Low-carb audience, full of other food choices, thins out
Foodmakers now are saddled with products that may not be wanted

By Delroy Alexander
Tribune staff reporter
Published January 16, 2005


After watching a friend lose 80 pounds on the Atkins diet, Marge Heath rushed into the low-carb craze in the summer of 2003.

She joined just after the number of Americans trying to slim down by eating few, if any, sweet and starchy foods hit its peak in February when 27 million Americans, or 9.1 percent of the population, said they were watching their carbs.

But Heath, 56, found the diet restrictive and specialized foods rare and expensive. And as she watched her friend slowly gain back weight, Heath switched to a more traditional approach espoused by Weight Watchers International with which she has lost 30 pounds.

"It was quick weight loss using the low-carb plan, but it wasn't permanent weight loss. I felt deprived on it, and I had used Weight Watchers before so I knew it worked," said the mother of four from Montgomery.

Heath's path mirrors that of millions of others who left for other plans or simply returned to the comforts of bread and potatoes. It's a path the food industry crossed, and missed, in its efforts to cash in on the low-carb craze.

In 2004 food companies increased the number of low-carb offerings more than fivefold, to 2,378 products, just as Heath and more than 16 million others appeared to have lost their appetite for low-carb diets. In 2003, when low-carb dieting was at its peak, there were just 400 low-carb products on the shelves, according to Mintel International Group Inc.'s new product database.

Atkins Nutritionals Inc., the products company behind the popular diet of the same name, and other firms such as Northfield-based Kraft Foods Inc. and Chicago's Sara Lee Corp. flooded the market with products, many of which failed to stick.

And they're still coming. This month Kraft expanded its line of cereal, meal-replacement bars, sandwich wraps, frozen entrees and pizzas for The South Beach Diet, which limits certain types of carbohydrates and fats.

The introduction was timed to coincide with shifts among low-carb dieters, said Dr. Arthur Agatston, creator of the South Beach diet.

"Weight loss is not about low carbs or low fat, but the right carbs and the right fats," Agatston said. "I am encouraged that people appear to be shifting from strict low-carbohydrate diets to more balanced approaches."

Other low-carb products have been on the decline.

Atkins Nutritionals saw its arrangement for a low-carb pasta with American Italian Pasta Co., the nation's largest producer of dry pasta, sink without a trace.

The company's push into pastries with Entenmann's owner George Weston Bakeries Inc. also died out quickly.

Mainstream targeted

Several of Kraft's CarbWell lines of products launched early last year have struggled to attract consumers' attention.

Even Sara Lee Bakeries, which has seen its year-old line of Delightful wheat breads soar in sales, is looking at reducing the prominence of its "9-grams-per-slice" carbohydrate claim on the bread bag in favor of a more broadly acceptable "45-calories-per-slice" tag, according to spokesman Matthew Hall.

"I think that products that have their identity entirely wrapped around carbs have probably suffered," Hall said. "We wanted to pitch our bread to mainstream consumers. We made sure we didn't put carb in the name."

Even though the explosion of new products missed the height of the frenzy, it's too early to say carb-conscious products are dead on the shelves, said Harry Balzer, a Chicago-based food industry consultant with NPD Group.

"The peak year for concern about low fat was 1994," said Balzer, drawing an analogy between carbs and another phenomenon that swept through the food sector.

"Ever since then there has been declining concern about it, but the peak year for consumption of low-fat products was 1999. Americans did what they always do. They tried new products, and I suspect they'll do it again."

Despite its recent failures, Atkins Nutritionals may be among the best examples of that.

"What we've seen is fewer people want to be on a diet," said chief marketing officer Matt Wiant. "But there are many more people who are willing to modify their eating patterns, and that's where our products fit."

Fewer new products will hit the market with the Atkins logo this year, mainly because of the growing competition, Wiant said.

He remains positive, though, given the potentially huge untapped market, estimating that the low-carb segment is worth about $1.5 billion annually.

Wider market

However, Atkins is targeting its products to a larger category: the $40 billion, "better-for-you" nutrition products, says Wiant, referring to goods aimed at people looking to eat healthier.

Another key factor likely to help sustain a steady flow of new products coming to market are Atkins' lucrative multiyear licensing deals, which have put its red A and blue ribbon logo on many products, including ice cream, sugar-free pancake syrup and chips.

In only two years the company has gone from producing almost all its products in-house to licensing the power of its brand to other food producers who have put Atkins goods in the dairy, refrigerated and freezer aisles as well as in the rest of the supermarket.

The licensees look longingly at the potential for growth illustrated by Atkins' most popular products, which are nutritional and energy bars.

From just three versions offered in 1997, the firm now has 170 different flavors. Last year Atkins Advantage nutrition and Endulge candy bars cornered almost 20 percent of the $660 million market, more than double the sales of Kraft's Balance bar, according to data from Information Resources Inc.

It's that potential and the power of the Atkins name that prompted Parthenon Capital and Goldman Sachs to pay a reported $533 million for an 80 percent stake in the privately held Atkins in October 2003.

"Investors are looking for a way to invest in the diet space," said Greg Capelli, a Chicago-based analyst at Credit Suisse First Boston. "They've seen the numbers, but Weight Watchers is really the only option at present."

The jury remains out on Weight Watchers, with a market cap of $4.2 billion, which saw double-digit declines in attendance at its support meetings during the height of the low-carb craze and has struggled to bounce back since, said Capelli.

In a move to help attract carb-conscious dieters, the company last year introduced Turnaround, a program that lets dieters eat more of certain foods instead of Weight Watchers' traditional diet, which allows members to eat a balanced range of foods based on a point system.

"Over the past year and a half they (Weight Watchers) have been greatly affected by low-carb plans," said Capelli. "January is typically a fantastic month for diets, what with New Year's resolutions. The question is, will that hold on into the rest of the winter and spring given the heightened awareness of other diet plans and interest in nutrition generally."


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