Atkins sees low-carb diet pickup after New Year
Fri Nov 12, 2004 06:04 PM ET
By Nichola Groom

LOS ANGELES, Nov 12 (Reuters) - The company behind the Atkins Diet on Friday shrugged off a recent decline in interest in low-carb diets as a seasonal blip, and its marketing chief said consumers would cut out starchy foods again after picking up pounds over the holidays.

"In the first quarter of next year, the dieter is going to come back to low carb," Atkins Chief Marketing Officer Matt Wiant said in an interview. "There will be a slow build from here, rather than the ridiculously big build you saw in 2003."

There has been a sharp dropoff in interest in diets like Atkins and South Beach after an explosion earlier this year, according to market research firm The NPD Group. It said 4.6 percent of Americans were following such programs in September, down from 9 percent in January.

Also squeezing privately held Atkins, other food companies have rushed to cash in with their own low-carb offerings. The company said two months ago it hired a turnaround firm, cut jobs, and downsized a Long Island distribution center in a bid to cut costs and boost efficiency.

"There is a smaller business opportunity," Wiant said of the low-carb packaged foods market, adding Atkins was focusing on its main product lines such as nutrition bars and snacks.

Wiant also blamed misinformation about the Atkins diet for contributing to skepticism and negative publicity. As Atkins tries to shed its "cheeseburger" image, problems include legal trouble such as a lawsuit by a man who blames his heart disease on all the pastrami and cheesecake he ate while on the diet.

Atkins expects more Americans to adopt the regimen as medical research proves its health benefits. Wiant said participation rates will rise and fall depending on the season, much like other diets.

"We're assuming that this begins to follow a more typical pattern of dieting behavior," he said.

As other U.S. food manufacturers like Kraft Foods Inc. (KFT.N: Quote, Profile, Research) and General Mills Inc. (GIS.N: Quote, Profile, Research) introduced low-carb versions of everything from Oreo cookies to Progresso soup, Atkins canceled plans to roll out its own low-carb pasta sauces, cookies, and soups.

In addition, the number of Atkins brand nutritional supplements shrank to 10 from 50, Wiant said.

To expand to other product lines without taking on all the financial responsibility, New York-based Atkins is partnering with manufacturers like Canadian bakery company George Weston Ltd (WN.TO: Quote, Profile, Research) , dairy company HP Hood LLC, and ice cream maker CoolBrands International Inc. (COBa.TO: Quote, Profile, Research)

Dollar sales of low-carb foods rose 6.1 percent to about $590 million during the 13 weeks ended Sept. 25, substantially slower growth than the double- and triple-digit gains in the previous six periods, according to ACNielsen LabelTrends.

But Atkins, which has been 80-percent owned by Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) and private equity firm Parthenon Capital since 2003, is at "the beginning of a wave rather than a crest of a wave," Wiant said. The company is not ruling out the possibility of an initial public offering in the future.

"I'm sure the reason (Goldman Sachs and Parthenon) invested was to eventually have some sort of an event, and that is one option," Wiant said of the possibility of an Atkins IPO.

A sale of the company to a bigger food manufacturer is also "a possibility," Wiant said, adding that buying Atkins would be "a quick way to get into the low carb market" for any major food industry player.

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