Product surplus slows low-carb sales, but diet isn't dead, suppliers suggest

Drug Store News, Oct 11, 2004 by Michael Johnsen

Reports concerning the death of low-carb dieting seem to be greatly exaggerated, suggesting that what once was considered a fleeting fad has eked a profitable existence successfully on drug store shelves. Indeed, a July 21 Gallup poll found that 27 percent of Americans are avoiding carb consumption actively, up from 20 percent two years ago. And a glance at nutrition bar sales in the drug channel for the 52 weeks ended Sept. 5 tells a positive story--Information Resources Inc. measures the category at $124.4 million, representing growth of 15.9 percent.

Indeed, IRI published a report in August suggesting that low carb was here to stay--especially in the grocery business, where many suppliers are plying low-carb messages on anything from peanuts--which always has been low in carbs--to mayonnaise.

But the trend in the drug channel certainly is slowing For the 13 weeks ended Sept. 5, every one of the top five meal replacement bars branded as a low-carb option lost dollar sales and volume compared with year-ago sales. Sales of nutritional bars overall fell 20.4 percent in that three-month period. Out of the top 10 bars as measured by dollars, only ZonePerfect (recently acquired by Abbott Laboratories), Slim Fast and Clif Bar's Luna offerings showed growth in both dollars and units in those three months, suggesting quite the opposite--consumers are abandoning the low-carb bandwagon in favor of other meal replacement options.

There are reasonable explanations behind the recent drop in low-carb activity, suggested Matt Wiant, chief marketing officer for Atkins. First, there are inherent, seasonal fluctuations in the dieting industry--the first quarter represents the biggest lift with New Year s resolutions, while the fourth quarter represents the greatest drop as people fall off their dieting wagons altogether with the Thanksgiving, Hanukkah and Christmas holidays. It's been growing so fast up until the first quarter of this year that you didn't even see seasonality in this category, really," Wiant said. "But we do see relative stability going forward for the next couple of years.

In addition, Wiant suggested that the low-carb market may be oversaturated with new players--and it s their collective weight that could be slowing the low-carb wagon down. [Customers] are buying three to four times as much product as they were buying a year ago," Wiant said. But suppliers have been launching products in droves to meet that increased demand, and consequently, some of the more established low-carb brands have suffered. "You have a market that's growing ... and you have a total saturation happening in the marketplace of products. There s just more product out there than there are people to buy it," he said.

At least that may explain the most recent round of layoffs at Atkins--the company last month began letting go an undisclosed number of employees (the company has 370 altogether). "If you're following a low-carb program today, you have so many more choices than you had six months ago. It really is a win-win for consumers," Wiant commented. "But it's not necessarily painless for some of these manufacturers who invested all these dollars to get in because the category that looked like panacea six months ago suddenly became a pretty competitive category."

And to be sure, the majority of those low-carb launches are more supermarket-friendly than they are fodder for drug store profit. Seasonally, Wiant said, Atkins' offerings of low-carb ketchups and bread mixes sell well. "But those aren't the items that are going to have the highest velocities day in and day out. The highest velocities ... are going to be the nutrition products: the meal replacements, the candy items, the snack items."

And those products that do sell well in supermarkets--everyday items like low-carb yogurts and low-carb breads--likewise are impacting the sale of low-carb goods in drug_ "Those products that the drug channel saw growth in a year ago were [products like] bars, shakes, candy, etc. That whole explosion of milk, bread, yogurt and so forth has clearly taken some share of stomach away from those bars and shakes," Wiant suggested.

While low-carb dieting continues to be about losing weight, the focus in the next few years may shift from weight management to the advocating of a healthy, nutrition-conscious lifestyle. And that especially may bode well for low-carb positions--that is, if results of clinical trials currently under way establish a link between low-carb dieting and glycemic control. "There's going to be more and more interest on the science of carbohydrates," Wiant said. "People are going to turn to controlling carbohydrates and reducing their sugar content for more than just weight loss," he added, especially as those clinicals link low-carb lifestyles to risk reductions of diabetes and heart disease.

And that's good news for pharmacy operators. According to Centers for Disease Control and Prevention statistics, as many as 135.2 million Americans currently are overweight; 63.9 million are obese. And as the link between beefy midsections and health is underscored in the network news and reinforced by consumer product packaging and advertising, the pharmacy could become the ideal place to receive counseling on weight management strategies. "The opportunity is to have a section of general health products that help with weight control and better nutrition," Wiant offered. "Label the section as a better nutrition section."