Slim-Fast International Market Potential Key To Unilever Acquisition
This article was originally published in The Tan Sheet
Executive Summary
Slim-Fast Foods is "ripe for international expansion," Unilever said in announcing its plan to acquire the privately owned nutritional and weight-loss products manufacturer for $2.3 bil.
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Slim-Fast Foods is "ripe for international expansion," Unilever said in announcing its plan to acquire the privately owned nutritional and weight-loss products manufacturer for $2.3 bil. Ninety-four percent of Slim-Fast's $611 mil. in net sales for the fiscal year ended Nov. 30 was tallied in the U.S. and Canada. Most of the remainder of its shakes, drinks and bars were sold in the U.K., France and Germany. Fiscal 1999 operating profits reached $125 mil. London-based Unilever said that it, "better than anyone, [has] the ability to continue to bring the benefits of Slim-Fast to consumers...around the world." Unilever plans to leverage its international foods presence to push the brand in European and other markets by applying its "international reach and deep understanding of...local needs." Slim-Fast controls 45% of the U.S. nutritional supplement and weight-loss product category, which is estimated at $1.3 bil. in annual sales, Unilever said. The brand has extended from its original powdered shake mixes to include ready-to-drink shakes, meal and snack bars and juice-based drinks. The company has been in operation for more than 20 years. Unilever predicted the acquisition will "significantly increase our presence in functional foods," which includes heart health products such as the sterol esters-containing Take Control line. Marketed by Unilever's Lipton division, Take Control reportedly leads in the cholesterol health spreads and dressings category over rival McNeil Consumer Healthcare's Benecol (1 (Also see "Unilever Core Brands Marketing Boost Planned; Personal Care Sales Up 7%" - Pink Sheet, 28 Feb, 2000.)). More functional foods are under development, Unilever asserted. Slim-Fast will mark the consumer product giant's foray into the weight management area. Slim-Fast sales climbed more than 25% in both 1998 and 1999, Unilever said, from $390 mil. in 1997 to $505 mil. in 1998 to its most recent high point. In addition to steady increases in market share since 1996, Slim-Fast sales also have grown faster than category-wide sales, the company added. Unilever envisions Web-based health information services as an avenue to promote Slim-Fast and its other functional food brands. The firm views Slim-Fast's current Web site - which offers study data, health and dieting advice, recipes and other information - as a model. Unilever's own long history with consumer product Web sites would strengthen promotions, the company maintained. The Unilever Health Institute and Tea and Health program already work in conjunction with product promotions by making available qualified science on the healthiness of Unilever foods. Following regulatory approval of the deal, Slim-Fast will be folded into Unilever's North American Foods division, which includes Lipton, Promise, Wish-Bone and other brands. The acquired company's management team will be retained and Chairman Daniel Abraham will assume an emeritus position. Slim-Fast Foods will operate as a stand-alone unit and will continue to be run from its West Palm Beach, Fla. headquarters. Its products also will be manufactured at the current dedicated facility. Unilever said it has not ruled out deeper integration in the future. Although Slim-Fast will largely be left intact, it still will reap benefits from its acquirer's vast financial and distribution resources, Unilever maintained. The acquisition is the latest event - and seemingly the largest - in a trend of major foods companies buying into the functional foods market. In February, Kraft Foods paid $268 mil. for Balance Bar and Nestle purchased PowerBar for an undisclosed amount (2 (Also see "Kraft Functional Foods Presence Expands With Balance Bar Purchase" - Pink Sheet, 7 Feb, 2000.), 3 (Also see "Nestle PowerBar Purchase Provides Access To Nutritionals Market" - Pink Sheet, 28 Feb, 2000.)). Balancing out its acquisition in the weight loss arena, Unilever concurrently announced plans to acquire the "weight gain" firm Ben & Jerry's Homemade for $326 mil. Ben & Jerry's launched a line of Frozen Smoothies with herbal ingredients last spring, but the ice cream maker has since discontinued the line due to poor sales (4 (Also see "Ben & Jerry's Frozen Smoothies With Herbals Carry Structure/Function Claims" - Pink Sheet, 17 May, 1999.)). Unilever also said its plan to concentrate on its 400 leading brands is underway (5 ). The company is not targeting brands for divestiture or discontinuance but rather is gradually allowing poorer performing brands to be phased out. Many of the brands in question are small overseas ones picked up along with larger acquisitions, the company explained. |