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Thursday, December 2, 2021

As Unilever tea sales heat up, plantation conditions become the focus




In 1890, Scottish entrepreneur Thomas Lipton (Thomas Lipton) bought his first tea plantation in Ceylon (now Sri Lanka). Bring to the public.

The business established by Lipton became the world’s largest tea company and has now ceased production. Unilever, which owns Lipton and other big brands such as PG Tips and Brooke Bond, is conducting a sales process for the tea business because growth has stagnated.

It partially retains an integrated business model like Lipton, while owning a brand and tea garden. This means that any buyer in the department now called Ekaterra must decide how to deal with sensitive issues such as human rights and fair pay for the three large plantations owned by Unilever.

According to people familiar with the matter, private equity groups including Advent, Carlyle and CVC have been bidding for the unit, which has annual sales of 2 billion euros and the price may be between 4 billion and 5 billion pounds. The second round of tenders will expire on Tuesday, but Unilever said it will retain the option of partnership or initial public offering.

In the process of managing this sale, Unilever is looking behind the scenes to solve a problem that plagued the tea department. Its operations in Kenya have begun reviewing claims that it failed to adequately help workers affected by the attack on their 8,900 hectares of Kericho plantation as a result of ethnic violence in 2007.

According to complaints submitted by 218 Kenyans to the UN Human Rights and Multinational Corporations Working Group and the UN Special Rapporteur on Extreme Poverty and Human Rights last year, 7 people were killed, 56 women were raped, and many others were injured. They are seeking medical and psychological treatment and compensation.

The complaint was filed after the failure of a civil case in the UK: London Court of Appeal 2018 rule The matter should be heard in a Kenyan court, and the claimant failed to prove that Unilever’s parent company in the UK had a duty of care. The Supreme Court rejected leave to appeal.

A person familiar with the situation said that Unilever has appointed an independent expert to conduct the review. The person familiar with the matter said that the affected workers hope there will be results this year. Another person said that the review has nothing to do with the spin-off.

Unilever said: “Although the British court rejected the allegations against Unilever and believed that we could not foresee the terrible violence that occurred after the 2007 general election and could not be held accountable, Unilever Kenya Tea Company believed that it was correct. The approach is to review whether any claimants did not receive the support it provided to other employees at the time, and if so, make up for what they missed.”

It stated that if the UN agency conducts an investigation, it will fully cooperate with the UN agency.

The workers complained that their wages were suspended for six months after the attack, and those who returned to the plantation received 80 pounds of financial assistance, which is about one month’s wages. Unilever said earlier that it provided “significant support” to victims, including “in-kind compensation”, replacement of destroyed property, medical treatment and consultation.

Although Unilever does not own Sir Thomas Lipton’s former plantation in Sri Lanka, it owns estates in Kenya, Tanzania, and Rwanda, where thousands of people live and work.

Sabita Banerji, CEO of Thirst, an international round table on sustainable tea, said that such estates can be traced back to the British colonial model, which established plantations in remote areas and removed workers and their families from other countries. Local introduction.

She said that the workers in these estates “rely entirely on management to make ends meet.” She added that these workers and small farmers who supply commodities are particularly vulnerable to poverty.

Unilever is part of the industry’s Ethical Tea Partnership and stated that it has a number of plans to address the “social challenges” of tea, including a women’s empowerment plan that has benefited 600,000 people in Kenya and India. It said Kericho’s salary was “significantly higher than the tea industry average”.

Recently, it clashed with Kenyan trade unions because it automates picking and reduces the number of workers.

A banker familiar with the process said that these issues may still affect any sales, and he said that potential buyers are concerned about environmental, social and governance issues. Another banker said that bidders may overemphasize these in an attempt to buy Ekaterra at a cheaper price.

Consultant Angela Pryce said that such social issues are one of the biggest challenges facing global tea brands. “These brands are usually very price sensitive… so it is difficult to imagine a simple solution,” she said.

At the same time, the market is slowing as drinkers in affluent markets switch to alternatives such as coffee, herbal tea and kombucha.

Mintel analyst Julia Buech said that black tea has experienced a “slow but steady long-term decline” in many Western markets, but was temporarily interrupted by the pandemic.

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In India and Indonesia, where consumption is growing, Unilever will retain its tea business and will maintain its ice tea partnership with PepsiCo. But high-end herbal tea brands such as Pukka, T2 and Tazo will join Ekaterra.

Unilever’s sales have many benefits. Since Alan Jope took over as CEO in 2019, its stock price has fallen 5.7% and is seen as a potential target for activist investors.

“Shareholders are not satisfied with the returns they receive from Unilever… The management is under pressure,” Jefferies analyst Martin Deboo said.

Tea processing will be the largest since Qiaopu took charge. However, some observers believe that Unilever missed a trick. Jamie Isenwater, founding partner of Ash Park Capital, a fund management company that owns shares, said: “This is the right strategy, not the right category… You can do many things with tea.”

Additional reporting by Arash Massoudi and Kaye Wiggins




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