Lipton PESTLE Analysis

Published in Companies category by MBA Skool Team

Lipton PESTLE (or PESTEL) Analysis assesses the brand on its business tactics across various parameters. PESTLE Analysis of Lipton examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. Let us start the Lipton PESTLE Analysis:

Political Factors:

The political factors in the Lipton PESTLE Analysis can be explained as follows:

Unilever brand Lipton is present in more than 100 countries. As tea can be produced in certain environmental factors for agriculture, there is always the risk of changing government regulations. This can affect the export and import of Lipton tea across the world. An area of concern is international taxation, causing risk of unpredictable tax exposures.

Being present in so many countries worldwide, the brand has to take care of the political situation in a particular country. The brand must ensure that all government policies and guidelines are followed diligently.

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Economic Factors:

Below are the economic factors in the PESTLE Analysis of Lipton:

Unilever initiated a strategic review of its tea business. The company is looking at options like listing tea business, partial or full sale.

This presents big opportunity for Lipton to tap the capital markets and grow further. As Lipton is present in close to 120 countries, the brand faces risk of economic instability that could adversely affect consumer demand, decline in sales and profits. Thus, adverse economic conditions in one country could affect many countries. Also, any government action like foreign exchange or control on prices, too, can affect the growth and profitability of the company. Brexit, too poses uncertainties for global tea market. One potential impact could be on the pound-dollar exchange rate which could affect import, export and domestic markets. It’s parent company, Unilever has also warned about possibility of job losses post-Brexit, as imports are expected to get costlier.

Social Factors:

Following are the social factors impacting Lipton PESTLE Analysis:

Lipton Tea is finding innovative ways to engage with consumers. The brand launched its ‘You.Me.Tea.Now’ campaign to combat loneliness amongst people. The brand carried out a global study to get insights on loneliness. Findings of the study revealed that one-third of respondents had no company and 30% admitted to feeling lonely. Such campaigns really improve brand connect with its consumers. It has a diverse product line. This is because it taps opportunities to serve customers of different classes, social backgrounds, regions, etc. For example, Lipton Iced Tea is one of the most popular products in the category. The first segment comprises people with a busy lifestyle like students, employees, working women, etc. Tea is sold in ready to dip bags and instant sachets. The second segment comprises health-conscious consumers, and has carefully positioned itself as a health beverage. Also, Lipton has introduced further varieties of Iced tea like Diet Iced Tea, Flavoured Iced Tea in lemon, raspberry, peach flavours, etc.

Technological Factors:

The technological factors in the PESTLE Analysis of Lipton are mentioned below:

Lipton uses technology to tap various opportunities in the market. Lipton has started plastic use with the help of Loop and Ionqia technologies. The said companies uses innovative technology to convert waste plastic into rPET and ‘virgin-quality’ materials. Also, Unilever has developed newer processes like CreaSolv to reduce plastic sachet waste. Also, Unilever is working on a pilot project in Malawi, to use blockchain to manage supply chain for its tea brands. The purpose is to give customers better quality and premium products and gain customer loyalty. Also, the project would help reduce tracking time which tea takes right from farmers to the retailers. The project plans to collaborate with banks and technology startups. The aim is to reach 10,000 farmers, and track them. The company has also designed the Cuppa Tea programme to maximize production from Lipton and other tea brands’ production from tea estates on a sustainable basis. The programme was launched as a pilot project in Kenya, 2018. The project aims to install low-cost sensors across plantations.

This will allow estate managers to get real-time data in the areas covering plantations.

Following are the legal factors in the Lipton PESTLE Analysis:

Lipton is subject to national and international laws in many areas like product safety, claims, trademarks, copyrights, patents, competition, health and safety of employees, data privacy, corporate governance, environment, etc. Any change in laws and rules has the potential affect the cost of doing business in those countries. Another area of concern is international taxation, causing risk of unpredictable tax exposures. For example, 135 countries are collaborating and implementing OECD/G20 Inclusive Framework on Base Erosion and profit sharing (BEPS). This program seeks to close loopholes in international taxation, exploited by companies, to pay less tax at home or avoid paying by inversions. Similarly, European Union is working on the Digitalising Economy Project, to bring further tax reforms. Lipton in India comes under HUL. Hindustan Unilever Limited filed close to 90 cases in 2019, citing alleged violation of its intellectual property rights. It was found that many firms produce fake products with similar logos. These firms then sell at very low prices. Thus, this raises similar risks for Lipton.

Environmental Factors:

In the Lipton PESTLE Analysis, the environmental elements affecting its business are as below:

Climate change is a serious environmental threat and this could impact Lipton in many ways. For example, there could be shortages of water, a key component in the plantation of tea. This could lead to a decline in demand, too. Also, there is the possibility of increase in raw material and packaging prices. If there are laws such as introduction of a carbon tax or zero net deforestation requirements, this could affect negatively the financial performance of the business due to higher costs and lesser flexibility in operations. There is also the possibility of higher frequency of extreme weather conditions like storms and floods. This could cause higher probability of adversely affecting company’s manufacturing and distribution. Overall, this would make the product costlier, or reduce availability in the market.

Ultimately, this would lead to lesser growth and profitability. Lipton still taps opportunities to reduce plastic usage. The brand also set 2 goals to be achieved: reduce the weight of tea bags and reduce the amount of waste produced by half for their hot tea products.

To conclude, the above Lipton PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.

This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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