Unilever (NYSE:UN) (NYSE:UL), the world's largest tea company, is hopeful that efforts to promote tea sustainability among its suppliers will usher in a profit boost in the coming years.
According to Sustainable Development Report, Unilever began outlining "sustainable agriculture guidelines for tea cultivation" in 1992. Since then, the company has gone on a mission to communicate these guidelines to its suppliers. So far, more than two-thirds of its global suppliers either meet the standards outlined in the guidelines or are full participants in its tea sustainability program.
This is an important subject for Unilever, since tea makes up a good portion of its business. As a percentage of world volume, Unilever's share of the world's black tea procurement in 2006 was 12%.
The company is now partnering with government and non-government agencies alike to reach out to the remaining one-third of suppliers that are often located in remote areas of the world. For instance, Unilever has partnered with the U.K.'s Department of International Development and the Kenya Tea Development Agency to figure out ways to better communicate with small tea farmers in Kenya, whose numbers exceed 450,000.
These efforts are about to pay off. In a recent press release, Unilever announced that it will become the first major tea company to introduce "sustainably certified tea on such a large scale." By 2010, it plans to have all Lipton Yellow Label and PG Tips tea bags sold in Western Europe to be certified. By 2015, the goal is for all Lipton tea bags sold globally to meet this new ethical standard.
Could "green" tea be to Unilever what "green" coffees are expected to be for Procter & Gamble's (NYSE:PG) Millstone brand or for Starbucks (NASDAQ:SBUX)? Unilever's most recent annual report states that the long-term success of its business is "intimately linked with the vitality of the environment and communities" in which it operates. For Unilever, the move toward environmentally friendly tea is more than ethics; it is also about being economically friendly to the company's owners, its shareholders.
"Green" food products are gaining speed with consumers and often fetch a premium price -- think of Whole Foods Market's (NASDAQ:WFMI) recent sales growth. Given this trend, my hunch is that "green" tea will lead to greener profits for Unilever.
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Fool contributor Jeremy MacNealy has no financial interest in any company mentioned. The Motley Fool has a disclosure policy.
