With a rising consumer interest in flavoured and herbal teas, Unilever reviews its tea business.

The traditional ‘cuppa’, ‘builders’ brew’, ‘cup of char’ – standard black tea has been the defining hot drink of the UK for centuries. However, generational shifts in taste and social influence affect the modern market, favouring the rise of coffee culture and similar growth in herbal and other flavoured teas. The humble cuppa faces a challenge, although one that may be exaggerated in the long-term.

Unilever is reviewing its global tea business, which includes some of the UK’s and international markets’ most well-known brands such as PG Tips, Lyons and Lipton in the face of standard black tea sales decline that the company has yet to find an answer to.

With industry analysts speculating that the business could sell for €6-€8bn and it still making sales of €3bn, its decline is relative but reflects a change in consumer behaviour that is, at least for now, presenting growth opportunities for tea in the new markets.

The influence of craft culture and premiumisation, paired with the social pressure and groupthink that goes with it (ironically associated with individualism), has fueled significant growth in coffee as the UK’s preferred hot beverage.

With the so-called Third Wave of Coffee still in full swing and the country covered with both artisan and mainstream coffee shops such as Costa and Starbucks, the choice and opportunities for experimentation with more premium and creative beverages has certainly increased.

This, in turn, has started to influence tea sales as startups focus on more exotic herbal and flavoured teas and new products such as cold coffee infusions with functional benefits and more complex flavours.

In comparison, traditional British tea rooms and cafes have an image problem. Generationally, they are associated with seniors – they are not youthful or hip. The new generation of craft-styled tea shops and cafes are, however, bringing tea to the urban millennial and Gen Z style-conscious consumer. However, these businesses and brands are focused on alternatives to black tea.

The millennials and Gen Z influence is undoubtedly important, with their bias for experience-seeking, a weaker affinity for traditional norms and responsiveness to social media, influencing many areas of fast-moving consumer goods (FMCG) consumption, from hot drinks to snacking and alcohol preferences. The British cuppa is not as valued in a social setting or as a feature of self-actualisation for the urban hipster like a flat white might be.

In this context, Unilever is understandably concerned with the underperformance of black tea brands. The rise of flavoured options has seen rival Twinings riding the tide effectively, overtaking PG Tips to become the number one brand in the UK.

However, the question persists if standard black tea is really going out of fashion, given its continued market dominance in spite of the sensational headline fodder that Unilever’s review provides.

Currently, the tea market growth is undoubtedly favouring herbal and alternative flavours. However, the UK market is still dominated by black tea, with this unlikely to ever be influenced by the alternatives.

Unilever owns the biggest tea business in the world. It could be strategically advantageous to review and consolidate some of its interests. The rise of premium coffee and alternative teas is not likely going to lead to the downfall of standard black tea.

Big brands face a very real private-label threat in standard tea, which may play a role as significant as that seen in the growth of herbal and flavoured alternatives. Branded teas have to compete with entirely comparable own brands and lose sales based on price point. For a standard, commoditised product like black tea, a private label is a strong option, with products such as Sainsbury’s Red Label being the go-to for many everyday tea drinkers both for taste and price.

Looking ahead, for brands in the Unilever portfolio, changes of approach and building new appeal may be needed. Digital marketing, social media and accurate demographic targeting backed up by a genuine understanding of the audience can be clever tools in making the old relevant to new consumers.

This was demonstrated in recent years with the rebirth of Diet Coke, a stagnant brand that was associated with 80s boomers. With a redesign, a few new flavours and a millennial-friendly ad campaign, Diet Coke burst back onto the cola scene, overtaking classic Coke in 2018 in the core US market. Lessons can be learnt from examples such as this in terms of how to remake classic brands and products and how consumers relate to them.

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