A profit warning in September had analysts prepared for Unilever's dismal third-quarter earnings release last week, in which even the leading brands of its $27 billion foods division-now 56% of total Unilever sales-dropped 1.5%.
Unilever is going to have to prove to Wall Street that it is anything but foolhardy to continue pushing its leaders into slow-growth, competitive categories such as frozen dinners and the now-flailing low-carbs sector. The behemoth has recently promised to increase its marketing spending.
carb options sales down
Hunting for elusive growth, Unilever was the first to jump headlong into the low-carb category with the January launch of Carb Options. This lineup of low-carb versions of brands from Hellmann's to Skippy now totals 42 products. But recent Information Resources data show that sales of the line totaled just $55 million for the 52 weeks ended Oct. 3 in food, drug and mass outlets excluding Wal-Mart. That is despite media expenditures that TNS Media Intelligence/CMR data shows topped $22 million through July.
Dave Best, director-marketing for the line at Unilever, defended Carb Options, saying the company is, "ecstatic because our volume share has remained steady for the last five months in the face of intense competition from Kraft Foods, Nestle and others." But dollar sales for Carb Options fell from $24.5 million for the quarter ended June 27 to $17.9 million for the quarter ended Sept. 25, IRI figures show.
Mr. Best said Unilever is "committed to driving the brand" but it is currently evaluating the "optimal [media] mix for 2005." WPP Group's Ogilvy & Mather Worldwide, New York, handles the effort.
Unilever is likewise committed to pushing forward with Bertolli into the $1 billion frozen dinners and entrees category, sales of which dropped nearly 3% for the Oct. 3 period, according to IRI.
Brian Manning, senior director of Bertolli, said a two-year test of the Bertolli Complete Skillet Dinners for Two in leading Northeast markets was "a phenomenal success." It gave the brand a 37% share of the segment and Unilever is optimistic it can replicate the success nationally.
Despite overall category declines, the Bertolli lineup of pasta-based Italian meals is targeted squarely within the premium multiserve segment, which is "growing substantially at rates of between 5%-10% annually," he said. ConAgra Foods' Marie Callender's Complete Dinners, for example, grew by double-digits over the past year.
Meanwhile, Nestle's Skillet Sensations, which successfully launched in 1998, have dropped by double-digits over the past year as Nestle pushes forward in other areas, such as its new whole-grain Lean Cuisine Spa Cuisine (AA, Oct. 25) Unilever's attempts at extending its leading Lipton brand into meals with shelf-stable dinner kits, Sizzle & Stir, also was unsuccessful. Despite major media expenditures in 2002, the brand has been discontinued.
In line with Unilever's attempt to step up marketing support (a move Prudential Securities' analyst John McMillin said was prompted by rivals "drawing a line in the sand to end market share losses,") Unilever will heavily back the Bertolli frozen dinners come January. TV and print from Interpublic Group of Cos.' McCann-Erickson Worldwide, and in-store promotions will push the notion of getting restaurant-quality Bertolli frozen meals prepared at home in 10 minutes.