PG Tips & Lipton Tea poised for sale as young people switch to coffee

PG Tips

The owner of PG Tips is considering quitting the tea business as the traditional cuppa is shunned by a generation of consumers raised on coffee and fashionable herbal teas.

On Thursday Unilever pointed to a slump in sales of black tea as it raised the “for sale” sign over a portfolio of brands that includes Lipton, Brooke Bond and Pukka Herbs.

Unilever’s chief executive, Alan Jope, said traditional tea drinkers were a dying breed, with drinkers of black tea “getting older and consuming less and starting to fall over”. He said traditional “builder’s tea” drinkers were “not into experimenting and trying new products”.

Young consumers, however, are “experience-seeking”, explained Jope of a market shift that has caused the standard cuppa to fall out of favour in developed markets while upmarket brews, which promise everything from a good night’s sleep to an energy boost cash in on the demand for “wellness” products.

Tea breaks have been a tradition in the UK for more than 200 years, according to the UK Tea and Infusions Association, which insists tea is still hanging on to its crown as the national drink with 100m cups supped every day. But Britons are increasingly drinking coffee in their tea breaks, with 95m cups downed every day, according to the British Coffee Association.

The first British brew-up can be traced back to 1658, when the London republican newspaper Mercurius Politicus carried the first advert for tea. The ad announced that a “China drink called by the Chinese, Tcha, by other Nations Tay alias Tee” was now available in a coffee house in the city.

But it was tea addict Catherine of Braganza – wife of Charles II – who turned it into a fashionable drink.

Soon the middle-classes were drinking tea and by the mid-18th century, it was the country’s most popular drink – pushing ale and gin from their place in British hearts. The teabag arrived at the start of the 20th century and today 96% of cuppas are made with one, but it is this mass end of the market that is going off the boil.

Total tea sales have declined by about 2% over the last two years to £565m, according to the research firm Nielsen, which tracks the UK grocery market. But a steeper decline in the sales of basic builder’s brews is being hidden by higher prices for upmarket spinoffs such as detox blends and cold infusions (teabags for cold water). Black tea remains the biggest chunk of the market at £360m, which is £18m down on two years ago.

“There are a few dynamics at play here,” explained Tom Newman, a Nielsen analyst. “British shoppers are buying 5% less than they did two years ago. But there has also been an influx of more premium products coming through, and the average price per kilogram is up 3% compared to two years ago.”

Newman suggested drinkers had opted to “trade in their cup of brew for a cup of java” as demand for ground coffee was up 9% on two years ago, the equivalent of £33m worth of sales.

Unilever’s PG Tips brand has long been the market leader in the UK but was overtaken by Twinings, owned by Associated British Foods (ABF), for the first time last year.

PG Tips was launched in 1930 by Brooke Bond and Company, a Manchester firm founded by the tea dealer Arthur Brooke, under the name “Pre-Gest Tea”. Sales at the brand, which is still made in Manchester, fell 7% last year, dropping below £100m.

Matthew Barry, a drinks and tobacco consultant at Euromonitor International, said: “Mass black tea bags have been seeing declining volumes for years. Major growth potential is increasingly only found in the fruit and herbal segment.”

Twinings, where annual UK sales increased 4% to £108m, has been able to ride this wave with products such as Cold Infuse teabags, which come in flavours such as rose lemonade, and can be dropped into a water bottle.

Unilever’s tea business is the biggest in the world – it also includes Bushells, Lyons and Pure Leaf – and includes some plantations. Jope said the strategic review did not have a “preordained outcome” that would automatically mean the sale of brands or factories. However, analysts suggested likely buyers could include Twinings’ owner, ABF, or Pepsi.