Low-Carb Bubble

The diet that was supposed to permanently change how we eat is starting to look like a fad after all

Maclean's magazine, August 23, 2004 edition

by STEVE MAICH


IN THE HISTORY of almost any business fad, there is a point at which people insist what's happening is not a fad at all but permanent social change -- the beginning of a new mainstream. Often, that's the moment when big corporations, terrified of being left behind a burgeoning groundswell, over-invest. It's also when things usually start to fall apart.

Tom Vierhile has watched many such crazes unfold. As executive editor of Productscan Online, a Naples, N.Y.-based company that tracks new consumer products, he saw North Americans fall in and out of love with wine coolers in the 1980s; then it was foods containing oat bran; in the early '90s, clear drinks were all the rage. To Vierhile, it appears the Atkins diet and its low-carbohydrate knock-offs are heading down the same road, taking with them millions of dollars spent on development and merchandising by food giants that clambered onto the bandwagon just as its wheels started to fall off. "It reminds me a lot of investors who around 1999 thought it would be a great time to invest in tech funds, and then proceeded to lose their pants," says Vierhile. "The pattern is very, very similar."

Indeed, recent surveys suggest Americans are starting to lose their taste for high-protein regimens and are switching back to less restrictive diets. (Far fewer carb-lite products have appeared in Canada, and industry representatives say the dieting trend is lagging by eight to 12 months here.) Last month, Kellogg CEO Carlos Gutierrez became the first major food executive to admit the industry may have overestimated low-carb's potential, acknowledging that the rapid proliferation of products had created "a bit of a glut" in the market. "We're clearly seeing that the low-carb trend, or fad, has peaked," he told investors. That sentiment was echoed by General Mills chief Stephen Sanger, who said he didn't believe the diet would be a long-term factor in the industry. Just like those Internet start-ups that found themselves starved of capital and bereft of customers in 2000, food execs are now wondering what's in store for their huge investments in low-carb.

It's a business that didn't even exist a few years ago. Dr. Robert Atkins first published his revolutionary approach to dieting in 1972, but it didn't catch on until an updated version of the book hit bestseller lists in 1997 -- and stayed there for almost 400 weeks. Soon, it seemed every other person was counting carbs and shunning potatoes, and the packaged-foods industry scrambled to keep up. In 2002, 339 new low-carb products were introduced in the U.S. In 2003, that figure almost doubled to 633. In the first six months of this year, the category exploded, with 1,863 products launched.

Dr. Atkins died in 2003, but the company he started, Atkins Nutritionals, remains a leader in the low-carb market. Last year, its sales of Atkins-branded foods and books more than tripled, topping US$200 million, and two private investment firms paid almost US$700 million for a majority stake.

A long list of companies whose products are loaded with carbs, from Krispy Kreme Doughnuts to Canada's bakery giant George Weston, have blamed the trend for disappointing profits and sales. Not surprisingly, many have rushed to get in on the revolution. Fast food chains like McDonald's and Burger King introduced high-protein platters with no bread. Kraft Foods, reeling from four quarters of falling profits, is cutting about 6,000 jobs and using some of the savings to promote lower-carb products. General Mills and Unilever rolled out entire low-carb lines. But almost as soon as all these products went on sale, executives started warning that the party was winding down.

HOLLY LEWIS'S experience with the Atkins diet helps explain why the low-carb trend is on the wane. The Toronto actor is by no means overweight, but she felt losing five pounds could help her get better roles. Seeing magazines filled with stories of starlets shedding pounds by gorging on meat, Lewis decided last fall to give Atkins a try. After reading up, she cut her carb intake drastically. She soon dropped a dress size and felt sure the diet was working.

Within a few weeks, however, she started having intense cravings for sweets and some minor stomach aches. But the most noticeable side effect was lethargy, and she was finding it more difficult to memorize lines. "I read about the connection between carbohydrates and brain function, and that made me nervous," she says. Six months after she started, Lewis switched to a more balanced diet.

Research suggests Lewis is just one of millions of North Americans who embraced the low-carb lifestyle only to find it disappointing. Morgan Stanley analyst William Pecoriello commissioned surveys on the eating habits of 2,500 American adults in each of the last three quarters, and in the latest poll, completed at the end of June, the low-carb craze posted its first decline. The survey showed about 10 per cent of Americans were on a low-carb diet, down from an average of 12 per cent in the first three months of the year. Pecoriello forecasts that by year-end, the number will be closer to five per cent.

None of the food giants will say how much they've spent chasing Dr. Atkins' disciples. But given the costs of developing and marketing new consumer products, Vierhile says the industry's total low-carb investment likely runs close to a billion dollars. If eating low-carb ends up relegated to niche status, much of that investment may turn out to be wasted, he says. "The later you get into a market like this, the greater the chance of losing money. It seems like that lesson is forgotten time and time again. The biggest companies tend to enter these fads at the wrong time, coming in full bore at the peak. That's happened here."

The giants like Kellogg and General Mills can take comfort in the fact that if people stop eliminating carbs, they'll shift back to some of their former favourites. The companies can also quietly pull weak products off the shelves without noticeably hurting profits. Atkins Nutritionals seems to be in a tougher spot. But Ernest Jacquet, co-CEO of Parthenon Capital, majority owner of Atkins, isn't conceding defeat. The market has slowed, he says, but dieting is a seasonal business that peaks around the first quarter. "We're very comfortable that in the long run things will keep growing."

Industry analysts are less sanguine. This spring, Wall Street observers predicted Atkins Nutritionals could sell shares to the public, valuing it at more than US$2 billion. But for those forecasts to come true, low-carb will have to reverse its slump. The trouble is, fads rarely regain momentum once they've lost it.


http://www.macleans.ca/topstories/b...23_86757_86757#

hmmmm... it seems to me that maybe the low carb junk food "bubble" is fading, but the nutritional strategy itself will continue to grow, because, simply put, it works.

Oh darn, you mean those guys who tried to sell High Carb crap can't sell us Low Carb crap?

I think that Trinsdad hit the nail on the head - obviously there has been a saturation of products on the market - but the most discerning LCers won't fall into the category of those people who buy most of the products - their statistics are based on those people who can't bare to give up the sweet treats and therefore never truly enter in the LC way of life *for real*. Those of us who live the LC way of life in the best way won't be taking part in a shopping basket full of these products, so to state that the LC craze may infact be slowing is nonsense, they need to do a survey on those people who don't often buy these franken foods...
Just my oppinion

Who decided that the way to guage how many people follow a low-carb diet is by how many low-carb products are sold? I for one have never bought a low-carb bread, cereal, or pastry product and never will. I did just fine before this crap hit the stores and will continue to do fine without it. Most of it is still too high in carbs for most of us who are serious about this WOE, the majority of people buying it are those who go flying half-arsed into the plan when they don't understand how it works, and then fail and go back to crap-eating.

These people only view it from the viewpoint of revenue of pre-fab LC products declining. Of course, we all know that revenue is the only measure of success these people understand. They couldn't possibly consider the whole/fresh food success because it doesn't contribute to anyones bottom line.(except ours! heehee)

I rarely read all these propaganda stories because I prefer to make my own observations and decisions about and for myself. Others are responsible for their own opinions, but they don't always reflect absolute truth for all people.

I will have to agree with the article on one point. The trend for everyone jumping could very well be dying. I am sure, as in any eating style a good amount of people try it, but never stick with it. But for those of us who do, well nothing will convince us otherwise that low carbing don't work. It can be convenient with some of those low carb products out there. But really, we can go on with out them. A lot of those product have to many carbs in them for me to want to buy them in the first place. Really what were they thinking? Why would I want a 32 carb count soda when I normally drink one with no carbs in it????

Those whose only measure of success is the sale of low carb products will consider low carb eating a bubble that has burst. Those of us in this forum know better. Low carbing will continue to grow because the science is overwhelming and becoming more so. However, a better economic indicator of low carb success would be whether Krispy Kreme and other purveyors of high carb junk who have suffered from the popularity of low carb eating have restored their sales volumes.

It's funny how the measure of "social change" is gauged by how gullible we are to the blowing winds of Madison Avenue...

Low carb will be more popular once the health benefits are better understood. I accept the studies that have show that lower insulin levels equal less oxidative damage, better health, and longer life. Mainstream press never mentions these benefits.

Hmmmm....thats to bad...I think'll keep eating like this..works for me!!!

I agree the article completely misses the point of LC..Although some of us chose to use some prepacked foods, we do so rarely that there will never be a huge demand. Now what they failed to mention is how the sales of eggs have gone through the roof as well, as chicken, beef, and pork. That is where the true tail lies. In the "pure" protein foods, not the prefab stuff.
One thing that caught my attention was the ref. to the tiredness factor. That is something I can not shake. Is this a side effect? I alway though the opposite was true and I was just a freak of nature.

BINGO!!!!!.....u hit the button on the nose!!!

Most people feel out of sorts the first few days to a week but report feeling better than before they began the diet after that. I suspect that the person referred to in the article had fallen into one (or several) mistakes that people can make while following a low carb regime:
-too few carbs for too long (read not enough veggies)
-too few calories
-too little fat
-not enough water
-not taking any supplements (such as a good all-purpose multivitamin)
-use of too much "fake food" and not enough real food
-trying to reach a goal weight that is unrealistic


This statement made me wonder. She started off wanting to lose 5 pounds and stayed at a "drastically low carb intake" for 6 months and then switched to a more balanced diet? I take it she failed to read the chapter on maintainence because it seems to me like she was trying to maintain on induction levels (or less) of carb intake instead of going to maintainence once she reached her goal. In fact, she really had no need whatsoever to ever do induction and would have done just fine starting with OWL levels of carbs as Dr. Atkins states in his book and considering that she had 5 pounds to lose, she should have been on maintainence levels for probably 5.5 months out of those 6.

Well maybe they are right. Low-carb IS a fad, rather buying low-carb products is. I was listening to a woman from work comment today that she tried some lowcarb products and they universally tasted bad. That probably has a lot to do with the fact that low-carb frakenfood isn't as popular as they had hoped. People try them and then never buy them again

So we can all hope that all this deluge of lowcarb frankenfood IS a fad and that it all goes away very soon. If we are lucky, only the really good products will stay and the rest of the crap will be discontinued.