KENYA – Multinational consumer goods company, Unilever is seeking to divest from its Kenyan tea subsidiary, Limuru Tea, to a new owner Holdco UK Limited (TeaCo).
The board of the company has approved the transfer subject to regulatory approvals, reports The Star.
The move follows a decision by its parent firm Unilever Group to separate its global tea business including tea plantations to become a separate entity and divest in most markets.
The maker of the popular Lipton, Brooke Bond and PG Tips brands, had initially indicated that it will retain the tea businesses in Kenya, India and Indonesia and the partnership interests in the ready-to-drink tea joint ventures with PepsiCo.
The JV between the two companies has PepsiCo focus on Lipton’s ready-to-drink beverages while Unilever handles the leaf tea. Each company owns a 50% stake.
However, in a notice to shareholders of Limuru Tea, the Unilever Kenya board said assets including land and factories will be transferred to TeaCo.
Limuru Tea has over 16,000 acres of land, 20 tea estates and eight factories producing 32 million kilogrammes of tea annually.
Its contribution to the economy as a foreign exchange earner has increased from Ksh0.25 million in 1972 to Ksh5.5 billion.
By virtue of the transfer of shares, Unilever Tea Kenya Limited’s indirect interest in Limuru Tea Plc will also transfer to TeaCo.
The consumer products giant has finally reached a decision where the company is ready to divest much of the slow-growing business but keep the best parts.
As consumers have opted for more herbal varieties, black tea, which accounts for two thirds of the CPG giant’s tea segment, has fallen out of favour.
Allied Market Research estimated the global tea market size was valued at US$55.1 billion in 2019 and could reach US$69 billion by 2027, a compound annual growth rate of 6.6%.
“Increase in trend of coffee consumption and fluctuating prices of raw materials caused by unpredictable climatic conditions act as the major restraint for this market.
“On the contrary, growth in demand for herbal tea and introduction of new flavor and variety of tea is anticipated to provide growth opportunities for the tea market,” the firm said.
In the UK, Unilever is also receiving suitors for its tea business with private equity firm, Advent International, mounting a purchase bid for the business.
Advent International has teamed up with Singapore’s Government Investment Corporation (GIC) to make a £4billion joint offer for the business.