Unilever's Skippy, Wishbone
And Ragu Go Low-Carb
By SARAH ELLISON and DEBORAH BALL
Staff Reporters of THE WALL STREET JOURNAL

In a sign that low-carb dieting may be more than just a passing fad, Anglo-Dutch marketing giant Unilever is launching a line of 18 new low-carbohydrate products hitched to some of its most venerable brand names.

Dubbed "Carb Options," the new line includes carbohydrate-conscious relatives of Skippy peanut butter, Ragu spaghetti sauce and Wishbone salad dressing, along with other condiments, spreads, snacks and shakes.

Costly and risky, Unilever's move is a measure of how far into the mainstream the hot low-carb diet trend has moved. An estimated 30 million to 50 million people are carb-conscious, according to Unilever, which figures the low-carb category could generate as much as $1 billion in sales in 2005.

Separately, snack-food giant Frito-Lay, a unit of PepsiCo Inc., is expected to announce Wednesday the launch of low-carb Doritos and Tostitos tortilla chips, containing 60% fewer carbs than the regular chips.

But betting so much on a diet craze is risky, particularly for Unilever, which has struggled over the past year to meet quarterly sales growth targets. Unilever is well aware of the dangers of chasing diet fads. One of its biggest brands, Slim-Fast shakes and snacks, has lost luster as dieters have turned away from meal-replacement products in favor of low-carb dieting. By linking some of its oldest trademarks to the latest trend in weight-loss, Unilever risks diluting their brand image.

The Carb Options line is meant both for people following strict low-carb diets and for people who are just "watching their carbs," says John Rice, chief executive of the Unilever Bestfoods North America unit. But Unilever, like most other big marketers, is unwilling to make an explicit "low carb" claim on its labels. The Food and Drug Administration hasn't issued labeling guidelines for the term "low carb," as it has for "low fat." The FDA is expected to issue carb guidelines as early as this year, following talks with major food companies and nutrition experts.

Each serving of the Carb Options products has six grams or less of "net carbs" -- a term that also isn't approved by the FDA but is increasingly used on food labels to describe those carbs with a measurable effect on blood sugar. Net carbs are sometimes known as "bad carbs," such as those found in sugar, bread and potatoes, and excluding those from fiber or sugar alcohols.

Unilever reformulated some of its most popular products for its low-carb line. For example, while regular Ragu Chunky Gardenstyle sauce contains 20 grams of carbohydrates per serving, the Carb Options version has only five grams of net carbs. Unilever also is using Carb Options as a stand-alone moniker for low-carb shakes and snack bars.

The low-carb craze began back in the 1970s with the late Robert Atkins's diet book; in recent years, the resurgent popularity of "Dr. Atkins' New Diet Revolution" has inspired a slew of similar regimes, including the South Beach diet, and low-carb products. Until now, niche marketers dominated the category of low-carb packaged food. Foremost among them has been Atkins Nutritionals Inc., the corporate designation for the Atkins empire. Analysts estimate it generated some $200 million in revenue last year; in October, Goldman, Sachs & Co. and Parthenon Capital, a Boston private equity firm, bought a majority stake in the company for an estimated $600 million to $800 million.

Unilever is pricing its Carb Options products at a premium of 20% to 25% above the existing brands. But the company notes they will be far less expensive than rival products from the niche marketers. A jar of Skippy Carb Options peanut spread, for example, has a suggested retail price of $2.89, while a comparable jar of regular Skippy costs $2.49. But both are a steal compared to Carb Not Beanit Butter, a soy-based spread costing $6.99. Anheuser-Busch Cos. has led brewers with a plunge into low-carb beer. And fast-food restaurants have become carb-conscious, too. At some locations, McDonald's Corp. and Burger King Holdings Inc. have posters making suggestions on how to choose low-carb, low-calorie and low-fat meals. For example, McDonald's will serve a burger wrapped in a lettuce leaf, not a bun.

But most big packaged-food marketers have watched the carb-counting trend from the sidelines. When H.J. Heinz Co. introduced a ketchup with only one gram of carbohydrates per serving last year, the product was the exception rather than the rule.

Unilever is returning for more of the diet-fad game after watching one of its biggest brands, Slim-Fast, triumph and tumble. Founded in 1977, Slim-Fast took off in the 1980s, riding consumers' passion for quick-loss dieting based on meal replacements. Following Oprah Winfrey's weight loss, Slim-Fast used celebrity endorsements to stoke growth and by 1990 was a mainstream brand with $600 million in annual sales.

But over the next five years, Slim-Fast's sales plummeted as consumers tired of celebrity endorsements and the taste of its shakes, turning instead to other diet fads based on grapefruit and cabbage soup. By 1996, Slim-Fast's global sales had shriveled to about $200 million.

New marketing and new products helped turn Slim-Fast around, and in 2000 Unilever bought the brand. The global marketer expanded distribution and put some marketing muscle behind it, turning it into a $1 billion dollar brand by 2002. But then the cycle repeated itself last year, and Slim-Fast fell victim to the Atkins craze. Sales began falling in early 2003, but Unilever's management was unfazed, calling Atkins a short-term trend that wouldn't slow Slim-Fast's growth. Unilever doesn't break out sales for Slim-Fast, but revenue in its Health & Wellness category, of which Slim-Fast is the biggest part, declined 15% in the first half of 2003 and 23% in the third quarter, according to the company. Sales of Slim-Fast fell 32% in the fourth quarter of 2003, according to estimates by Sanford C. Bernstein.

Slim-Fast's roller-coaster rides mirrors that of SnackWell's, a fat-free cookie brand launched by Nabisco (now part of Kraft Foods Inc.). In the early 1990s, SnackWell's rode the low-fat craze and reached a sales peak of $600 million, then quickly fell off. The brand has since reintroduced some fat into the products, but it remains a small player.

Unilever, in addition to launching the Carb Options products, also will make a labeling change. To its venerable Hellmann's mayonnaise, Unilever will add the phrase, "As always, zero grams of carbs per serving."

Unilever plans to spend more than $10 million marketing its new low-carb products this year, reassuring customers that the food tastes good, and referring to the durability of the accompanying brand names. The slogan for the print campaign: "Taste you can count on."

--Chad Terhune contributed to this article.


Updated January 14, 2004</FONT>


Copyright (c) 2003 | Dow Jones & Company, Inc.
All Rights Reserved

If only they'd make lowcarb milk shakes at fastfood joints.... yum.

What really jumped out at me in this article is the continuous words such as FAD and CRAZE. That drives ME Crazy! For years they catered to lowfat/low calorie, and now low carb is reduced to a fad or a craze. GRRRRRR!

Let's hope what they/Unilever DOESN"T jump on is the nasty trend of charging ridiculous prices for LC foods! We are being ripped off big time..you can't convince me that the alternate ingredients justify charging $8.99 for a bottle of ketchup or $5.99 for a loaf of bread. We are being held hostage due to the fact that it is difficult to duplicate these items at home. Frankly, I don't use many of the prepared LC foods, preferring to make many of my own, and just forgoing the bread etc. You can make delicious LC ketchup for pennies..no need to be ripped off!