Bankruptcy marks rapid fall of low-carb craze

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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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