November 15, 2004
by Stephanie Thomson
Atkins Nutritionals is in retreat just months after an aggressive offensive, in the latest sign that the low-carb craze is cooling.
Facing waning category growth, large-scale competitors and financial and legal woes, Atkins is cutting its marketing budget significantly, eschewing sexy image-driving TV for tactical, product-pushing newspaper inserts for the post-holiday diet season.
Riding high on the surge in sales of low-carb foods earlier this year, the leading manufacturer of “controlled carbohydrate” products more than doubled its 2002 media budget.
In the first half of this year, it spent $32 million and made its first national TV buys, according to TNS Media Intelligence/CMR. But spending for 2005 is expected to be a mere fraction of that.
An Atkins spokesman declined to comment on the shift, noting only that the company will distribute a multi-page free-standing insert in newspapers nationally on Jan. 2. But an executive with knowledge of the situation said the budget correction is a result of “acting responsibly.”
“The metrics have changed,” since the enormous growth in the category during the first quarter of this year and even since the company launched its umbrella branding effort in May, the executive said. Not the least of the changes is the decline in the numbers of Atkins dieters, down from 8% of Americans to 4.8%, he said, and entries of food giants Unilever and Kraft into the category.
One grocery executive reported that “sales are so soft for Atkins … that they are not advertising,” and instead are “letting the products wither on the vine.” He added, “They’ve seen the writing on the wall, and they’re not going to throw bad money at it.”
Sales for Atkins’ top-selling brands, such as Advantage bars and shakes, Morning Start cereals and Endulge candies, grew 91% to $221 million for the 52 weeks ended Oct. 3. But in the last 12 weeks, sales have dramatically slowed, dropping 31%, according to Information Resources Inc. data.
In an effort to revive sales, Atkins will run a four-page newspaper insert in January featuring coupons for its entire product line. In-store efforts include aisle banners and shopping cart ads that highlight the taste of Atkins products. Other product-centered print is likely, and Atkins could increase the budget depending on sales.
Atkins in September said it would reorganize and lay off employees in the face of waning sales.
Glenn Gundersen, partner and co-chair of the intellectual property group at law firm Dechert, said the velocity of low-carb mania is evidenced by the pace of trademark applications that include the word “carb.” For the first four months of this year, over 400 applications were filed, the same amount filed in all of 2003 and four times the amount filed in 2002.
Jim Capparell, until recently the publisher of Low Carb Living, said since the rush to get products into the market, there has indeed there has been a drop off in advertising from the smaller, mom-and-pop manufacturers of low-carb products. Two to three years ago, these marketers had the category all to themselves but have over the last year been knocked out by larger players such as Kraft Foods, which has much deeper pockets.