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Unilever waves white flag in good-for-you food crusade

For Unilever, it was a very big adventure: functional foods. Products that not only filled your stomach but improved your health, and the star performer was low-cholesterol margarine. For more than a decade the soap-to-soup combine has been urging consumers to switch from butter to new oil-based alternatives that contain plant sterols as part of a healthy lifestyle. But in September, Unilever conceded defeat, adding butter to Rama, its leading German spread, in a tacit admission that consumers just don't believe that marge is as good as butter.

Spreads are part of the bedrock of Unilever's business – the company was formed out of a combination of the British soaps empire Lever Bros. and Margarine Unie, the Dutch palm oil processor. But in recent years, they have become a drag, a legacy Northern Hemisphere business that takes the shine off of the stellar growth achieved from selling personal hygiene products in developing countries.

Unilever's spreads, which include brands such as Country Crock and I Can't Believe It's Not Butter, have suffered quarterly sales declines for more than a year and the company on Tuesday complained about "declining margarine markets" in its presentation of the final-quarter results. One of the few bright spots was Rama, the brand with added butter. At a presentation in December, Unilever foods president Antoine de Saint-Affrique confirmed that he would "address the margarine issue." Instead of preaching to consumers about health, the company seems to have decided to go with the flow. "We have been too obsessed, overly obsessed" with margarine. I'm happy to say that this time is over and we have changed. And we have changed in a very significant way."

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What has changed minds is the triple-whammy suffered by the spreads business. The price of butter has fallen sharply as dairy markets recovered from a period of shortages, making butter more competitive in relation to commodities, such as palm oil. Meanwhile, governments have changed their tune about the health risks in consuming saturated fats. The U.K.'s National Institute for Health and Care Excellence (NICE) has revised it advice to GPs, suggesting there is no evidence that switching to low-cholesterol spreads will reduce the risk of heart disease.

But the nail in the coffin has been those TV chefs and bakers, urging us all to don aprons and get buttery, glazing meat with sauces rich in caramelized butter and kneading it into pastry dough. The awful truth is that consumers reckon butter tastes better than marge. Since 2000, butter sales in the U.S. have risen in value by almost two-thirds. Hence the decision by Unilever in 2010 to launch Flora pro-activ Buttery, a new version of its leading U.K. spread with an "indulgent" taste and, finally, Rama, with added dairy fat.

Unilever says its strategy is working, that it is making money from marge and that it is taking market share in what it admits is a shrinking market. It still insists that margarine is better for you than butter but clearly, this will not be at the heart of its marketing message.

The question is whether functional foods are now dead, an idea whose time came but is now gone. Medicine is sold every day on the premise that it will make you feel well and the idea of food that could not only taste good but have that added medicinal boost seemed too good to be true. However, for consumers these may have been mixed messages. We want our food to make us feel good in different ways to medicine; sometimes good for you just doesn't feel quite good enough.

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About the Author

Carl Mortished is a Canadian financial journalist and freelance consultant based in the U.K. With a career spanning investment banking, journalism and consulting for global companies, he was for many years a financial writer and columnist for The Times of London. More

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