Businesses hurt as low-carb diets fade

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 sticking 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.

A study by NPD Group, an independent marketing information company, found that the percentage of American adults on any low-carb diet in 2004 peaked at 9.1 percent in February and dropped to 4.9 percent by early November.

Further, it said only one of four people surveyed was significantly cutting carbs and “virtually none” were reducing carbs as much as the diets recommended.

That means many companies that rode the low-carb wave are either out of business or refocusing their strategies.

One example: MGP Ingredients Inc. of Atchison, Kan., which profited from the low-carb trend, earlier this month announced it was cutting its fiscal 2005 per-share earnings forecast by more than half — from $1.08 to no more than 50 cents.

The reason is reduced demand for its specialty proteins and starches used to remove carbohydrates from foods. 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.

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

“We expected 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 Co., 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-carb 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 though. ACNielsen LabelTrends reported that sales of products labeled for low-carb lifestyles were still growing but had slowed.