Analyst Warns Low-Carb Diet Craze Waning

June 29, 2004
CBS MarketWatch
by William Spain

CHICAGO (CBS.MW) - “The second day of a diet is always easier than the first,” Jackie Gleason once said, because “by the second day, you’re off it.”

While the low-carb diet craze seem to have somewhat more staying power, one food and beverage industry analyst suggested this week that the fad may well have peaked and could soon see much slower growth.

In a note to investors Monday, Wachovia’s Jonathan Feeney cited “data from credible companies, a persistent split in the medical community and some weak specialty retail” figures as indications that “low-carb diet adoption rates in the U.S. are slowing.”

That could provide relief for companies in high-carb categories, he continued, “provided the execution and competitive outlook are strong.”

However, he cautioned, it is “not evidence of a reversal. We think the popularity of low-carb diets will have durable effects on some categories, but that trends are decelerating. This is sustained good news for the protein complex,” including Tyson (TSN), Smithfield (SFD) and Hormel (HRL) and “sustained bad news for industries such as pasta and bakery where a sudden and unforeseen drop in demand has now created a need for painful rationalization.”

To back that up, Feeney referred to consumer studies cited recently by PepsiCo (PEP) and Kellogg (K) indicating a slowdown in new dieters but “without any evidence of a quick reversal of negative trends in carb-heavy-categories.”

He also he noted the “relative sparseness of medical evidence” that low-carb diets assist people in losing weight - one factor that has kept the ultimate food arbiter - the Food & Drug Administration - from giving the diets its stamp of imprimatur.

Feeney speculated that a half-hearted approach by dieters, leading to poor results, is also contributing to a slowdown as “peaks of diet fads are usually reached when enough people have tried and failed and failed to lose weight.”

That hypothesis is born out by some of the available data, perhaps most notably a survey of 11,000 adults earlier this year by the NPD Group. Among its findings were that even among the “small fraction of the population [that] actually followed a lower-carb diet” - roughly 10 million Americans – few were doing it properly.

NPD reported that adults who are cutting carbs are still eating an average of 128 grams of refined carbs a day, which is “considerably higher than the 20 to 50 grams of carbs per day some low-carb diets recommend for weight loss.”

Said Feeney: “People want fast results without much effort. The low carb diets may just be another fad as people don’t see results from their limited efforts and give up.”

And, ironically, the low-carb diet may well become something of a victim of its own success as food companies rush to roll out new products to cash in on it.

“Variety and volume attract consumers to buy and eat more - thus interfering with their weight loss,” Feeney noted.

Of course, whether or not the low-carb diet trend just slows down or fades out, it is almost certain to come back: Food fads come and go and come back with regularity, Feeney said, and “low-carb dieting has been around has been around for over a century.”

To illustrate, he compiled a list of some 17 different diet plans dating back to 1862 and ranging from 1929’s “Eskimo-Style Meat-Only Diet” (meat, fat, coffee and water) to last year’s “South Beach.” Even the Atkins Diet - the most popular of the current low-carb plans - has been around since the early 1970s.