Lean times for Atkins foods; Company plans layoffs…
September 14, 2004
Newsday (New York)
by Elizabeth Sanger
Atkins Nutritionals Inc., the company whose founder created the low-carbohydrate diet craze, is reorganizing and laying off employees as it faces growing competition and a slowing market.
The Ronkonkoma-based company, which makes more than 150 low-carb versions of high-carb foods, stated it is “refocusing its operations in response to the revolutionary changes that are reshaping the overall food industry.” One-third of the company’s food products, which include bagels, pasta and ice cream, were introduced last year.
Richard Rothstein, a spokesman for the private company, said it employed 370 people before it started handing out pink slips last week. He wouldn’t say how many will lose their jobs.
At the end of last year, low-carb, high protein and high-fat dieting was the rage and the market became overheated, said John Rutherford, a co-founder of Parthenon Capital, a private equity firm in Boston that holds a controlling interest in Atkins. A slew of competitors jumped on the bandwagon, from small upstarts to major food producers.
As a result of the media hype, supermarkets, mass merchants and other retailers ordered large quantities of low-carb foods, but couldn’t get as much as they wanted, Rutherford said. Orders rose, supply caught up, and retailers ended up with more product than they sold. Meanwhile, demand fell as some medical professionals questioned Atkins’ health benefits and competing diets gained popularity.
“Retailers’ purchases went up too fast and then went down too fast,” Rutherford said. Once they work through the inventory, the market should stabilize.
Rutherford, who sits on Atkins’ board, said the long-term demand for low-carb foods remains strong and Atkins Nutritionals is the market leader. The company doesn’t reveal annual sales. Rutherford said revenues last year were at least double those of the prior year, but growth in 2004 is slowing.
The company will take a write-off this year for foods that expired before they could be sold. Still, Atkins will show a profit, he said, adding, “fundamentally it’s a profitable business.” The company said 30 percent of Americans control their daily consumption of carbs, namely sugars and starches.
Atkins Nutritionals began in 1989 as an outgrowth of the late Dr. Robert C. Atkins’ practice. Starting Oct. 1, it will team up with Acosta, a national distributor based in Jacksonville, Fla., that works with 1,300 manufacturers of consumer products to sell and merchandise their goods, part of a plan to operate the business as “professionally as possible” as it grows, Rutherford said. Atkins also will “de-emphasize” its Long Island distribution facility as it ramps up new operations in Atlanta and Denver, the company said.
“There’s no clear definition of what low carb is,” Rothstein said, adding that some foods bill themselves as being low in carbohydrates when in fact they have added sugars and trans fats.