I Can’t Believe It’s Butter in My Unilever Rama Spread

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Unilever’s surrender comes as butter makes a comeback, lifted by new nutrition research, cooking shows like “The Great British Bake Off,” and a consumer embrace of all things natural. Close

Unilever’s surrender comes as butter makes a comeback, lifted by new nutrition... Read More

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Source: Media for Medical/UIG via Getty Images

Unilever’s surrender comes as butter makes a comeback, lifted by new nutrition research, cooking shows like “The Great British Bake Off,” and a consumer embrace of all things natural.

Paul Polman, the head of margarine maker Unilever (UNA), has criticized butter in the past, saying the dairy fat “kills.” With sales of the company’s spreads sagging, he is now embracing it.

In what Unilever Foods President Antoine de Saint-Affrique calls a “fundamental turnaround” of a $4.8 billion business that has struggled for years, Unilever in September added butter to Rama in Germany, the biggest spread brand in that market. After years of positioning butter as the enemy of margarine, the battle is over, he said in a Dec. 5 investor conference.

Unilever’s surrender comes as butter makes a comeback, lifted by new nutrition research, cooking shows like “The Great British Bake Off,” and a consumer embrace of all things natural. Per-capita butter consumption hit a 44-year high in 2012, according to U.S. government data, while margarine is at a 70-year low. In Germany, butter outsells margarine by a three-to-one margin, and the gap is widening as the latter failed to grow in 2013, according to data tracker IRI.

“Margarine has become a marker for cheap, processed, artificial, unhealthy food,” says Marion Nestle, a New York University nutrition professor. “The irony is hilarious. Unilever went to a lot of trouble to formulate healthy margarines, but the zeitgeist has caught up with them.”

Artisan breads are served with I Can't Believe It's Not Butter!, Deliciously Simple, and Country Crock (Photo by Jason DeCrow/Invision/AP Images) Close

Artisan breads are served with I Can't Believe It's Not Butter!, Deliciously Simple,... Read More

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Artisan breads are served with I Can't Believe It's Not Butter!, Deliciously Simple, and Country Crock (Photo by Jason DeCrow/Invision/AP Images)

Sinking Spreads

For Unilever, adding butter to Rama comes after unit sales in the division that includes spreads have declined for six straight quarters. Analysts expect another decrease when the company reports fourth-quarter results Jan. 21. Unilever’s shares were little changed last year, trailing the STOXX Europe 600 Price Index’s 17 percent gain. They were little changed at 28.67 euros at 2:42 p.m. in Amsterdam.

A Unilever spokeswoman declined to comment on the unit’s performance or elaborate on the addition of butter ahead of the earnings report. Spreads account for about 7 percent of the company’s total sales.

With brands like Flora, Country Crock and I Can’t Believe It’s Not Butter, London- and Rotterdam-based Unilever is the world’s leading maker of spreads with over 30 percent of the market, according to Euromonitor. Margarine was invented by a French chemist in 1869 after Napoleon III offered a prize for making an alternative to butter to feed his troops and the poor. The chemist sold his patent to a Dutch company that is now part of Unilever and the product grew more popular amid butter shortages during World War II.

‘Margarine Goodness’

Over time, Unilever has improved the health profile of its spreads, phasing out the use of artery-clogging trans fats and adding Omega-3 fatty acids and plant sterols to reduce cholesterol. Today, the products most people call margarine are spreads, better-tasting variants made from oils and fats that emerged in the 1970s.

Unilever has positioned margarine as healthier and less expensive than butter, as vegetable oils have less saturated fat and cost less than the cream used for butter. In 2009, Polman’s first year as CEO, the company unveiled an ad campaign touting the “Goodness of Margarine,” which implored people to limit butter intake.

Adding butter to Rama and to one of its spreads in Finland is just Polman’s latest effort to revive the business. Unilever spent 35 million euros developing a new lower-cost production method dubbed “Cool Blend” several years ago. The process promised a creamier-tasting spread with fewer ingredients and less fat.

‘New Coke’

Cool Blend spreads hit the European market in 2012. In the U.K., which makes up about 10 percent of the company’s spreads sales, Britons blanched at the new taste of Flora so much that Unilever switched back to the original formulation last year amid a 17 percent decline in sales, according to IRI.

“It was a New Coke moment,” said Mintel analyst David Turner, referring to Coca-Cola Co. (KO)’s aborted 1985 reformulation of its flagship soda. “They took a big risk, and it backfired.”

While Flora floundered, butter flourished. A 21 percent drop in the wholesale price of butter last summer made it more affordable compared with spreads. And new research has challenged the long-held view that the saturated fat in butter causes heart disease, says Aseem Malhotra, a member of Britain’s Academy of Medical Royal Colleges Obesity Steering Group.

Butter also benefits from the trend toward more natural foods with simple ingredients, a desire kindled by celebrity chefs and cooking shows, like the Food Network’s “Heartland Table,” which calls butter “the essential lifeblood of every dish.”

Natural Product

Meanwhile, Unilever investors are running out of patience with spreads. Calls to sell some or all of the business, which Investec Securities last year estimated is worth at least 8 billion euros, are mounting, according to MainFirst analyst Alain-Sebastian Oberhuber.

“If it’s a battle they can’t win, I’m not sure if it’s smart to keep battling,” he said. “It’s better to divest as long as the margins and cash flow are still strong and to get a decent price for it.”

For now, Polman is backing spreads and even wants a seat on the all-natural bandwagon. At the Dec. 5 conference, de Saint-Affrique said that margarine “is a natural product” as “it’s made of oil in the same way as butter is made of milk.” He added that the brand is starting to win back market share, though it was still in the early stages of its rollout.

That may be a tough sell. “You’ve told us for 20 years that butter is bad,” said Mintel’s Turner, “and now you are putting it back in your margarine? For the consumer, it’s a big leap.”

To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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