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Low-carb slump gives way to slow-carb revolution

The glory days of low carb have gone, reports Shane Starling, but the experience has paved the way for the industry?s next big trend — the glycaemic index — which ranks foods based to how quickly they affect blood sugar levels.

Where to now for low carb? This is the question being asked by food players both large and small with a vested interest in the sector. After three years of spectacular growth, predominantly in the US, low carb is losing its lustre. Predictions vary wildly, but there is a definite consensus of opinion that the sector?s heyday has already come and gone — at least in the US.

Forecasts are erratic in other markets. Some, like mainland Europe, have yet to embrace low-carb dieting in any substantial way. In other markets, including the UK and Canada, it appears sales may also have already peaked, although opinions vary. Others like Australia appear to be where the US was in 2003 — low-carb fever approaching maximum with major companies like Unilever launching extensive low-carb lines.

The view from the US
The US in 2005 is a more confusing picture; 2004 was a record year for low-carb product launches, with 2,585 low-carb introductions, or 17.9 per cent of all food and beverage product launches, according to Productscan Online. In 2003, there were 633; in 1999, about 70. The 2003-04 years saw major food players engage low carb in a big way with some prominent brand conceptions from the likes of Pepsi/Frito-Lay (Doritos Edge), Michelob (Low-carb Ultra), Kraft (CarbWell), Unilever (CarbOptions and moderate low-carb, low-fat range Optima), Hershey?s (1g), Heinz (One Carb Ketchup), and Hain Celestial (CarbFit). This activity has followed the work of established niche players like Atkins, Keto Foods, CarbSense, Richardson Labs/NBTY (Carb Solutions) and Carbolite.

Nutrition Business Journal puts the US retail market in the vicinity of $2.7 billion in 2004. It also foresees continued if slowing growth for the category all the way to 2013 when it projects the market will still be growing at three per cent and be valued at $4 billion. This year the market will grow at a healthy 30 per cent, the San Diego-based journal predicts, and will continue to exceed mainstream food industry growth rates (usually about 2-4 per cent) until at least 2010.

Other market analysis is less optimistic. Productscan Online notes stock keeping units (SKUs) in almost every low-carb food and beverage category began dropping in the second half of 2004 — falling from 633 SKUs in June, to 306 in July and 209 in August.

US low-carb product launches are likely to fall in 2005 — for the first time since low-carb dieting began seizing the public?s imagination in 1999. The number of people pursuing low-carb diets has nosedived as disillusionment with the diet?s effectiveness has set in and sections of the medical fraternity have weighed in against it.

US research company NPD Group puts the number of Americans pursuing a low-carb diet at only 4.6 per cent in September 2004. The good press has largely dried up. Canada banned ?net carb? labelling for a lack of scientific evidence supporting the concept. The Food and Drug Administration may do the same this year.

Even market leader Atkins Nutritionals has hired a consultant to halt its waning sales (down 32 per cent in the second half of 2004). It has also altered and reduced its range and refigured its ?net carbs? labelling scheme to ?Atkins carbs? to differentiate itself from its competitors. Atkins halved its marketing budget and laid off more than 40 per cent of its staff in 2004.

Low-carb pioneer Keto Foods of New Jersey is regretting its decision to cash in on the mainstream interest in low-carb eating. It has already cut 75 of its 110 products. ?If I could do it over again, I would have stayed a cottage industry and not assumed supermarkets were the answer,? chief executive Arne Bey told The New York Times. ?But it was a low-carb gold rush, and, like everyone else, we got swept up in it. We?re in terrible financial condition right now.?

Consumer education
Such a state of affairs comes as no surprise to Linda Gilbert, president of market research firm HealthFocus International. ?It took seven to eight years for people to start thinking of good and bad fat. It took one to two years for people to achieve knowledge of good and bad carbs. It happened too fast, and so we advised our customers not to go too heavily into it.?

Similarly, most of the big food companies that have jumped on the low-carb bandwagon are reporting stagnant if not falling sales — or not saying anything at all. Line extensions have been shelved. A low-carb retail chain with plans for 5,000 outlets by 2008 revised its projections to less than 100.

Another niche low-carb specialist, Oregon-based CarbSense, is more upbeat about the market. ?Hastily launched products from many companies, including in some cases those by mainstream manufactures such as Kraft, Unilever and Pepsi/Frito-Lay, and in particular products made with sugar alcohols and other questionable ingredients, have lead to consumer dissatisfaction and even backlash in the category,? notes president Jim Haun. ?As carb-optimised products become more ubiquitous in the marketplace, speciality companies like ours are cultivating niches within the segment, and as a result, anticipate a very good year in 2005."

Despite such optimism, the good times, it would appear, are almost certainly over for most. So is 2005 going to be the year low carb dies a slow (or fast) death? Is it game over for low carb?

Yes and no, according to Lynea Schultz-Ela of Colorado-based natural products industry consultancy A Natural Resource. ?As an independent way of measuring food/caloric consumption and for weight loss, this is a fad and will not last,? she predicts. ?As part of a balanced diet, as well as a weight loss diet, understanding carbs is an important component. The fad has created an opportunity for nutrition education. As a result, we will see informed and partially informed consumers investigating their food not just for enjoyment eating but for nutritious eating. Informed customers are powerful and they are the basis of the natural foods industry. While low carb won?t last, it will build sales in the natural foods sector.?

The presence of big food companies may validate the category to some extent, she notes, but ?we will see it melt into the low-calorie diet subcategory with time. Consumers won?t stick with it if they feel deprived. It?s a rule of thumb, and I think the big food folks are nimble enough to exploit fads and then get out.?

A matter of taste
For Jim Tonkin of Arizona-based consultancy Tonkin Consulting, the nascent category needs further time to develop. ?As new products continue to come to market, they and the overall market may spike up or down, based on acceptance by retail and consumers,? he observes. ?However, due to the lack of credible clinical trials by third parties, consumers not really wanting to change their eating or drinking habits long term, and the fact most of the products still don?t taste very good, the category is still emerging.

?I believe the substitute sweetener category is where a lot of action will be in the next year or so,? he adds. ?As more of them are brought to market and approved for different uses in foods and beverages, we will see low- or no-calorie products continue to grow. These address a bigger issue than low carbs, and that is obesity. That is the big category.?

Julie Hirsch, director of product development at New Jersey-based WellGen and founder and president of Fourscore & five LLC, a scientific marketing consultancy, agrees that low carbs are just a stepping stone on the way to better eating by a greater proportion of the population. ?People initially saw great results with low carb,? she notes. ?They would have tried a lot of processed foods and decided what they liked and didn?t like and learned a whole lot about carbs in the process. So now they may look for products they feel are better for them that may or may not be low-carb processed foods. People forget that a lot of Atkins information is good information.?

She adds: ?Having said that, many people still don?t make the link between carbs and sugars or rice or bread. They don?t really understand just what a carb is, and there isn?t a lot of room on the label to educate people.?

Emanuel Stern, managing director of New York-based food product developer Culinova, points the finger at the taste conundrum as being a major stumbling block to processed low-carb foods? popularity — aside from their weight-loss efficaciousness. ?I think a lot of the big food companies have jumped in too quickly, but they are looking for ways to differentiate their products and nobody wants to be left behind,? he says. ?But I haven?t seen a low-carb pizza or pasta or bread product that measures up to full-carb equivalents. Many of the bars are not much better. There?s still a lot of work to be done on formulations, but whether people care about these kinds of products in a year?s time is debatable.?

He says that while ingredients developments have made it easier to extract carbs with less effect on taste, the taste matrix remains problematic and often prohibitively time consuming. ?Then with all this R&D, the cost of the end product can skyrocket,? he concludes.

Dietary sea change
One thing most experts in the industry agree on is that low-carb dieting has led many consumers to a greater understanding of carbohydrates and how they impact body function. This understanding may lay the foundation for the dietary sea change low carb promised to be — what is becoming known as slow carb.

Slow carb is based on the principles of the glycaemic index (GI), which ranks foods according to how quickly and dramatically they affect blood sugar levels. Slow-carb foods such as fibre-enriched baked goods are gaining increasing attention. ?Just watch, the millions who?ve adopted low-carb or healthier lifestyles, including America?s tens of millions of diabetics, will start to aggressively make the connection between carbs and fibre,? said food industry observer Bob Messenger in his Internet newsletter The Morning Cup. ?Fibre negates carb counts in a meaningful way. Even-tually, the media is going to put on its track shoes and chase down the fibre story and then trumpet it to the masses.?

As a guideline to diet selection, GI is already increasingly popular in countries like Australia, South Africa, Canada and the UK, if not so readily in the US where public education has been less robust.

?Fibre will really gain recognition,? says A Natural Resource?s Schultz-Ela. ?Slow carb is an obvious direction for natural food manufacturers and retailers to take. But it requires investment in education as consumers are still opting for the familiar white carbs rather than complex carbohydrates.? Brands like Winnipeg-based Solo GI have already been launched in the US promoting low-GI properties.

?GI is a little tricky for the average consumer to work with, but it can be simplified,? observes Stern. ?After all, Atkins took a lot of his ideas from the GI. I would say the big food companies would be looking for the next thing. Whether that is GI or not remains to be seen.?

Through the post low-carb haze a trend is discernible — and that is a public (at least the wealthier section of the public) coming to the realisation that junk carbs equal poor health. For that, low-carb dieting can, at least in part, be thanked.

US low-carb food sales by per cent of category

US consumer sales of various food categories in millions of dollars

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