Posted on Thu, Jan. 22, 2004

Pasta company cuts back on carbs

American Italian offers new products

By JENNIFER MANN, The Kansas City Star

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American Italian Pasta Co. is rolling out a line of reduced-carbohydrate pasta to appeal to mainstream consumers looking for more healthful eating alternatives.

The new pastas are made from wheat, unlike the soy-based product the company makes for Atkins Nutritionals. Besides a lower carbohydrate count, the new line of pasta is also higher in fiber, something many nutritionists say a lot of Americans do not get enough of in their daily diets.

American Italian says it is not necessarily going after the Atkins-and-its-ilk crowd, but like the bread industry, the pasta industry has seen a big dent in sales, with reportedly 40 million Americans on some sort of reduced-carbohydrate diet.

A recent survey conducted by the bread industry found that 40 percent of consumers said they were eating less bread than they were a year ago, and the same sort of numbers were true for pasta.

Dan Trott, president of AIPC Sales Co. and executive vice president of marketing, said all the carbs-are-bad publicity pounding has had an effect.

“With the soy-based product, you are compromising some on taste,” Trott said. “We truly do believe we have come up with a formula that has all the taste but cuts the carbs in half.”

Tim Webster, American Italian chief executive officer, said that because of all the negativity surrounding carbs, the company thought it needed to take action.

“We're taking a proactive response to this, and we're first to market, and that's why we're so excited,” Webster said.

American Italian, based in Kansas City, worked with Atchison-based MPG Ingredients — formerly known as Midwest Grain Products — in developing a proprietary process used to make the pasta, which has about 19 carbs per serving, compared with 39 for traditional pasta.

Besides a higher fiber content, it also has a higher protein count than traditional pasta.

American Italian has done market studies and projections on revenues for the new lines of pasta, which come in five shapes, but the company isn't disclosing those numbers.

The company's stock took an almost 10 percent hit last week after the company told Wall Street that it expected to earn between $2.55 to $2.70 a share for the year ending in October. Before that announcement, the Wall Street consensus had been $2.73 a share.

Webster confirmed that company officials had built a 15-cent-a-share spread into the earnings guidance, because although they were optimistic about the reduced-carb line, they would not know numbers until the goods were in stores, sometime within the 30 to 45 days.

The company has developed new carton packaging for the line, which allows it to impart more information to shoppers on grocery shelves than the widely used film packaging. The products will be sold under its regional brands, including Martha Gooch in this region.

The new line will cost about twice what traditional pasta costs, which is selling for a little more than $1 a pound. The new line is packaged in 12-ounce sizes and has a suggested retail price of $1.99.

“But we still see that as very affordable,” Webster said.

To get the word out, the company will spend more than $15 million in the first 12 months on radio, billboard and print advertising, as well as newspaper inserts, interactive efforts and in-store promotions. The tagline for the new products is “Pasta's Never Looked So Good on You.”

The new pasta will be offered to all of American Italian's clients, including its institutional ones, who use the pasta in packaged dinners and for the restaurant industry.

Already, Webster said, the company has had tremendous response from Sysco, one of its largest institutional clients, with all 70 units of that company saying they wanted to buy the new line.

Webster said the company had worked on projections as to what percentage of its customers using its traditional pasta might migrate to the lower-carb line.

The company's stock closed Wednesday at $37.43, off 15 cents.

To reach Jennifer Mann, call (816) 234-4453, or send e-mail to jmann~kcstar.com.