Waning interest in low-carb diets hitting some firms

Sunday, December 12, 2004

KANSAS CITY, Mo. -- About a year ago, Dave Champlin and his two roommates lived in what their friends at the University of Missouri called the House of Fat.

At a combined weight of 890 pounds, the three decided to try the Atkins diet. By strictly adhering to the low-carb, high-protein diet, Champlin lost about 45 pounds and his roommates each lost between 50 and 60 pounds.

Despite being pleased with the results, all three were off the diet by this summer and have gained back some of the weight.

"It just got kind of tiresome," Champlin said. "Eating the same thing over and over. It was monotonous."

Champlin, 23, and his friends exemplify why many diet and food industry experts are declaring the low-carb diet craze over. That means many companies that rode the low-carb wave are either out of business or refocusing their strategies.

One example: MGP Ingredients Inc., an Atchison-Kan.-based company that profited from the low-carb trend, earlier this month announced it was reducing its fiscal 2005 earnings guidance by more than half.

The company said reduced demand for its specialty proteins and starches used to remove carbohydrates from foods prompted it to reduce the 2005 earnings forecast from as much as $1.08 per share to between 40 and 50 cents per share. MGP said low-carb demand had peaked and it did not expect it to return to anywhere near the level that sparked a 123 percent increase in sales in the third quarter of fiscal 2004.

18 months off

MGP officials always expected the low-carb demand to cool, but it happened more quickly than they anticipated, spokesman Steve Pickman said.

"We expected [the demand] at least to continue at its strong level for the next 18 to 36 months," Pickman said. "We by no means feel low-carb is dead, but it's declined to a much lower plateau than we or the industry expected."

While MGP's future is not threatened, many smaller businesses based on low-carb products have closed their doors, and larger companies that introduced low-carb foods are changing strategies.

American Italian Pasta, the nation's largest producer of dry pasta, reported a net loss of $12.2 million, or 67 cents per share, in the second quarter of this year. The company's reduced-carbohydrate pasta was a flop, with sales 50 percent lower than expected. Chief executive Tim Webster said the company planned to begin marketing it as a low-calorie, high-fiber product.

No one expects low-carb products to disappear from grocery store shelves. ACNielsen LabelTrends reported that sales of products labeled for low-carb lifestyles were still growing but had slowed. Sales rose only 6.1 percent for the 13 weeks ended Sept. 25, compared with a 122 percent increase in the 13 weeks that ended March 27.

Lessons taught

Champlin, the Missouri student, said he will continue to buy some low-carb products as part of a healthier lifestyle.

"It did teach me to watch what I eat and drink," he said. "I'm not going to go back to how I ate before."

Others say the decline in low-carb popularity was predictable, much like past fads such as low-cal or liquid diets.

A study by The NPD Group, an independent marketing information company, found that the percent of U.S. adults on any low-carb diet peaked at 9.1 percent in February and dropped to 4.9 percent in early November. Further, it said only one of four people surveyed was significantly cutting carbs and "virtually none" was reducing carbs to the extent that the diets recommended.

"It was overhyped from the beginning, a craze that was never a craze," said Bob Goldin, executive vice president of Technomic Inc., a food industry research firm. "It was a little bubble that had zero staying power. We've been there, done that, many, many times."

Seattle Sutton, who runs Seattle Sutton's Healthy Eating in Marseilles, Ill., said all fad diets are destined to fade because only low-calorie, balanced and nutritional meals, such as her company offers, promote weight loss and healthy living.

"There's always some fad diet, some gimmick to say that nutritional science has been wrong for 100 years," said Sutton. "The bottom line is how many calories you consume versus how many you expend. That's it."

Goldin said companies suffering because they got on the low-carb bandwagon have only themselves to blame.

"Everyone's always looking for the silver bullet, a magic diet or a magic pill," he said. "The whole industry needs to look at nutrition from a holistic standpoint. A lot of things go into healthy living, and they shouldn't look for one thing to make their fame and fortune."

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