Is the Atkins Brand Toast?

Why the Atkins diet is getting plumped up with product.

From: Inc. Magazine, December 2003 | Page 25 By: Michelle Leder

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When Dr. Robert Atkins died in April at the age of 72 after slipping on an icy sidewalk outside of his Manhattan medical practice, carb-avoiding dieters across the country were left without their chief patron--as were the employees of Atkins Nutritionals, the business that Dr. Atkins launched nearly 15 years ago to sell a line of vitamins. Ironically, however, the company, which markets Atkins-brand packaged foods, has been on a tear in the months following the diet doc's sudden death. Under its new leadership, Atkins Nutritionals has introduced 70 new products this year--a pace unheard of in the food industry. Research firm NPD Group pegs Atkins's 2002 sales at well over $100 million and 2003 sales to be more than twice that.

While observers may be surprised by the furious clip with which Atkins has released new product lines, Atkins himself anticipated extending the brand before he died. In fact, he hired the executives who now run the business back in August 2000. But given that the push into new businesses has accelerated since Atkins's death, it is possible that the new team has more ambition for the name than the man who put them in place. Atkins Nutritionals president and COO Scott Kabak says the business's strategy is to place an ever-increasing number of products bearing the company logo--a red-and-blue "A"--in health food stores and then supermarkets nationwide. "We're being very aggressive in launching products and expect to continue to be for the foreseeable future," he says.

The growth comes despite considerable turmoil in the organization. In October, with the consent of Atkins's widow, Veronica, the company shut down the doctor's beloved medical practice. In so doing, Atkins Nutritionals pulled the rug out from under an heir apparent who may have had the vision for the business that most clearly matched that of Atkins himself. Of course, any company, after the death of its founder, faces the question of who should take charge. And this is complicated when the founder is closely identified with the brand. Wendy's paid homage to founder Dave Thomas in its ads after he died, while Frank Perdue's son replaced his father as the face of his company. Kentucky Fried Chicken simply turned Colonel Sanders into a cartoon. Now Atkins's successors must decide how far they will push his name, and how devoted they are to his vision. "The Atkins brand is powerful," says Scott M. Davis, of brand-strategy consulting firm Prophet, "and has elasticity that most other brands don't have."

"I didn't even know that he was still alive when I read that he had died."

Kabak puts it more succinctly: "This is not a diet but a lifestyle," he says. "There's no ceiling to this business."

Dr. Atkins first espoused his diet principles more than 30 years ago in his best-selling book, Dr. Atkins' Diet Revolution . In the years since, his diet has become a cultural phenomenon, with clinicians debating its efficacy while restaurant menus routinely flag Atkins-friendly entrees. More than 60% of all Americans are either overweight or obese, and industry watchers estimate that the number of Americans on a low-carb diet is now as high as 30 million.

The executives who Atkins tapped to build out the products business came from publishing: Kabak and Paul D. Wolff, Atkins CEO, had worked together at Times-Mirror Magazines. When the pair, who are both 49, joined Atkins, the company essentially had two products--a line of protein-rich shakes, similar to Slim-Fast, and a line of protein bars, called Atkins Advantage. These two lines sold moderately well, but the business that the partners took over pales in comparison to what they have now: Atkins has introduced more than 100 products in the last three years.

But despite the company's rapid growth, the medical practice--called the Atkins Center for Complementary Medicine--was always Dr. Atkins's primary focus. Located in midtown Manhattan, it had 4,000 active patients in 2003. Devotees came from as far away as Uzbekistan, even though they were required to return for checkups at least every six months.

When Atkins died, a brash, 34-year-old doctor named Keith Berkowitz emerged as his successor at the clinic. Here's where the absence of the founder was most obviously felt. The products company had coexisted peacefully with the practice when Atkins was alive. But though the doctor had founded both businesses, the principals decided that the two entities should split up following his death. The plan was for Berkowitz to buy the practice for an undisclosed sum; as part of the deal, he would give up the Atkins name, which was important to the product marketers.

Then on October 2--just days before Berkowitz was set to ink the deal--Atkins Nutritionals announced in a press release that the center would cease operations 13 days later. Patients were informed that they would need to seek treatment elsewhere. The center's 25 employees were given notice. Berkowitz was stunned. In a statement, Veronica Atkins said, "It is sad for me to see the medical practice close, but I am gratified to see [my husband's] teachings being accepted and practiced by physicians in this country and around the world." (Through a company publicist, Veronica Atkins declined to speak to Inc. )

Richard Rothstein, the spokesperson for Atkins Nutritionals, says he thinks the deal broke down over money--an assertion with which Berkowitz disagrees. When asked if he believes Dr. Atkins would be disappointed that the practice closed, Berkowitz says "probably"--adding that his mentor would approve of his subsequent plans to open his own practice in New York, employing most of his former colleagues.

Kabak says that the clinic closed precisely because Dr. Atkins played a central role in it. In contrast, the products business can survive without him "because he was never very involved," Kabak says. "He wanted to produce products, but it's not what made him tick." And so the company continues to roll out everything from bagels to breakfast cereal, produced by various manufacturers and marketed under the Atkins label. The company has also struck licensing deals with the likes of New England dairy producer HP Hood, which is selling a line of milk called Carb Countdown with 75% to 90% fewer carbohydrates than regular milk. Mary Ellen Spencer, vice president of brand marketing for Hood, says she got on the Atkins bandwagon because "it's no secret that this thing is growing."

In fact, Atkins is likely to attract big-name competitors, as well as partners. Already, H.J. Heinz and Michelob are introducing low-carb products--and a growing number of niche players are making goods like sugar-free chocolate bars. On the plus side, retail demand is also rising. Wal-Mart Supercenters stock the Atkins-Hood milk, and a spokesperson for the health food chain GNC, which operates 4,500 stores in the U.S., says its larger stores now stock four shelves with low-carb products--up from one shelf last year.

Of course, as brand consultant Davis notes, "it is possible to follow a low-carb diet without eating Atkins-branded products." Given that consumers have options, Davis adds, the company will succeed only if Atkins products taste good. That may be tricky because, to strip carbs out of food, the company replaces key ingredients like wheat with soy and almond flour--a process that can muddy the taste. Indeed, in online chatrooms where Atkins followers swap recipes, taste comments pop up a lot. One person used the word blech to describe Atkins barbecue sauce; another complained that the pancake syrup was "no Mrs. Butterworth's."

High prices may also limit the brand's appeal--several chatroom posters said that the $4.99 price tag for four small single-serving ice-cream cups was a bit steep. "I suppose that if some people get desperate enough for a bagel or cereal, they may be willing to pay anything," says Hayes Roth, a vice president of the brand consulting firm Landor. "But there is a point where the price gets too high."

Despite these problems, however, the team extending the Atkins brand shows no signs of slowing down. Because the diet doc didn't really manage the products business, his loss is not acutely felt there. Sure, the patients he treated will miss him. But consumers will probably forget that Atkins was, in fact, a real person in time. For a brand, that's okay. "To be honest," says Roth, "I didn't even know that he was still alive when I read that he had died."