Lipton and PG Tips, a quarter of the FTSE 100-listed group’s food & refreshment division, made €2.9bn in annual revenue in 2019.
But the owner of Dove and Marmite said there is increasingly low demand for black tea in developed markets.
The focus remained on premium brews, emerging markets and herbal teas, such as the Pukka range.
Analysts at Liberum said there is scope for €2bn cost savings per annum which would lift operating margins beyond the company’s 20% target.
“Unilever’s recent investor days highlighted a move away from a dizzying pace of bolt-on deals towards integration, disposals and continuing digital transformation,” they said in a note.
According to a note by Berenberg published last week, tea is struggling in most geographies and only 14% sales are gaining shares, mostly in Eastern Europe.
While in the UK, historically a country of tea lovers, sales in the year to last February were down 1% to £663mln as research firm Kantar surveyed.
If chief executive Alan Jope decides to take the disposal route, US giant PepsiCo, partner of ten years in the Lipton joint venture, will have to be involved.
Analysts at Jefferies said a potential sale will come with its hurdles.
First of all, when Lipton goes on the market, US giant PepsiCo will have to be involved as it has been Unilever’s joint venture partner of 12 years.
Then, there are no “obvious” trade buyers, the US investment bank highlighted.
PepsiCo, for one, would not be interested in the developed market hot tea business despite the existing ice brew deal.
India’s Tata Global Beverages has a notable global presence but analysts wonder whether Unilever would want to enfranchise its biggest competitor in the country.
Finally, US player General Mills would “barely” have adequate balance sheets, analysts commented.
According to the Jefferies, exiting emerging countries such as India may dilute earnings.
Instead, selling the developed market tea business would add 10 to 15 percentage points to organic growth, so this might be the way forward.
“Management focus on scaling the brands of tomorrow whilst disposing of slow-growth assets should help Unilever become a mid-single-digit top-line growth company in time,” analysts at Liberum concluded.
Shares rose 1% to 4,502p on Thursday afternoon.