Unilever Plc. put its 2.9-billion-euro global tea business up for strategic review, a move that may have implications for its Indian unit Hindustan Unilever Ltd., the maker of Brooke Bond and Taj Mahal brands.
The review is a result of the company looking at various channel designs for future growth, the company said in a statement accompanying its earnings for the quarter ended December. “We are reviewing (including the premium tea portfolio) on how we can best get value for our stakeholders. But we haven't made a decision yet,” Alan Jope, chief executive officer at Unilever, told investors after the earnings.
Tea is witnessing lower recovery in the developed markets and is earnings dilutive, Unilever said, adding it's not technology-linked and is structurally slow growing. “It (Unilever) has a disproportionately large footprint in the developed market for black tea (two-thirds of the portfolio),” Jope said.
He didn't elaborate or give details on a possible sale or impact on India. For HUL, tea contributed 19 percent of its Rs 3,797-crore food & refreshments revenue in the six months ended September 2019. It contributes nearly 4 percent of the company's India revenue.
HUL vies with Tata Tea Ltd. for leadership in India's branded tea market. According to a December Motilal Oswal report, both commanded 19 percent market share by volumes.
Brooke Bond Red Label, 3 Roses, Taaza and Taj Mahal, among its tea brands in India, continue to grow, according to its 2018-19 annual report. Brooke Bond Tazza has grown threefold as its tea portfolio more than doubled in three years, driven by its penetration in urban areas.
India Stress Impacts Parent
Unilever's quarterly revenue rose 1.4 percent as the growth slowed down because of lacklustre performance in Africa and India.
In India, the growth in the fourth quarter ended December also fell sharper than expected because of price cuts, according to Graeme Pitkethly, chief financial officer, Unilever.
Shares of HUL closed 0.8 percent lower at Rs 2,058 apiece, in line with the drop in the NSE Nifty Index.
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