Atkins craze reduces Unilever's profits

THE Atkins diet is slimming Unilever's bottom line. Sales of its Slim-Fast food range slumped 30%, or £50m, in the quarter to September, hard hit by rivals such as Atkins.

Co-chairman Niall Fitz-Gerald's hopes that Atkins would prove a 'fad' look optimistic and the group now admits it had a 'greater than expected impact'.

Though a recent Harvard University study found Slim-Fast highly effective, consumers have been seduced by Atkins. Its popularity soared after celebrities such as Jennifer Aniston used it.

Slim-Fast is fighting back with a new range of snack bars. Its 25-year history has included seven bad years, but it still grew at a compound 14% annually.

Unilever has other headaches. Sales of Calvin Klein, Lagerfeld and Vera Wang fragrances slumped 25% in the quarter, as travel and luxury stores suffered.

It had already warned of slower sales of top brands. They rose 3.2% in the quarter and 3.1% in nine months, but full-year growth will slip below 3%. FitzGerald's 'Path to Growth' plan called for 5% to 6%.

WestLB analyst John Elston says: 'Life has got much tougher in certain markets. Unilever needs to speed up sales growth to restore confidence.'

The Anglo-Dutch giant still has many strong brands, including Dove soap and Liptons tea. Quarterly sales were unchanged at £8.3bn and pre-tax profits 10% ahead at £974m. The ninemonth surplus was down 1% at £2.44bn, but dividends rose 18% to 6.16p.

Rivals Procter & Gamble and Nestle are outpacing Unilever. Its successor growth plan, due in February, will come under close scrutiny.

This year's glitches have dented confidence. The shares, 620p in April, fell 8 1/2p to 487 1/2p. The rating has fallen to 11 times likely 2004 earnings and dividend yield is creeping towards 4%. That looks cheap, but first the group needs to emerge from its sticky patch.