Could Atkins bounce back from bankruptcy?

Related tags Atkins Nutrition

Business is looking bleak for Atkins Nutritionals. As the
once-celebrated pioneer of a diet regime that took the world by
storm files for bankruptcy protection, Jess Halliday asks:
What went wrong?

Two years ago Atkins​ was the buzz-word about town. You could barely move for consumers turning their noses up at bread, potatoes and even vegetables, demanding instead extra portions of protein-rich foods like meat.

The diet craze spawned a whole industry in low- and reduced-carb foods, with big players like General Mills bringing products to market. Atkins, too, became more than a diet; the now-famous name of the regime's inventor was also given to a range of low-carb bars and beverages.

Atkins was riding the crest of a wave. Now, with press reports claiming that the company owes creditors in the region of $300 million and a bankruptcy hearing scheduled to take place today, it seems to have come crashing down around its ears.

Bankruptcy protection allows a company to continue trading, but keeps the creditors from the door while it puts its finances in order and comes up with a rescue strategy.

Although claiming that the day-to-day business of the company remains unchanged, president and chief executive Mark Rodriguez said in a statement that the company has changed its structure to "accommodate a smaller business".

When it emerges from protection, the focus will be on bars and beverages, and on promoting its brands "more broadly for consumers who are concerned about health and wellness."

Some commentators have blamed other food companies for stealing Atkin's thunder, cashing in on the trend with the innovative products designed to meet the diet and nutritional needs of devotees.

But Atkins is not the only company to have suffered a loss this year. Others, including retailer Tree of Life (Wessanen​), have blamed waning interest in the low-carb lifestyle for a drop off in sales.

Despite this, retail sales of reduced-carb packaged foods have not yet actually gone into a decline, according to Euromonitor​. Nor are they expected to do so until 2007.

The slow down started to show in 2004, when sales were $2.74 billion, representing growth of 101.1 percent compared to 135.5 percent the previous year. This year the market researcher anticipates the drop off to be more severe with sales of $3.27 billion (just 19.6 percent growth), and in 2006, $3.43 billion (4.9 percent growth).

In 2007, the market is predicted to go into a decline for the first time with sales of $3.36 billion. And by 2009 it is expected to have receded to $3.09 billion.

So although the future is not looking rosy, it seems a little premature to pin Atkin's problems solely on the state of the market.

Certainly, condemnation from some medical professionals concerned about the lack of emphasis on fruit and vegetables, and the potential for high-fat diet choices didn't help. Nor did the diet's implication in the sudden death from heart arrhythmia of 16-year-old Rachel Huskey.

When diet founder Dr Robert Atkins died in 2003 following a fall he weighed 258 pounds. The media had a field day, but the company said he had gained weight due to water retention during his illness, and that prior to this accident he had been squarely within the 'normal' range.

But perhaps the most significant of the factors conspiring against Atkins was the advent of the low-glycemic approach to weight loss, which does not outlaw carbs altogether but places more emphasis on slow-release carbs like oats and whole grains, instead of fast-release carbs such as white bread, refined breakfast cereals, and concentrated sugars, which cause blood sugar levels to spike, which cause blood sugar levels to spike.

Originally devised to help diabetics manage their condition, the low-glycemic approach is most popular in Australia, but is gaining ground in the US and Europe too.

Nine new products featured in Mintel's Global New Products Database​ since January make a reference to the glycemic index, compared with 19 in Australia and 13 in the UK.

Low-g, as it is known, is a feature of several of Atkins' competitors, such as the South Beach Diet and The Zone.

In March, Atkins quietly followed suit and introduced a glycemic measurement into its program, called the 'net Atkins count'.

Matt Spolar, vice president of product technology at Atkins Nutritionals said the change, developed by clinical nutritionalist Dr Thomas Wolever, was "an opportunity to develop a better tool to help consumers have success doing Atkins"​.

If it does, indeed, get its house in order and the bar and beverages pave the way forward, rolling with low-g could well be the golden ticket towards a secure, if slimline, future for Atkins.

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