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Atkins Nutritionals heads into bankruptcy as low-carb trend fades
Tuesday, August 02, 2005

For a few, brief moments in early 2004, eating bunless hamburgers and bottomless plates of sausage, bacon and eggs were part of the hottest weight-loss craze on the planet.

Robin Rombach, Post-Gazette
Amy Perilstein stocks the shelves with Atkins products at her store, TLC Foods in Blawnox. The store is one of the last remaining stores to sell all low-carb food products. Atkins Nutritionals Inc., filed for bankruptcy court protection on Sunday.
Click photo for larger image.
Yet few people yesterday were surprised to hear that Atkins Nutritionals Inc., founded by the late Dr. Robert C. Atkins to promote the benefits of this high-protein, low-carb eating plan and sell products had filed for bankruptcy court protection.

They just wondered why it took so long. And everyone had a theory on what went wrong.

"The taste wasn't that great," said Debbie Graham, a slim mother of three in South Fayette who has followed a modified version of the plan since the late 1990s. A low-carb connoisseur, she said she bought everything but the Atkins Nutritionals brand. "I liked the other brands better," Graham said.

Graham, 45, said she knew Atkins was in trouble when she saw the expensive products being sold in local dollar stores.

The company, which Atkins founded in 1989, sells nutrition bars, shakes, cereals and other low-carb products and promotes nutritional information. It owes $300 million in outstanding principal and interest, and filed for Chapter 11 bankruptcy protection Sunday in U.S. Bankruptcy Court in New York.

Although the doctor introduced his weight-loss plan decades ago, the Atkins craze didn't take off until late 2003 after studies suggested that people were losing weight faster on the high-protein, low-carb diet than by following a low-fat plan.

And this was welcome news to the two-thirds of Americans who were overweight.

What followed was an avalanche of low-carb products from ice cream to pasta to bread to spaghetti sauce that crammed grocery shelves and filled restaurant menus. Early last year, 11 percent of the U.S. population was on a low-carbohydrate diet, according to one poll.

Sales in low-carb products quadrupled, growing $815 million in the year ended in June 2004, according to Information Resources Inc.

But by midsummer, sales had already started to slip nationally, including at Giant Eagle, the region's largest grocery store chain, said spokesman Brian Frey.

The popularity of some products has plunged. Sales of the Atkins Advantage Nutrition bars have dropped by 51.7 percent and the Morning Start cereal by 48 percent in the last year ended July 10, according to Information Resources, which tracks the industry.

The growth in product offerings actually triggered the downfall of the low-carb industry, said Madelyn Fernstrom, a weight management expert at University of Pittsburgh Medical Center.

People lost weight on Atkins because by cutting out breads, pastas, rice and other carbohydrates, they also were cutting calories, she said. The new products were providing substitutes for everything that was eliminated.

"It provided all these extra options, and they were way too confusing," Fernstrom said. "People were eating too many calories."

And most of the products tasted "horrible," she said. "It doesn't work, and people can't stay on it," she said of the Atkins plan.

Amy Perilstein, 43, co-owner of Totally Low Carb Foods Inc., in Blawnox, which opened at the height of the Atkins craze in January 2004, has her own theory for the company's financial woes.

Atkins should have stayed in the specialty market, she said. When the company started selling to mass marketers such as Wal-Mart, she had a hard time stocking its products. "I had trouble getting it when they sold it to everyone, and I'm the low-carb store," Perilstein said.

She was a homemaker raising three children in O'Hara when her husband told her of the many low-carb stores he saw during his business travels to California. She thought a similar store would work here.

Business was brisk for the first six months, but it has fallen off. To hang on, Perilstein has expanded her inventory of gluten-free and sugar-free products to address the dietary needs of people with various health conditions, such as celiac-sprue disease and diabetes. These offerings are attracting people from Ohio and West Virginia, she said.

"Diabetes is never going away," she said. "We're a diabetic's heaven here."

Perilstein said the sales of Atkins' shakes and nutrition bars continued to do well in her store.

Those products will be the focus for the Ronkonkoma, N.Y-based company once it leaves bankruptcy, according to a report by The Associated Press.

The company said it had received $25 million in financing to operate during the bankruptcy proceedings, which it said would not affect day-to-day operations.

President and CEO Mark S. Rodriguez said the company had "adjusted our organization to accommodate a smaller business" in the past year and would promote its brands "more broadly for consumers who are concerned about health and wellness."

First published on August 2, 2005 at 12:00 am
Virginia Linn can be reached 412-263-1662 or vlinn@post-gazette.com.