UNILEVER HEDGES BETS ON LOW-CARB CRAZE

Slim-Fast Line Reengineered

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NEW YORK (AdAge.com) -- Unilever, which last year was first out of the gate with Carb Options, an extensive line of low-carb products, is hedging its bets with its ailing Slim-Fast line by introducing Optima, a
Optima is the new reengineered version of Slim-Fast diet plan products.
middle-ground approach to low-carb, low-fat diets.

Terry Olson, who stepped into the head role of vice president and general manager at Slim-Fast this week as the formerly separate operating unit was rolled under Unilever's retail foods division, said Optima is a "reinvention of a balanced diet that is the wave of the future."

30% drop in business
Slim-Fast late last year rolled out a handful of low-carb items and is now launching a full line, perhaps too late, to address the diet craze that has contributed to the roughly 30% drop in its business over the last year.

"Carb is yesterday's news. Consumers will be looking for better balance, for enough sugar, at a level that's healthy, and for healthy unsaturated fats," Mr. Olson said. Optima, he said, offers the optimum balance of carbs, fats and proteins for energy, taste and to control calories.

Slim-Fast "has struggled to get relevant in a low-carb world," said John McMillin, a Prudential Securities analyst. "Everyone knows they missed the boat. The other part of Unilever was

Analysts said the existing Slim-Fast line was too slow to readjust to the low-carb trend.
quicker to adjust to the new world with Carb Options. Now what they are trying to do is not to drown."

The company will relaunch Slim-Fast this September under a new Optima banner and will feature powders, shakes, bars and likely new fruit smoothies with 50% less sugar and more calcium, among other benefits. The reformulation of the traditional line will dovetail with Slim-Fast's new 18-item lineup of low-carb varieties for a two-diet strategy it hopes can stem the deep declines Mr. Olson pegs to too much sugar.

Sugar as new villain
Sugar is in fact expected to be the new villain of the food industry in the coming months. Categories from candy to cereal have already begun introducing low-sugar varieties in response to consumers' increased health concerns, but industry observers see the backlash against sugar growing even more prevalent.

Bob Goldin, executive vice president of food industry research firm Technomic, said Unilever's more balanced approach with Optima is a good one as "carb consciousness is going to continue to be a reality but other dietary concerns like sugar and fat are expected to elevate in importance." Mr. Goldin cited USDA research that shows America's sugar intake is up 25% since 1970, an average of 30 pounds per capita per year of additional consumption.

Optima, a diet plan that calls for roughly 125 carbs a day, is expected to account for roughly 60% of Slim-Fast sales while the low-carb lineup, which by its April 28 earnings announcement had already accounted for 20% of Slim-Fast sales, is expected to account for 40%, according to an executive close to the company. The executive said that the Optima Smoothies, set to go up against Cadbury Schweppes' new Snapple-A-Day line and others like it, will launch in late September. Mr. Olson said plans have not been confirmed for the smoothies, touted recently to chain drugstore buyers at a trade conference, but did nod to a variety of new product introductions for Slim-Fast that will similarly capitalize on the balanced diet approach.

New ad campaigns
Advertising for both Optima and the low-carb line will launch in prime diet season, late December or early January, from Grey Global Group's Grey Worldwide, New York. Advertising creative has not been finalized but will likely push the message that the low-sugar, high-calcium Optima diet includes a strong commitment to whole foods including fruits and vegetables. It is likely that spokes-celebrity Whoopi Goldberg, brought on in December 2003, will continue to tout the merits of the low-carb varieties, which she began to promote in a campaign in May.

Unilever spent $37 million in media in 2003, according to TNS Media Intelligence/CMR. Sales for Slim-Fast's core shakes and powders dropped 37% to $225 million and its bars dropped 11% to $86 million in food, drug and mass outlets excluding Wal-Mart, according to data from Information Resources Inc. for the 52 weeks ended June 13. Pasta and soup varieties under the Slim-Fast banner, launched in mid-2003, have combined sales of less than $10 million. Mr. Olson said those extensions will not be brought under the Optima banner, which has a specific goal of sugar reduction, and some varieties will be revamped.

As Unilever explores strategies to unite its disparate divisions and to put a greater emphasis on the Unilever corporate brand, the company is expected to announce that its retail foods division will no longer be called Unilever Bestfoods.

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