Unilever plays 'price piano', buys Australia premium tea business T2

By Ben BOUCKLEY contact

- Last updated on GMT

Picture Credit: Sean Biehle
Picture Credit: Sean Biehle

Related tags: Tea

Unilever has signed an agreement to acquire Australian tea firm T2 citing the firm’s double-digit growth and significant potential, and says the deal will add a premium tea business to its portfolio.

In terms of sales T2 is relatively small, sales were circa. AUS $57m ($52m) for the 12 months ending June 30 2012, but Unilever clearly sees prospect for scalability in the business; on a group level its tea business grew sales mid single digit in Q1 2013 to April 25.

T2 was founded by CEO Maryanne Shearer, who started Australia's largest tea retailer to offer a "true retail experience"​ lacking in the category; the firm now claims to sell enough tea per month to make seven million cups of tea.

Scale and access to new markets

Kevin Havelock, Unilever president for refreshment, said: “T2 is a fast growing premium tea business with great potential. Unilever is the biggest tea company in the world with brands like Lipton...This will allow us to bring the benefits of scale and access to new markets to the T2 business and for both businesses to share tea category expertise."

He added: "This deal will also bring a premium tea business to complement our portfolio that we can leverage in a similar way to other recent Unilever acquisitions.”

T2 sells its teas and tea wares in 40 stores and upmarket restaurants across Australia, and Cliver Stiff, Unilever Australasia chair, said: “Our Lipton and Bushells brands are two of Australia’s oldest and best-loved tea brands and tea is a strategically important category for Unilever Australia."

Asked whether Unilever would consider further bolt-on tea acquisitions, given the potential it sees in tea, especially at higher price points, and in RTD products, Flip Dötsch, Unilever spokesman refused to comment on the tea sector specifically.

But he told that the firm always looked for potential acquisitions when it made sense.

High-end tea offers real potential

Dötsch said it was too early to comment on where T2 had potential beyond Australia - given the firm's desire to leverage the brand elsewhere but added that there were clear benefits to owning a "local Australian brand​" established for 17 years.

"If you look at the acquisition, it really fits the way we look at our portfolio, what we sometimes call the ‘price piano’. We have cheaper products, something in the middle, then this comes as a premium brand. So we have something to offer consumers from cheaper to more premium products."

In this respect T2 sat above Lipton on the price piano, Dötsch said, although he declined to comment on recent comments by a top Unilever executive indicating that high-end tea is an underexploited niche​, given that it commands 29% of global volume in beverages, but only 13% of global value.

"I wouldn’t set this acquisition within that context, but it’s a great addition to our portfolio as it stands. How we will develop that in future it’s too early to say," ​Dötsch.

“But we will keep the T2 format as it is – keep the same management structure in place. And we’re used to running a regional chain (in terms of retail outlets) because we have the Ben & Jerry’s ice cream shops in Australia.”

Tea-time innovations from Unilever

Raoul Jean-Marc Sidney Huët, Unilever CFO, said, ​while discussing the firm's Q1 2013 results on April 25, that it was driving through better product quality, better advertising and improved in-market execution, with strong growth for the Lipton brand (now worth almost $2.6bn) in Russia and the Middle East in particular.

"Our teas now taste even better with patented technology that allows us to improve the flavor profile. We are rolling this out broadly and introduced it to Pakistan, the Middle East in the first quarter,"​ he told analysts.

"In green tea markets like China, we are encouraging loose tea users to switch to tea bags with long fresh leaves."

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