|The last sentences confirms(IMO) my position that this is a positive for SMBL as Unilever is stating that this is the market to be in for food products.|
By Shara Tibken
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of Smart Balance Inc. (SMBL) dropped as much as
13% Monday following reports a competitor is planning to remove all artificial
trans fat from its spreads, hurting a marketing advantage of the buttery spread
USA Today reported that Unilever NV (UN) - the largest seller of soft
margarine - intends to announce plans Monday to remove all partially
hydrogenated oils, or artificial trans fats, from its spreads, including I
Can't Believe It's Not Butter and Shedd's Spread Country Crock. The article
said the change is to begin by next month and be done by the second quarter of
A representative from Unilever confirmed that the company plans to make an
Canaccord Adams analyst Scott Van Winkle said the announcement would take
away one of the marketing benefits Smart Balance has over its competition.
"This is a long-term risk because it takes away the advantage of having the
claim it has the lowest level of trans fats," Van Winkle said in an interview.
U.S. Food and Drug Administration regulations allow products with less than
0.5 grams of trans fat per serving to be labeled as containing no trans fat.
Unlike Unilever's spreads, Smart Balance's products currently contain no
hydrogenated oils - which the company cites as an advantage over its
One of Smart Balance's recent marketing campaigns has included a push toward
making consumers aware of the health problems associated with partially
hydrogenated oil, or trans fat, which its competitors use in their products.
"Even 1 gram of trans fat increases the risk of heart disease 15x more than 1
gram of saturated fat," an ad on Smart Balance's Web site said. "Choose Smart
Balance Buttery Spread with absolutely no hydrogenated oils and less trans
A representative from Smart Balance wasn't immediately available to comment.
In recent trading, Smart Balance tumbled 11% to $6 after earlier falling as
low as $5.84. Shares are down 15% over the past 12 months. American depositary
shares of Unilever, meanwhile, were down 7 cents to $26.38.
Northland Securities analyst Chris Krueger said the sell-off Monday is an
overreaction as Unilever plans to replace the partially hydrogenated oils with
a mixture of palm and interesterified fat, or plant oil.
He said interesterified fat could also be unhealthy, as it may be bad for
HDL, or good, cholesterol or raise blood sugar.
In addition, Krueger said Smart Balance could possibly benefit from
Unilever's marketing campaign against partially hydrogenated oil as it would be
another option for more health-conscious consumers.
"If Unilever is not going to use hydrogenated oil, the thought at first
glance is this is real competition, and Unilever is going to take some share
back from Smart Balance," Krueger told Dow Jones Newswires.
But he added that Unilever, which spends a lot of money on advertising, could
make a push for encouraging consumers to use products that don't include
"This could hurt the rest of the buttery spread categories except for the
ones that don't use hydrogenated fats," including Smart Balance, Krueger said.
"It could be that a rising tide lifts all boats."