Slim-Fast Foods Company

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Slim-Fast Foods Company

777 South Flagler Drive
West Tower, Suite 1400
West Palm Beach, Florida 33401
U.S.A.
Telephone: (407) 833-9920
Fax: (407) 822-2876
Web site: http://www.slim-fast.com

Wholly Owned Subsidiary of Unilever Group
Incorporated: 1945 as Thompson Medical Company
Employees: 110
Sales: $28 million (1999)
NAIC: 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 311999 All Other Miscellaneous Food Manufacturing

Slim-Fast Foods Company sells its popular meal replacement shakes, drink powders, snack bars, and meals throughout the United States, Europe, Asia, and Latin America. Created in 1977 by S. Daniel Abraham, Slim-Fast grew rapidly in the 1980s due in part to successful advertising featuring celebrities like Los Angeles Dodgers manager Tommy Lasorda. The company was spun off from Thompson Medical Co. in 1990, and consumer products giant Unilever acquired it in 2000. Following the high protein, low-carbohydrate diet craze that swept the United States in 2003, the Slim-Fast has been forced to rethink its product strategy.

The Early Years

What would become Slim-Fast Foods Company began with S. Daniel Abraham's ability to sell itch relief cream. Abraham exited the U.S. Army in 1945 at age 21 and went to work at his uncle's small drug company in New York. While working there, he read an advertisement in a trade journal for an itch-relief cream and decided to purchase the product and its maker for $5,000. Abraham left his uncle's company and began traveling throughout neighboring states to offer doctors and pharmacists samples of his product while distributing his advertisement posters. Abraham's fledgling enterprise soon became known as the Thompson Medical Company.

Abraham used his profits to hire chemists and pharmacologists to modify other manufacturers' existing products. In addition, he purchased the rights to other pharmaceutical companies' smaller and less-successful product lines, which he then revamped and marketed as Thompson Medical products. In 1956, Abraham unveiled his first diet product, called Slim-Mint gum, which contained a hunger suppressant called benzocaine. By 1960, his company had also added a line of diet pills called Figure-Aid.

It was not until 1976, with the introduction of Dexatrim, that Abraham's experimentation in the diet-control market began to pay off big. Dexatrim was a diet pill containing the appetite suppressant phenylpropanolamine (PPA). Although the use of PPA was somewhat controversial at the time, Dexatrim soon became the best-selling diet pill on the market and helped Thompson Medical's sales surpass $50 million by the end of the decade.

Slim-Fast Is Born: 1970s–1980s

Thompson Medical introduced Slim-Fast in 1977. When mixed with low-fat milk, the powdered formula took on the taste and texture of a milkshake. Marketed as a 1,200-calorie-per-day meal-replacement product, Slim-Fast was engineered to be used at both breakfast and lunch, and then supplemented with a sensible and healthy dinner. Unfortunately, during its first year on the market, Slim-Fast was pulled from circulation along with all other fluid meal-replacement products after almost sixty dieters died while using 300-calorie-per-day liquid diets made by other manufacturers. To counter the loss of earnings that had been generated by the Slim-Fast product, Abraham engineered a public offering in 1979 of approximately four million shares of Thompson Medical stock. The offering brought in $8.4 million in earnings, most of which was spent on advertising and promotion of the company's products.

Luckily, Abraham was able to reintroduce his Slim-Fast product in the early 1980s, at the same time that Dexatrim sales began to decline due to the Food & Drug Administration's growing concerns regarding the use of PPA in consumer products. The readmittance of Slim-Fast to the diet control market helped Thompson Medical achieve sales of approximately $197 million in 1984 and laid the foundation for the product's future success.

Throughout the mid-1980s, Thompson Medical's sales fluctuated as more manufacturers entered the diet-control market and competed for market share. In late 1987, just after the October stock market crash, Abraham decided to make the company private once again and began repurchasing shares of Thompson's stock. A year later, he had acquired 33 percent of the company's stock, a controlling interest that he maintained into the mid-2000s. At this time, he also stumbled upon what would become the most successful advertising tool used by Slim-Fast in the coming years: televised celebrity endorsements.

In 1988, Los Angeles Dodgers manager Tommy Lasorda needed to lose 20 pounds, and Slim-Fast was in need of a celebrity to promote its product in the same way that Oprah Winfrey was promoting competitor Opti-Fast. The company signed Lasorda as its spokesman and offered to contribute $20,000 to his favorite charity if he would stick to the diet plan. Within months, Lasorda had lost almost 30 pounds, and a Nashville-based group of nuns received a new convent in his name. Research showed Lasorda to be an especially effective spokesman with female consumers, who found him to be credible because he was a man admitting to a weight problem on national television, and he was seeing successful results due to his use of the Slim-Fast product.

On Its Own in the 1990s

Throughout the 1980s, Thompson Medical had diversified its product offerings and had begun to market such over-the-counter remedies as Aspercreme, Sportscreme, and Cortizone-5. By 1990, in response to Slim-Fast's rapid growth in the diet and nutritional foods segment, Abraham spun off the division to become its own company, although he retained his position as chairman and majority stockholder.

Just after the split, Slim-Fast began to experience a decrease in sales, due in part to Oprah Winfrey's highly publicized weight gain after discontinuing use of a fluid meal-replacement product. Without Thompson Medical's diverse portfolio to back it, Slim-Fast had to find a way to support itself through this time period. Thus, the company began planning the introduction of a variety of new products under the Slim-Fast brand name, and Slim-Fast Nutritional Foods International, Inc. was born.

The new Slim-Fast offerings were accompanied by a broadening of the company's focus to combine weight loss with an emphasis on the importance of a healthy lifestyle and the nutritional benefits of Slim-Fast products. A new slogan was introduced, advertising the company's products as a part of the "Slim-Fast way of life." New product offerings stressed convenience and included pre-mixed Slim-Fast in cans and refrigerated cartons, hot chocolate mix, frozen entrees and desserts, and snacks such as cheese curls and popcorn. ConAgra, a leading force in the health and diet business with its Healthy Choice product line, manufactured and distributed the frozen foods. The pre-mixed Slim-Fast was manufactured by Farmland Dairies, and the snack items were made in partnership with Borden.

In another effort to move the company beyond its typical weight-loss products, Slim-Fast produced new television advertisements featuring celebrity testimonials to the health benefits derived from the "Slim-Fast way of life." While many people questioned Slim-Fast's ability to compete in the health-food arena against giants such as Weight Watchers and Lean Cuisine, Slim-Fast hoped its advertising campaign would generate increased sales. A new spot featuring Lasorda was aired, as were other spots containing media personalities Frank and Kathie Lee Gifford, actor Peter DeLuise (Dom's son), ex-New York Mayor Ed Koch, and singer Mel Torme.

In 1992, about a year after Slim-Fast separated from Thompson Medical, Ron Stern was promoted to the position of president of Slim-Fast. Stern had previously been with the company as a vice-president and was instrumental in the signing of Lasorda as spokesman three years earlier. Although Slim-Fast held a 70 percent share of the meal-replacement market at that time, Stern noted that a rapidly increasing amount of competition threatened the company's market share. Slim-Fast decided to lower the wholesale price of its products by an average of 55 cents, thereby making its competitors' products more expensive to stock.

The following year, Slim-Fast began airing a talk-show style infomercial in an attempt to counter the growing segment of companies that were offering mail-order diet products. Interestingly, Slim-Fast did not actually sell its products through the infomercial. Instead, the television spot tried to persuade consumers to go to retail stores for weight control products, rather than purchase such items through the mail. Using this method, Slim-Fast made efforts to retain its market share without having to enter the mail-order arena to compete effectively.

Slim-Fast Nutritional Foods International entered the mid-1990s in a position of dominance in the weight management and health-food industry. With a controlling share of the market, Slim-Fast was beginning to receive accolades for its performance. "No single brand has demonstrated the vitality, marketing savvy and well-timed ability to tie into Americans' desire for weight management and proper nutrition as has Slim-Fast," according to Supermarket Business. As one of the few brands that followed the Surgeon General's recommendations on diet and health and as a recipient of the Good Housekeeping Seal of Approval, Slim-Fast appeared to be equipped to handle the pressures of an increasingly cautious consumer society. An expanding array of product offerings and a growing base of customers interested in better health left Slim-Fast well positioned to face future challenges.

Company Perspectives:

For more than 25 years, we have been committed to the development of wholesome and balanced nutritional products to aid in weight management and improved health.

Late 1990s and Beyond

In order to maintain its market share, Slim-Fast introduced new products and spent heavily on advertising in the late 1990s. Over $46 million was earmarked for advertising in 1996. The company launched a $10 million campaign in May 1997 for its new quick diet product, Jump Start, which claimed consumers could lose five pounds in five days. "Give us a week, we'll take off the weight" was a popular tagline during this time. Slim-Fast also added a new line of Slim-Fast Meal On-The-Go bars to its arsenal, introducing consumers to the products via a $60 million advertising campaign in 1999.

Slim-Fast now held a 46 percent share of the diet liquid/powder segment of the weight loss market, selling over $611 million of its products in 1999. With the diet/weight loss market slated to grow by at least 10 percent per year, Slim-Fast entered the 2000s on solid ground. Its annual sales were growing at a rate of 20 percent per year, and the company soon caught the eye of consumer products conglomerate Unilever. In April 2000, Unilever announced that it would buy Slim-Fast in a $2.3 billion deal. Unilever also bought ice cream maker Ben & Jerry's at the same time, thereby tapping into two groups of consumers—those that craved sweets and those searching for weight loss products. An April 14, 2000 Wall Street Journal article wrote about the benefits of the deal, reporting that "only six percent of its [Slim-Fast] sales are outside North America, offering Unilever an opportunity to push the brand through its world-wide distribution and sales network."

Indeed, under Unilever's ownership Slim-Fast began an aggressive expansion plan. The company—now called Slim-Fast Foods Co.—opened a new manufacturing plant in Tucson, Arizona. It also expanded into twelve global markets in Europe, Asia, and Latin America.

By 2003, intense competition forced the company to launch a line of convenient-meals, including pastas, soups, and a new frozen novelties line that included a low-calorie fudge bar. The company and its peers in the diet industry faced a major challenge at this time as the low-carbohydrate/high protein diet craze swept the United States. Weight loss programs like Atkins and South Beach, which focused on low sugar and low carb diets, began to cut severely into Slim-Fast revenues. In 2003, the company's sales fell by 21 percent. In an attempt to attract low-carb conscious consumers, Slim-Fast launched a line of high protein and low carbohydrate products in late 2003 and early 2004.

While the recent shift in consumer preference was indeed a setback, Slim-Fast was confident it would remain the leading weight management brand in the United States. The company claimed that nearly one billion people across the globe were overweight or obese and that for the first time there were more over-nourished people in the world than under-nourished. With a consumer products giant as a parent, Slim-Fast appeared to be well positioned to face the challenges brought on by changing customer demands.