the first half of 2020 has shown the true strength of Unilever.
His words, “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.
“I would like to thank every member of the Unilever team for the outstanding commitment they have shown in the most difficult of circumstances,” he added.
Unilever announced its results for the H1 2020, which show that overall underlying sales declined 0.1 per cent, with developed markets up 2.4 per cent and emerging markets down 1.9 per cent.