Specialist
Former VP at Unilever plc
Agenda
- Global leaf tea market update and mid-term outlook, including potential structural changes from coronavirus
- Perimeter of sale and discussion involving excluded assets, dyssynergies, financials, logistics and current trading
- Opportunities to accelerate portfolio growth and and efficiencies for Unilever's tea business under potential new ownership
- Valuation considerations and spin-off scenarios
Questions
1.
Could you provide an update on the impact of coronavirus on the consumer demand side of the global leaf tea market? Which impacts might be temporary vs longer lasting?
2.
Will the coronavirus impacts be varied across the larger players such as Unilever or Twinings vs small, regional and local players?
3.
What have been the short-term and structural impacts of coronavirus on supply chains for this sector?
4.
What’s your outlook for the global leaf tea industry in 5-10 years? What are the key dynamics? You referenced high-end offerings as a key growth driver.
5.
What are your global growth rate expectations for the industry in the next five years?
6.
Unilever is set to sell a large part of its tea business. Why do you think India and Indonesia were excluded from the sale process?
7.
What about Unilever’s plantations? Are they included within the perimeter? Why might that be important?
8.
I would have thought Unilever’s R&D function for tea would be included in a potential sale, but it is located in India. What’s the importance of that function? Do you think it will be included in a potential sale?
9.
Why do you think Unilever’s JV with Pepsi – the ready-to-drink Lipton – has been excluded from the sale? What impact might that have?
10.
How do you think Unilever has separated the assets of sale? What is the structure that it’s built and are there any legal implications around that?
11.
How do you expect distribution to work post-sale, particularly in countries where there might not be a local tea operation? Will they have to find a new local distributor, or might they continue distribution agreements with Unilever on the sale of the business?
12.
Unilever has so far disclosed that the assets for sale had sales of roughly EUR 2bn in 2020. What might have been the gross margin in 2020? How should we think about EBITDA? EUR 350m-400m has been suggested. What might be the numbers now and post-dis-synergies, depending on how the business is traded?
13.
You mentioned coronavirus might have given a bump to the top line of Unilever’s tea business. What might trading be like in the lead-up to the sale? Could that change anything around Unilever’s feeling for the business and the valuation it expects?
14.
How might a new owner run the business differently or better than Unilever?
15.
Could you outline the growth opportunities within existing markets and the categories or sub-categories that Unilever’s tea business currently plays in?
16.
How would a standalone company enter a new market if it doesn’t have a presence there?
17.
Do you think the potential new owner of Unilever’s tea business would try to re-enter India or Indonesia? Do you think that might even be legally possible? How might it do that, given they are quite big markets with growth potential?
18.
What are the potential organic innovation opportunities? Is there an opportunity to premiumise a mainstream brand such as Lipton to where the growth in the market is?
19.
Do you think the potential new management might pursue growth in ready-to-drink opportunities, which is a growing market in some geographies? Alternatively, do you think there might be non-compete issues there, if Unilever seems intent on retaining its 50% stake in the Pepsi JV?
20.
How important do you think acquisition might be for potential value creation for a new owner? You mentioned specialist tea acquisitions to try and enhance the whole portfolio offering into higher-growth areas.
Could it try to enter new markets through acquisition? How do you think a new owner should approach M&A?
21.
What do you consider to be the role of T2 in the portfolio, in addressing the speciality tea segment? Could it develop into a global brand, perhaps more successfully under a new owner than under Unilever?
22.
What are the cost optimisation opportunities around the supply chain and anywhere else in the P&L? It seems Unilever has certainly taken quite a lot of cost out over the past few years. Is there anything left for a new owner to do?
23.
How should we think about the capital requirements? You alluded to a one-off investment to upgrade some of the manufacturing facilities. How significant do you think that could be? What are the regular capital requirements for a tea business?
24.
How should we think about marketing costs and requirements? It’s a reasonably big part of a P&L. Do you think Unilever was spending sufficiently on the tea brands, given it wasn’t perhaps considered to be the biggest priority in the portfolio?
25.
You mentioned how Unilever might be thinking of its options around the spin-off. Do you want to contribute anything else?
26.
What multiples might Unilever be thinking about for its tea business?
27.
Could you outline the ESG considerations with Unilever’s tea business? There are always opportunities, but also headwinds and associated costs.
28.
What major risks might a potential buyer face over the next 3-5 years?
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