-01- Last Thursday, Unilever announced its fourth-quarter and full-year 2019 results. Due to slowing growth in the fourth quarter, its quarterly growth rate of 1.5% was the lowest in nearly a decade, causing overall annual growth to slightly miss expectations. Unilever CEO Alan Jope stated in the earnings release, "In 2019, Unilever's underlying sales grew 2.9%. We are now stepping up our efforts to improve growth momentum, continuing to review our portfolio, and have begun a strategic review of our global tea business." This implies that selling the tea business, which generates €3 billion in annual sales, could become one of the means to achieve its 3%-5% growth target. In fact, as early as November last year, there were rumors that due to declining consumer demand, Unilever was considering selling its traditional tea business, including its heritage brands PG Tips and Lipton, to cater to changing consumer tastes. However, Unilever quickly denied these rumors, stating that it was committed to turning around the slow growth of black tea. After all, according to Unilever's official website, between 2013 and 2017, the company successively acquired Australian premium tea brand T2, Starbucks' tea brand Tazo, and British organic herbal tea brand Pukka. These moves signaled its continued commitment to the tea business, making the "rumors" untenable. Moreover, Unilever, which owns brands like Lipton, is the world's largest tea company. According to Euromonitor International data, global tea sales grew 6% year-on-year in 2018 to $45.4 billion (approximately RMB 319.1 billion). Unilever held a 10.6% global market share, up 0.2 percentage points from the previous year. Not only was it ranked first, but it could be described as "far ahead of the competition." Following Unilever, the top five companies by global market share were: India's Tata Group (2.3%), UK-based Associated British Foods, which operates the black tea brand "Twinings" (2.3%), China's Yunnan Dayi Tea Group (1.7%), and Germany's Teekanne, which sells herbal tea brands like "Pompadour" (1.7%). Additionally, according to Unilever's public information, by sales value, the tea business accounted for over 20% of Unilever's annual sales, which total hundreds of billions of euros. -02- Given this, why would Unilever treat its tea business, a "gold mine," as a "hot potato"? In its earnings announcement, it noted that although the tea business achieved price-driven growth, sales volumes declined due to falling demand for black tea from consumers in developed markets. Black tea accounts for a high proportion of the company's tea business sales, and this category is experiencing slowing growth, even in developing markets. Over the long term, the tea business has impacted Unilever's growth and profitability. Jope also mentioned, "This trend is not just short-term but a long-term phenomenon over the past decade." Naturally, as the world's largest tea company by market share, it has officially begun to consider selling "PG Tips and Lipton," even though they generate nearly €3 billion in annual revenue. Some industry analysts have even suggested that Unilever should sell all of its food business. In 2019, this business generated sales of €19.1 billion, with a 1.5% growth rate, the worst performance among the three divisions, and its operating margin was the only one to decline, contracting by 20 basis points year-on-year. A full sale of the food division could be valued at €60 billion, and upon completion, Jope could focus on the personal care sector, where he has expertise, while improving Unilever's overall valuation and growth rate. Before becoming CEO, Jope was President of Unilever's Beauty & Personal Care division. Under both Madison邦 and Jope's leadership, Unilever has been expanding its beauty and personal care business in recent years. Since 2015, Unilever's acquisitions have focused on skincare and cosmetics. Of the 30 deals totaling €11 billion (approximately RMB 85.2 billion), beauty and personal care transactions accounted for nearly three-quarters. During the same period, Unilever also sold €8 billion (approximately RMB 61.95 billion) in assets, mainly in slower-growing food categories such as spreads and margarine. In the fourth quarter, Unilever's beauty business recorded 5.6% growth, continuing to lead the three divisions, with full-year growth of 2.6% to €21.9 billion, making it the group's largest division. The home care division achieved growth of 2.7% and 6.1% in the fourth quarter and full year, respectively. Both divisions saw operating margins improve by 70 and 150 basis points, respectively. -03- However, even if Unilever's food business overall growth is slowing, it does not necessarily mean that the divestiture of the tea business or the entire food business is a done deal. Jope stated, "We have no conclusions yet; all options are still on the table. The outcome of the tea review may not necessarily be a full divestiture." He also responded to earlier denials of selling the tea business, saying that at the time, there were indeed no plans to sell, but it was not as if the company had "unlimited love" for the business, as described. However, The Guardian believes that Jope's statement that the strategic review has "no predetermined outcome" means Unilever may sell some brands or factories. It also cited analysts saying potential buyers include Associated British Foods, the parent company of Twinings, and PepsiCo. The former ranked second in global tea market share in 2018, while the latter has a joint venture with Unilever to sell Lipton ready-to-drink tea beverages. Both companies have deep ties with Unilever. Additionally, it is worth mentioning that Unilever's food business in the Chinese market is likely to be affected by the novel coronavirus, with industry insiders predicting a 20% decline in its China operations. Finally, for the full year 2019, Unilever's revenue was €51.98 billion, up 2.0% from €50.982 billion in 2018, with constant currency growth of 2.7% and underlying growth of 2.9%. It expects underlying sales growth in 2020 to be in the low single digits of the 3-5% range. Although sales are expected to improve from Q4 2019 to H1 2020, growth is still expected to be at the lower end of the 3-5% range. Compiled and edited by