Unilever giant eyes sale of some of its tea brands for €4.5bn   

Shares of Unilever, which sells Dove soap and Ben & Jerry’s ice cream, have fallen 12% this year. 

Foods and groceries giant Unilever, the owner of Lipton and PG Tips, is nearing a sale of some tea assets to buyout firm CVC Capital Partners in one of the year’s biggest carveouts by a European company, people with knowledge of the matter said.

CVC has reached an agreement with Unilever after beating out rival private equity bidders including Advent International, according to the sources. The transaction is set to value the business at about €4.5bn. 

A sale of the tea business would mark a much-needed win for Unilever chief executive Alan Jope, who’s been seeking to rejig the company’s portfolio to keep up with changing consumer tastes. 

The firm abandoned a planned $1bn sale of a beauty product portfolio earlier this year after failing to attract sufficient demand from potential buyers, sources said. Shares of Unilever, which sells Dove soap and Ben & Jerry’s ice cream, have fallen 12% this year. 

Rivals including L’Oreal and Nestlé have gained as consumer spending came back in the wake of the pandemic. Unilever’s stock performance and pace of change have led to speculation the company would attract activist investors’ attention, especially after Elliott Investment Management’s campaign at GlaxoSmithKline this year.

Shift to herbal alternatives

Demand for tea has suffered in recent years amid a shift to herbal alternatives and artisan coffee. The company said in January 2020 it was starting a strategic review of its tea business that could result in a partial or full sale. It later moved to scale back the scope of the tea sale and retain operations in emerging markets. 

The proposed disposal would not include Unilever’s tea units in India and Indonesia or its partnerships in the ready-to-drink tea market, such as its stake in a joint venture with PepsiCo, sources said in July.

Under former CEO Paul Polman, Unilever sold its margarine and spreads business to KKR for about $8bn. The company tried to profit from growth in herbal tea by acquiring the Pukka brand in 2017. 

Last month, it emerged that Unilever increased prices by the most in almost a decade, pushing rising raw material costs onto consumers and compensating for a decline in shipments in southeast Asia due to Covid-19 outbreaks.

The maker said it increased pricing by 4.1% in the third quarter, the fastest rate since the start of 2012. Mr Jope forecast at least another 12 months of inflationary pressure.

“Peak inflation will be in the first half of 2022, and it will moderate as we move towards the second half,” Mr Jope said in an interview in October.  

• Bloomberg