Atkins Diet Turns Food Industry On Its Head
Jason Chow
Financial Post
Thursday, September 04, 2003
H.J. Heinz Co. said yesterday it will revamp its frozen foods line after sales in the division fell by 10% during the past three months.
The reason for the decline in demand: U.S. consumers are switching to low-carbohydrate diets, popularized by Dr. Robert Atkins, and have been shunning Heinz's high-starch potato products and frozen meals.
The Pittsburgh-based food giant is just the latest to announce changes in its business due to the Atkins craze. Low-carb diets have put a dent in the sales of bread, chips, frozen fries and other carb-filled products.
On the other side of the equation the diets have boosted sales in pork rinds, pepperoni sticks and beef jerky, forcing food companies to rethink their product lines.
More than 15 million copies of the Atkins diet book -- Dr. Atkins died this year -- have been sold around the world, and industry watchers estimate between 15 million and 30 million North Americans are attempting to lose weight by not eating bread and loading up on steak.
In the case of Heinz, the switch to low-carb diets has taken a big slice out of its frozen Ore-Ida potatoes and Boston Market brand meals fell 10% to US$392.7-million, the third- straight quarterly drop.
Heinz's chief growth officer, Casey Keller, assured investors the company would be mindful of the Atkins converts.
"We will have new items and we will be flagging items with low-carbohydrate food content in the very near future," Mr. Keller said.
While there are an estimated 200 low-carb speciality shops in the U.S., mainstream food giants are trying to edge their way into the low-carb world. At stake is a piece of the US$30-billion that U.S. consumers spend each year on dieting and diet-related products.
The rush to capitalize on the trend has brought about a war of the lites among beer brewers. Two weeks ago, Sleeman Breweries Ltd. introduced Canada's first low-carb beer, Sleeman Clear. On the same day, Labatt USA announced a new take on its Rolling Rock brand called Rock Green Light.
Sleeman Clear contains 2.5 grams of carbohydrates per bottle, less than a third of most light beers.
Both are hoping to repeat the success of Anheuser-Busch Cos. Inc., brewer of several brands including Budweiser. The company blazed the way with the hugely successful rollout last September of its low-carb Michelob Ultra. The beer has shot to No. 7 in sales for premium beer brands.
Low-carb also means higher profits. According to Anheuser-Busch, about 40% of Ultra drinkers shifted from its other products, including Bud Light. The company can live with that, since Ultra is priced 12% to 15% higher than Bud Light.
Still, most of those who have made the most money off the low-carb fad have been small niche firms that manufacture low-carb, low-sugar products, and the specialty stores that sell them. For example, Carbolite Foods Inc., a U.S. privately held maker of low-carb chocolate bars, has said its sales reached US$45-million last year, and it expects to top US$70-million this year.
Food industry sources estimate that Atkins Nutritionals Inc., the company founded by the late doctor just five years ago, which markets a host of low-carb-related products, made US$100-million in sales last year.
The goods don't come cheap, suggesting that profit margins are fat: An Atkins snack bar retails for US$2.29 and a canister of sugar-free lemon tea blend costs US$7.50.
jchow~nationalpost.com
http://www.nationalpost.com/
Atkins Diet Turns Food Industry On Its Head
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