Unilever sees food sales growth accelerating

By David Jones

CHICAGO (Reuters) - Consumer goods giant Unilever Plc/NV said it expects demand for new healthy products to help growth in its food business catch up with the faster growth rate in its home and personal care (HPC) unit.

Anglo-Dutch Unilever (ULVR.L: Quote, Profile, Research, Stock Buzz)(UNc.AS: Quote, Profile, Research, Stock Buzz), maker of Knorr soups, Hellmann's mayonnaise and Skippy peanut butter, reported underlying 2006 sales growth of 3.8 percent in 2006. Within that, its foods rose just 2.9 percent, while sales in the HPC unit, which sells soaps and deodorants, grew 4.7 percent.

"We expect that food growth will catch up eventually with that of HPC, but we are not giving a timescale," Alan Jope, global foods vice president for Unilever, said at the Reuters Food Summit in Chicago on Wednesday .

Jope added that the move toward healthier foods by Unilever, the world's No. 3 food group after Nestle (NESN.VX: Quote, Profile, Research, Stock Buzz) and Kraft Foods Co. (KFT.N: Quote, Profile, Research, Stock Buzz), was supported by its global "choices" program, which features a front-of-pack logo that gives consumers details on trans fats, saturated fats, salt and sugar content.

He highlighted two products that are spearheading its "vitality" program toward healthier eating -- a yogurt-based "one shot" drink aimed at lowering cholesterol levels and a soya-based fruit drink from South America.

One-shot yogurt drinks are now a 3 billion euro market in Europe, and Unilever intends to launch a product containing plant sterols, which are claimed to lower harmful cholesterol, on May 21 in the U.S. under its Promise brand at $1.00 a shot.

It has also launched its South American soya-based fruit drink in the UK under the Adez brand, and this and a European Knorr Vie fruit-and-vegetable-shot drink are also under consideration for launch into the U.S. market.

GROWTH FOCUS

Jope pointed to Unilever's focus on growth in its food business, on an increase in food sales in developing markets and on the health benefits of core food areas such as margarines as underlying the expected higher growth rate in food sales.

His focus is on five developing countries in the food area -- China, India, Russia, Brazil and Mexico. In the first two, Unilever has a relatively small foods business, but it hopes to piggyback on the strong growth and wide distribution network in these nations of its soaps and shampoos.

Unilever is also gaining from the high consumption of mayonnaise in Russia, which Jope puts down to its use as a margarine substitute for cooking in the former Soviet era and the generally bland nature of Russian food.

"We see Russia as a big opportunity for soups, mayonnaise and ketchup, and even ice-cream," Jope said.

He also expects more innovative healthy products to emerge from Unilever's core food areas of margarines, soups, ice creams and teas. A margarine spread has already been launched in 15 European countries under the Rama/BlueBand Idea! brands, which contains added nutrients that are claimed to be beneficial to children's mental development.

Unilever Chief Executive Patrick Cescau has said that growth is the group's top priority for 2007, and it has seen a slow recovery from a profit warning in September 2004, when overall group growth ground to a halt.

Analysts say Unilever should be able to grow by around 4 percent in the future, in the middle of its 3 to 5 percent 2010 target, but this still lags growth rates of European rivals. Nestle recorded 6.2 percent underlying sales growth in 2006, while Danone (DANO.PA: Quote, Profile, Research, Stock Buzz) grew even faster at 9.7 percent.