Atkins Nutritionals Files For Chapter 11 Bankruptcy
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The 'Dr. Atkins' New Diet Revolution' is one of the top 50 selling books of all time.
By Martin Wolk
msnbc.com
updated 8/2/2005 4:37:37 PM ET 2005-08-02T20:37:37
ANALYSIS

It was only two years ago that the food industry seemed to be in full retreat under the onslaught of the low-carbohydrate diet craze led by best-selling author Dr. Robert Atkins.

Burger King tossed the bun and offered high-protein alternatives like steak and grilled shrimp. Food giants Unilever and Kraft scrambled to offer low-carb options in everything from frozen dinners to snack foods. There were low-carb colas, low-carb wines and low-carb malt beverages. Even KFC tried to market its fried chicken as a healthy, low-carb food, a move that earned it a reprimand from the Federal Trade Commission.

Now it is the Atkins diet that is withering under fire, as seen this week in the Chapter 11 bankruptcy filing of Atkins Nutritionals, the company founded by the late cardiologist and most closely identified with the low-carb lifestyle.

“It was a fad, but it was a different fad than usual because it was so big and lasted so long,” said James Hill, director of the Center for Human Nutrition at the University of Colorado. He said the Atkins plan appealed to overweight Americans looking for a quick fix, but like most diet-book diets it included no prescription for the physical activity needed to maintain a healthy weight.

The Atkins diet may have promised more than it ultimately could deliver, but the early results in the form of lost pounds were impressive enough to get millions of Americans to try the meat-and-no-potatoes regimen. Atkins’ books were best-sellers as far back as the 1970s, but it was not until around 2000 that the fad took off, fueled by a surge of media attention to the problem of obesity and grass-roots enthusiasm for the diet.

The idea that you could eat bacon and eggs for breakfast, steak for dinner and still lose weight was an appealing one for dieters. In a world of conflicting messages about diet, the Atkins plan was clear and simple: Protein was good, carbs were bad.

And it worked — at least for a while.

“People actually saw the effect of what they were doing,” said said Ken Harris, a food industry consultant with Cannondale Associates in Evanston, Ill. “There was a buzz created that was bigger than Atkins.”

The buzz transformed the $30 billion diet industry, hurting traditional players like Weight Watchers International, boosting the fortunes of companies like NutriSystem Inc. and creating a vast new market for copycat books and food products including high-protein, low-carb nutrition bars.

It was in that atmosphere that investment bank Goldman Sachs and private equity firm Parthenon Capital decided in 2003 to buy a majority stake in Atkins in a deal that reportedly valued the company at $700 million.

Atkins himself had recently died after falling and hitting his head on an icy street, but his company was raking in revenues from book sales, licensing and branded food products like the Atkins Advantage Bar. There was widespread speculation the company was being prepared for a public stock offering.

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But even then a backlash was brewing, despite some medical research that showed the Atkins diet was effective. Some nutrition activists warned the diet could be dangerous, risking bone damage from overeating of protein, for example. And nutritionists said it defied common sense to believe that people could maintain a healthy weight while feasting on high-fat meats and sauces.

“Any diet can be effective if it’s cutting calories,” said Seattle dietitian Lola O’Rourke, a spokeswoman for the American Dietetic Association. “One of the big problems of the low-carb Atkins is that it eliminates some the most healthful foods that should be the foundation for our diets.”

And like many diets, the Atkins plan often fails in the long run because dieters are unable to stick with it. Even on the company’s own Web site, half the people who responded to an online survey and said they had gotten beyond the “induction” phase of the diet reported gaining weight when they tried to move on.

At the peak of the fad in early 2004, when 28 percent of American adults said they were on a diet, 9 percent said they were on a low-carb diet, according to market researcher NPD Group. By this month that figure had fallen to 2 percent.

Atkins began seeing declining demand for its products, was forced to lay off workers, and lost $341 million last year, according to papers filed in bankruptcy court. The company said in a statement it plans to continue operations normally and already has reached agreement with the “overwhelming majority of its lenders” on a plan to restructure its debt.

Even as the Atkins diet is being eclipsed by its less extreme low-carb rival South Beach Diet, others lurk on the horizon including a new “glycemic index” diet method that is popular in Europe.

“People are always going to be looking for the next quick fix,” said Hill. “So I think there is a great opportunity for the next fad diet to come along.”

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