Natural Foods Merchandiser

The Low-Carb Army Marches On

Everywhere, unavoidable on store shelves, restaurant menus, even magazine covers, is that term: low carb. The phrase first came to attention in the early 1970s with the release of Dr. Atkins Diet Revolution, but recently it has proliferated into other big-name weight-loss diets such as South Beach and The Zone. Now, some say, ?low carb? has become a primary part of healthy eating, whether the goal is to shed pounds, prevent diabetes or just stay in optimal shape.

Last year, low-carb products sales totaled $15 billion, and this year they?re projected to double to $30 billion, said Laurie Kuntz, chief executive officer of LowCarbiz, a Denver-based trade magazine and Web site tracking the trend. ?Pretty much every conventional product has a low-carb counterpart,? said Kuntz. The low-carb label is also a ubiquitous marketing tool. ?Lots of manufacturers are renaming items—not changing the SKU but identifying something as ?carb conscious,?? she said.

This is a trend with longevity, industry experts agree. ?It?s probably here to stay, barring any bad medical news on, perhaps, how restricting complex carbohydrates may have long-term ill effects on health,? said Jay Jacobowitz, president of Retail Insights, a Brattleboro, Vt., natural products consulting firm. Natural foods retailers would be remiss to ignore the trend altogether, he said. And few stores are low-carb-blind these days, though some stock formulated low-carb products, while others stick to just noting which foods are inherently low-carb.

?I don?t think low carb is going to go away, and even if it did it would take a long time,? said Steve French, managing partner of The Natural Marketing Institute in Harleysville, Pa.

For natural foods retailers, attracting these low-carb-loving customers is good business, French said, and not for the reasons you might think. NMI?s research found that low-carb consumers are more likely to take and believe in the benefit of supplements, to be open to new products, to purchase more health-related products, to be predisposed to organic foods—to be, essentially, opinion leaders. Furthermore, they tend to be younger and earn a higher income than average. All this, and coming from the mainstream market. ?This is not the Birkenstock crowd,? said French.

Naturals retailers have responded, many by adding shelf space at a dramatic rate to meet consumer demand and to keep up with the skyrocketing number of new products. ?Within 12 months I have gone from stocking a few items that everyone had to, now, four freezer doors full and one 24-foot aisle with six to eight shelves,? said Jeremy Andrew, owner of High Country Health Foods in Park City, Utah. ?Then I have another 12 shelves devoted to goodies—the bars and the candy.?

?This is the biggest trend I?ve seen,? he said. ?The low-carb market has exploded pretty good for us,? though it?s beginning to slow a bit. ?It was really fast growth last year, peaked at the holidays and is now doing 16 percent [growth]. We haven?t cut back at all, but it is taking a little longer to sell out.?

Investment bank Morgan Stanley reported in April that the low-carb craze had peaked by the end of the first quarter of 2004. About 13 percent of consumers were on a low-carb diet in the first quarter of the year, but only 11 percent were adherents by the end of March. Of course, the numbers vary, depending on who is doing the tracking. (See ?Learning the New Math of Counting Carbs? for more optimistic projections.)

But the trend may be sustainable because of its role in disease prevention. ?We have a very high incidence of diabetes,? said Donna Link, owner of The Earth Pantry in Bismarck, N.D. She created a low-carb freezer section, and stocks about 45 shelves with the products. ?Not huge, but a big allotment of space, and I revamp it every month,? she said. If buying slacks off, she can easily rearrange inventory, but her prediction is that the low-carb habit is a keeper. ?I?ve seen trends come and go, but I think some of this philosophy will stay.?

The issue for some retailers is the healthfulness of certain products. Particularly suspect are those with synthetic ingredients and artificial sweeteners. ?Sucralose and other artificial sweeteners are definitely an issue for health food retailers,? acknowledged French. And many consumers have increased purchases of foods that may be inherently low-carb, but also high in fat and not necessarily healthful.

Rather than compromise their mission by selling unhealthy foods, some retailers stick to promoting naturally low-carb foods. But Jacobowitz, the consultant from Retail Insights, views processed low-carb foods as a stepping-stone to making better food choices. He advises natural foods retailers to stay in the game, no matter the reservations they may voice. ?You need to be in the conversation about diets, all diets,? he said. The low-carb diet is critical, he added, because it?s the only one currently that specifically addresses diabetes. But, he cautioned, because of the questions surrounding such commonly used ingredients as sucralose, retailers need to offer full disclosure with the products they sell. ?The bottom line is that this is one of those lesser-of-two-evils things. These are transitional products. But don?t throw out the baby with the bathwater.? Many low-carb products are less than ideal, but when a customer buys one, it?s a shift, an indication of the first step toward taking more responsibility for health.

The statistics bear this out. Among independents and small chains, health food stores with more than 2,000 square feet did the most low-carb business, accounting for 28 percent of the $485 million market, even though they have only 10.7 percent of total retail sales in the naturals channel (see Universe of Stores chart). The two largest chains, Whole Foods and Wild Oats, also have a bigger footprint in the low-carb market (24 percent combined) than they do in total sales (21 percent combined). Naturals stores, it seems, are attracting consumers who come in looking for low-carb items but may discover other healthy products once they're in the door.

Some products are better than others from an ingredients standpoint. ?The preference should be for products that are naturally low in carbohydrates, or low-carb, without synthetic ingredients,? said Jacobowitz.

?Use it as a chance to educate,? he suggested. That means talking to customers about the big picture of low-carbohydrate foods—about, for instance, the benefits of organic meats, which are naturally low-carb, without synthetic ingredients.

Obviously, some products also taste better than others, and eventually the less tasty ones are weeded out. ?Some are great,? said Andrew of High Country Health Foods. ?Others, I?d rather eat Alpo.?

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