• by Karlene Lukovitz  @KLmarketdaily, April 6, 2007

Unilever's newly announced agreement with U.K.-based functional/medical foods developer Provexis promises to produce the latest weapon in the global marketer's arsenal of heart-healthy offerings.

Under the agreement, officially announced last week, the companies are developing a second-generation, concentrated format of Provexis's patented Fruitflow--a tomato extract shown in human trials to reduce blood clotting associated with cardiovascular disease--for use in Unilever products.

A planned post-development licensing deal calls for Provexis to grant Unilever exclusive rights for "certain" food and beverage categories, but retain exclusive global commercial rights for Fruitflow in drinks containing fruit juice (excluding "mini drinks"), products marketed for deep vein thrombosis (DVT), over-the-counter medicines, medical foods, dietary supplements and prescribed medical products. Categories outside the exclusive rights deal will be available to Unilever on a non-exclusive basis.

In addition, even if a Fruitflow licensing agreement were to be thwarted by technical, regulatory or economic factors, the companies have agreed to continue collaborating on developing new intellectual property for another three years.

The original Fruitflow formulation--a thick, sugary syrup that lends itself to juice drinks, but not to dairy and other products--has so far been used only in Provexis's Sirco juice product, marketed in the U.K. According to FoodNavigator.com, Provexis CEO Stephen Moon has confirmed that the new formulation, which extracts sugar to convert the bioactive ingredient into a concentrated powder, is already being manufactured for safety and efficacy tests, and the companies are working on a cost-effective supply chain.

The Fruitflow R&D exclusivity deal is reportedly for 12 months, and was signed last July.

In the March 30 announcement, Jim Busby, vice president, Unilever Foods R&D (spreads and cooking product category), noted that such open innovation agreements ensure Unilever's access to "the latest scientific and technological advances in heart health," and confirmed that the Fruitflow ingredient will be rolled out across Unilever's global foods portfolio once testing is complete and the supply chain is ready.

While the companies aren't identifying the specific food category rights secured by Unilever, Busby's area of specialty would seem to offer a clue as to initial focus.

Becel/Flora spreads and drinking yogurts are Unilever's largest heart health business segment. In 1999, Unilever extended the original heart healthy benefits of the 40-year-old Becel brand (marketed as Flora in the U.K. and Australia, and Promise margarine in the U.S.) into the high-performance cholesterol-lowering range with the introduction of Becel/Flora pro.activ products containing plant sterols.

Now the world's best-selling cholesterol-lowering food brand, the pro.activ group, which includes yogurt mini drinks as well as spreads, has seen 25%+ sales growth in each of the last three years. The overall Becel brand, in 30 countries and still expanding, is one of Unilever's largest and fastest-growing, with annual sales of over ¬1 billion Euros ($1.34 billion) and a CAGR in the high single digits for the last five years, according to a report presented by Vindi Banga, President, Foods, at a Prudential conference last fall.

Banga confirmed that Unilever is pushing to extend the European heart health success to the U.S., and has already made strides: The Promise margarine brand, while still small by Unilever standards, saw sales triple in first-half 2006.

According to Mintel International, overall U.S. margarine sales declined by 3.2% last year. Unilever controlled half of the U.S. margarine market in both 2005 and 2006, but its total share declined by 3.9% (to 51.9%) in the 12 months ending Sept. 10, 2006, and its best-selling I Can't Believe It's Not Butter brand lost nearly 4%, in part to GFA's Smart Balance (see related news brief in today's issue).

I Can't Believe, Country Crock and Imperial, with market shares of 19.8%, 15.5% and 4.7%, respectively, accounted for 87.7% of Unilever's $614 billion in U.S. margarine sales. Promise and other brands produced the remaining 12.3%.

The Provexis agreement and an emphasis on heart healthy products are elements in Unilever's overall, health and well-being-driven global strategy.

Unilever's Global Health, Well-Being Push Is in High Gear

Unilever's collaboration with Provexis is one piece of a massive new global strategy with health and well-being product innovation at its core.

"Vitality"--Unilever's pithy term for the health/well-being focus--is the key to the conglomerate's push to create a higher-margin product mix and build market share in the face of higher product costs and growing competition.

Development and marketing of heart-healthy products is a critical spoke in the strategy. Unilever is aggressively promoting the heart-healthy benefits not only of its Becel/Flora spread and yogurt drink products, but a large and growing number of offerings within brands ranging from Bertolli to the Hellmann's group (including Wish-Bone, Amora, Calve') to Country Crock, Rama and Knorr (Unilever's largest brand).

The three-pronged plan for shifting the portfolio mix includes making existing products healthier without compromising taste, exploiting the inherent goodness of existing product ingredients (tea, milk, oil, soy and fruits and vegetables), and expanding the functional health segment (foods with clinically proven health benefits), Unilever SVP Investor Relations John Rothenberg told attendees at a Prudential conference last September.

Ten out of 15 of the company's priority innovation products in foods are directed explicitly at consumer health and wellness needs, and immunity and strength, brain and weight management benefits are targeted as areas with particularly strong potential for multi-category development, Rothenberg reported.

Unilever's direction is dead on-target in the food arena, observes NPD Executive VP Harry Balzer. "Marketers absolutely must stay ahead of the latest health developments in food, and whereas the focus in the 80s was removing harmful ingredients, the focus now is on adding beneficial ingredients," he says.

The Fruitflow initiative clearly fits with this imperative, Balzer adds, although in the U.S. market, beneficial new food products tend to meet with initial enthusiasm, but to date have almost never managed to become category leaders. "Benefiting from a healthy food product takes time, and Americans seem to lack the patience to stick with it--they move on to the latest healthy product," he says. "No one product or ingredient is a silver bullet."

For this reason, Unilever and other food marketers in the U.S. need to remain flexible even as they stay ahead of the development curve, "knowing that the 'latest' is going to change," Balzer stresses.

Food, however, is only one-half of the Unilever health/wellness juggernaut. Vitality-oriented products are a key part of the company's enhanced focus on the particularly fast-growing overall personal care/beauty business (up 6% worldwide last year).

The global health/wellness strategy is being supported by several operational and marketing initiatives. One is the "One Unilever" reorganization, launched in 2005 to cut costs and streamline marketplace execution and category development across the company's businesses. Another is aggressive leveraging of opportunities in developing and emerging markets, which now represent 41% of Unilever's portfolio and are growing at 8%.

Beefed-up advertising and promotion--increased by 110 basis points in 2005, and another 50 in first-half 06--is another critical component. And, of course, the Provexis collaboration underlines Unilever's deep pockets and determination to be the leader in leveraging health/wellness technology innovations that are increasingly driving growth for marketers in virtually all product categories.

The Unilever Food and Health Research Institute, boasting 450 science and technology experts of 40 nationalities, collaborates with scientific experts and universities around the globe to contribute to scientific developments in areas impacting Unilever's business.

Unilever has also created a new program already shown to encourage consumers to make healthy choices, intended to cross companies and categories and be rolled out on a global basis. The program, centered on a "My Choice" logo featured on products that meet benchmarks for saturated fat, trans fat, sodium and sugar, was launched last year in the Netherlands with government support and participation by other companies.

The highly focused, revitalized overall corporate strategy enabled Unilever, which was losing share as of 2004, to achieve underlying sales growth of 3.8% last year (versus 3.1% in 2005), according to a results report made by Unilever Group Chief Executive Patrick Cescau in February. That's back to its historical growth range of 3% to 4%, and well within the typical 2% to 4% growth range for the markets and categories in which it operates, according to the company's reports.

Corporate goals include 3% to 5% per annum underlying sales growth and a 15%+ margin by 2010.