Tea time again in London as Unilever brews up a drinks revival

Tuesday, 29 April 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Consumer goods giant Unilever opened its first European tea shop in London on Thursday, aiming to cash in on the growing appeal of unusual and luxury cuppas and ignite fresh enthusiasm for the national drink. A new generation of Britons drink more coffee than tea since the arrival of the mighty Starbucks, and a host of imitators that now crowd high streets. But with Starbucks opening a tea bar in New York last October and talking about a $90 billion global market, the tide may be turning. Unilever, whose Lipton brand is the world’s top-selling tea, bought Australia’s T2 tea chain - where the menu ranges from a 5.75 pound ($9.65) box of English Breakfast to Japanese Gyokuro teas costing upwards of 25 pounds ($41.94) a tin – in September and hopes to appeal to the same consumers interested in upscale coffee that fuelled the last drinks boom.

Sales of luxury and super-premium teas are growing at an annual clip of 12 to 14%, said Kevin Havelock, president of Unilever’s refreshment business, which grew 5.9% in the first quarter. “We are seeing more and more interest in more exciting teas,” Havelock said at the store. “This provides growth for Unilever in the most exciting growth segment of the tea market.” The store, in fashionable Shoreditch, has 200 types of tea and a rainbow selection of pots and cups, and gives Unilever access to some of London’s trendiest young consumers - potentially useful for the marketing of its 400 other brands, which range from Dove soap to Hellmann’s mayonnaise. Unilever is currently looking for ways to boost its profitability after the global economic slowdown crimped sales in many markets, and is selling underperforming or non-core brands. T2’s profit margins currently outweigh Unilever’s, and Havelock said its growth stands to fatten the group’s margins.

Younger generation T2 is the brainchild of Australian entrepreneur Maryanne Shearer, who opened her first tea boutique in Melbourne in 1996. When Unilever announced the deal - declining to disclose the price it paid - T2 had 40 stores in Australia and sales nearing A$57 million ($52.94 million) for the year ended June 30, 2013. Sales are growing at a double-digit rate and performance has “more than met expectations,” it said. “Darjeeling First Flush” is Shearer’s favorite tea though she takes pride in T2’s unusual flavors including “Licorice Legs”, inspired by American actor Jennifer Lopez. With an array of herbal and scented teas rounding out the more standard offerings, T2 hopes to appeal to a younger generation that grew up drinking cappuccinos and lattes. Though 65% of Britons aged 25 to 34 drink tea at least once a day, according to research firm Mintel Group, that is lower than the 72% of those above 55 who do. Unilever, which already operates about 400 retail outlets under each of its Ben & Jerry’s and Wall’s brands, hopes to open more T2 stores in Britain this year, then look further afield. “We actually don’t believe that there are any highly developed cities in the world that would not be a good environment for T2,” Havelock said. Still, Unilever is likely to proceed with caution. Coffee sales in Britain have far outpaced tea sales for the past five years, according to Euromonitor International, and while the economic environment is improving, consumer confidence is still fragile. Whittard of Chelsea - another tea and coffee retailer - came close to filing for administration in 2008 after its Icelandic owner was hit by the banking crisis and demand from UK consumers ebbed. In terms of developing the brand, Unilever has no plans to sell T2 tea at grocery stores. Havelock, however, sees opportunities online. And while yellow-label Lipton is sold in capsules for Keurig Green Mountain’s at-home coffee brewers, Havelock said though it was “difficult” to imagine T2 in a capsule, it was “certainly possible”.