Unilever, the Anglo-Dutch household products giant that warned on trading last month, pinned some of the blame for the slump in sales of its Slim-Fast diet products on the US supermarket behemoth Wal-Mart.
Niall FitzGerald, the co-chairman, said "trading issues" with Wal-Mart were partly behind Slim-Fast's disappointing performance in the first half of the year, including a 17 per cent decline in sales in the initial three months. "Faddish diets", such as Dr Atkin's much hyped low carbohydrate regime, also took their toll, he added.
Mr FitzGerald said Wal-Mart, the world's biggest retailer which accounts for up to 45 per cent of Slim-Fast's volumes in the US, had historically taken a margin hit on sales of Slim-Fast products. "They began to pull back on their very aggressive pricing and our response was tardy," he said. Wal-Mart also launched its own version of Slim-Fast, further eating into Unilever's sales.
Unilever's response has been to broaden its Slim-Fast ranges, adding pasta, soup and ice cream to the basic shakes and bars. "Slim-Fast was an internal issue and we have dealt with it," Mr FitzGerald said. Striking a more upbeat note, he said the group's business with Wal-Mart - worth $3bn, or 6 per cent of its global sales - would be Unilever's fastest-growing business, as the US company that started life as a non-food retailer sought to expand its food sales. The company reported a lacklustre start to the year with sales of its leading 400 brands such as PG Tips tea and Ben & Jerry's ice cream up just 3.1 per cent. This means its top brands must grow by 5 per cent in the second half to meet the group's full-year target of 4 per cent.
Mr FitzGerald said that any businesses that held back that growth could be put up for sale. He said Unilever's frozen foods division, which includes Birds Eye in Britain and Findus in Italy, its household care unit and its prestige fragrances arm, home to Calvin Klein perfume, were "on watch".
The group revealed that it had bowed to shareholder pressure and abandoned its practice of issuing eight trading updates a year. Mr FitzGerald said June's pre-close announcement had been the "final brick in the wall", leading to "volatility" in the stock. The company will continue to report quarterly, in line with US requirements, he added.
Unilever reaffirmed its low double-digit earnings growth and leading brands sales targets as it reported a 26 per cent fall in pre-tax profits for the second quarter. In the six months to end-June, pre-tax profits fell 7 per cent to €2.1bn, dragged down by restructuring-related charges.
Earnings per share grew by 4 per cent. Its shares jumped 8p to 512p.