Unilever's Slim-Fast juggernaut shrinks to also-ran
Sunday, January 20, 2013
LONDON -- After running a marathon, Unilever Chief Executive Officer Paul Polman revives himself with his company's Slim-Fast bars. Today it's Slim-Fast that's in need of revival.
Polman, who has re-energized Unilever's Dove personal care and Magnum ice cream brands since he arrived in 2009, has done little for Slim-Fast, the one-time leader in the $13 billion weight-management sector. That has allowed products such as Kellogg's Special K to fill the void.
Over the past four years, Slim-Fast's sales in the United States, its biggest market, have declined 40 percent, to $196 million, according to data trackers SymphonyIRI. During the same period, waistlines have expanded and the global meal-replacement category has grown 27 percent, researcher Euromonitor reports.
Is Slim-Fast "a forgotten brand? It certainly seems that way," said Lee Linthicum, an analyst at Euromonitor. "Kellogg did really well to launch their own products just when Slim-Fast had troubles."
The biggest U.S. cereal maker has expanded its brand into a bona fide diet plan that mirrors Slim-Fast, encouraging dieters to swap two meals a day with Special K cereal and bars.
"The quick crash diet is a thing of the past," said Mark Baynes, Kellogg's chief marketing officer. "People are happy to be seen eating Special K. People might not be so happy to be seen walking around with Slim-Fast."
Unilever, which no longer breaks out Slim-Fast's results, has seen sales growth at its refreshment business, where Slim- Fast is housed, fall behind the company as a whole. The brand now represents less than 1 percent of the company's annual sales of about $67 billion. Slim-Fast has pulled out of France, and innovation has slowed. The brand introduced seven new items last year, versus 77 in 2005, according to market researcher Mintel.
Slim-Fast has also missed out as diets go digital. Research firm Research2guidance has estimated that 500 million people will be using health-related smartphone apps by 2015, and diet apps are among the most downloaded.
Despite pleas from its users on Slim-Fast's own message boards, Slim-Fast still has no smartphone app. In a survey published this month in Consumer Reports magazine, Slim-Fast ranked last in overall satisfaction among do-it-yourself diet plans, behind MyFitnessPal, the Paleo Diet, the Mediterranean Diet, and low-carb diets like Atkins.
In an emailed statement, Slim-Fast said it's planning "exciting changes" and promised investments needed to bring the brand up to date.
Created in 1977 by New York native S. Daniel Abraham, Slim- Fast powder, mixed with low-fat milk, was designed to replace breakfast and lunch, complemented by a 600-calorie "sensible" dinner. Sales took off in 1988 when Los Angeles Dodgers manager Tommy Lasorda signed on as its spokesman. Dieters connected to Lasorda, seeing in him a man not afraid to admit he had a weight problem, according to a 2001 study from Texas A&M University professors.
The success attracted Unilever, which bought Slim-Fast for $2.4 billion in 2000. The company, based in London and Rotterdam, was eager to expand the brand outside North America, which comprised over 90 percent of Slim-Fast's sales at the time. By plugging Slim-Fast into its global marketing and distribution system, Unilever said it could increase revenue fivefold by 2003.
That didn't happen as the emergence of low-carb diets such as Atkins and South Beach caught Unilever by surprise. After climbing to more than 1 billion euros in 2002, Slim-Fast sales plummeted 21 percent in 2003. In response, Unilever took about half of the sugar out of the product and rebranded it as Slim-Fast Optima, offering discounts to keep dieters from defecting. The damage was done, though, and in 2005 Unilever took two charges totaling 850 million euros to account for the decline in the value of the brand.
Things didn't get any better from there. In December 2009, Unilever voluntarily recalled all cans of ready-to-drink Slim-Fast products in the U.S. over concerns they may have been contaminated with bacteria that could cause food poisoning.
CEO Polman said in a December interview that he would look to get rid of "orphan" food brands, and the company on Jan. 3 said it will sell Skippy peanut butter to Hormel Foods for $700 million. Given the 2005 writedowns and shrinking sales since, the Slim-Fast business today is worth a fraction of what Unilever paid for it, according to Sanford C. Bernstein analyst Andrew Wood.
"Perhaps they are just letting it die quietly," Wood said.
Polman could decide to sell Slim-Fast. Or he could sit down with Abraham, Slim-Fast's founder, who says he has offered to help "revitalize" the brand.
"Unilever is sleeping on it," Abraham said. "If I still owned it, it would not be that way. I would be fighting harder. It's a damn shame."