16 Jul 2014 Unilever tightens belt with Slim-Fast sale

Consumer goods giant Unilever has shed its Slim-Fast milkshake and snack bar brand in another belt-tightening move.

The Anglo-Dutch group said it had sold a majority stake in the diet brand to US private equity fund Kainos Capital, which specialises in food and drink investments. Neither parties disclosed deal terms.

The flavoured soya and dairy based shake was created by the Thomson Medical company and Slim-Fast became the favoured weight-loss product during the 1990s. Unilever acquired the business in 2000 when the meal replacement shake was being used by 45% of the American health and weight management market for a reported £1.4bn.

However, the diet industry has changed dramatically since then as more restrictive diets, such as the Atkins and 5:2 program, have become more popular. As a result, sources watching the sale process said that Slim-Fast had struggled to whet buyers’ appetites.

It was said that Unilever was looking for a pricetag of around £1bn but the Slim-Fast sale is unlikely to have fetched that sum after a difficult process which led to the consumer titan keeping a minority stake in the business.

Unilever has embarked on its own slimming programme under the guidance of new chief executive Paul Polman who is aiming to achieve cost savings of €500m (£400m) by the end of this year.

Earlier this year the company sold pasta sauce brand, Ragu, to Japan’s Mizkan Group for £1.26bn, its meat snack Peperami to American food producer Jack Links, and last year offloaded Wish-Bone salad dressing to Pinnacle Foods for $580m and Skippy peanut butter to Hormel Foods for $700m.

Earlier this month The Telegraph reported Unilever had also hired advisers at PwC to explore sale options for male hair grooming product Brylcreem.

COMMENT: Nestlé, Unilever losing interest in food?

This comment from Dave Fusaro, Editor in Chief, FoodProcessing.com…

Both Nestlé and Unilever continue to give financial analysts hints that the global consumer packaged goods giants are interested in selling off slow-growing food & beverage businesses in order to develop and acquire operations in nonfood categories with greater potential. 

In the past month, Unilever sold a majority stake in its Slim-Fast brand to private equity firm Kainos Capital, although Unilever will retain a minority stake in the business. Earlier this year, its Wish-Bone and Western salad dressings went to Pinnacle Foods and the Ragú and Bertolli pasta sauces to Mizkan Group. Skippy peanut butter sold to Hormel last year, and the promising Bertolli and PF Chang’s frozen meals businesses were bought by ConAgra in 2012.

However, Kees Kruythoff, president of Unilever North America, said: “The Slim-Fast sale is the last step in the portfolio reshaping that we had planned for North America. This transaction, along with previously announced divestitures, will give us the focus to drive growth behind our core portfolio.”

At the Deutsche Bank Conference in Paris June 18, one of CFO Jean-Marc Huët’s slides read, “Reducing our dependency on foods.” A bar chart, titled “More personal care weighted,” showed food at 46 percent and personal care at 24 percent in 2009, and now the split is 36 percent food and 33 percent personal care.

Look at what Nestlé’s been selling and buying. In the past month, Nestle sold its Juicy Juice brand to Brynwood Partners, a buyout firm that also purchased the company’s Bit-O-Honey, Joseph’s Pasta Co. and Flipz brands. PowerBar and Musashi brands went to Post Holdings earlier this year, and the Jenny Craig business to North Castle Partners.

Instead, the Swiss company this year created Nestlé Skin Health SA to pursue “the field of specialised medical skin treatments,” filling it first with the 50 percent stake in Galderma it didn’t already own (L’Oréal held the other half) and more recently with Valeant Pharmaceuticals’ rights to several key injectable aesthetic dermatology products.

“We will divest certain businesses or subcategories of certain businesses,” CEO Paul Bulcke told the company’s June investor seminar in Boston. “We will not allow problems to drag on.”

In the background was the Nestle motto: “Good food, good life.”