Unilever plans to reposition its tea business to meet on-trend segments.

LONDON — Unilever P.L.C. has placed a priority on accelerating growth while maintaining strong margins and cash flow in its foods business. In the first quarter of 2016, that strategy contributed to underlying sales growth of 1.9% in the category.

Andrew Stephen, head of investor relations at Unilever

“Savory continues to grow well, driven by increased consumption in emerging markets and innovation that combines global scale in branding and technology with local relevance, like the Mealmakers in Southeast Asia that we spoke about last quarter or a new range of Knorr Masala seasoning mixes that we’ve just launched in India, offering restaurant-quality taste in innovative zip-lock packs,” Andrew Stephen, head of investor relations at Unilever, said during an April 14 conference call with analysts. “We’re also seeing good traction across the foods portfolio for products that meet the growing demand for authentic, fresh, natural and sustainably-sourced products. Knorr Mealmakers, with 100% natural ingredients, are growing well in Germany. And Hellmann’s is gaining share with the new ‘Real’ campaign and launches in the U.S. of an organic range and a new vegan alternative under the banner of Carefully Crafted.

Hellmann’s is gaining share with its ‘Real’ campaign and its organic and vegan Carefully Crafted launches.

“In the U.K. we’re repositioning Flora spreads as Powered by Plants, emphasizing that they are made from natural plant oils and not from animal-sourced fats. We’ve also introduced a dairy-free variant for vegan and lactose-intolerant consumers. However, the spreads market continued to decline in both Europe and North America, dragging on the overall foods performance.”

Revenues in the first quarter of fiscal 2016 for Unilever’s foods business totaled €3.1 billion ($3.5 billion).

Turning to the company’s refreshment business, revenues in the quarter totaled €2.2 billion ($2.5 billion). Unilever said underlying sales grew 3.8% during the quarter, split between volume and price. The company’s strategy has been to improve margins and cash flows in ice cream and to grow faster in tea by repositioning the business to on-trend segments.

Recent Ben & Jerry's innovations like  Wich sandwiches and non-dairy frozen desserts have seen success.

“In ice cream, Ben & Jerry’s shows the power of combining a purpose-led brand with innovations, like the recent launches of Wich sandwiches for snacking and a non-dairy ice cream made from almond milk,” Mr. Stephen said. “Magnum’s new ‘Release the Beast’ campaign is giving strong support to the Magnum Double range. And Breyers Gelato and Carte D’Or premium desserts are benefiting from new recipes like tarte au citron meringue and Rainforest Alliance vanilla.

“In tea, growth is driven by specialty teas, like T2, and by green teas, which have helped to restore our overall leadership position in India. The traditional black tea market remains highly competitive, with deep promotional discounting, particularly in the U.K.

“On the other hand, we’re seeing double-digit growth in ready-to-drink tea, both with Lipton and the Pure Leaf brand. Pure Leaf is another good example of a brand appealing to the trend for naturalness and is up by more than 30%.”

Unilever's tea growth is driven by specialty teas, such as its T2 brand.

Overall, total revenues at Unilever in the first quarter of 2016 totaled €12.5 billion, with underlying sales growth of 4.7%.

“The first quarter demonstrates a strong volume-driven performance, following on from a good delivery in 2015,” said Paul Polman, chief executive officer. “We are maintaining momentum despite a tougher external environment, with all four categories gaining market share. This broad-based growth, including over 8% in emerging markets, shows the validity of our strategy, portfolio management and a step-up in innovation.”