No-carb: Sales fail, trend ends

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PepsiCo, Unilever and Kraft are retreating from the shrinking low-carb food category as fast as they raced to get in.

Citing dismal sales, mainstream marketers have halted production on a variety of low-carb products mere months after their debuts, while smaller players such as Keto Foods have closed their doors. Those still serving the segment will likely spend little to advertise in what has quickly returned to a niche market.

The low-carb food market was once predicted to hit sales as high as $15 billion, but seems to have topped out at around $1 billion. A trend companies hoped to ride for at least five years passed in just one.

At last May's Food Marketing Institute trade show, virtually every booth featured new low-carb products. But while data show that many consumers are still counting carbs, they have clearly not been buying foods catered specifically to that purpose. Now the remaining carb-conscious consumers are struggling to find any low-carb products as manufacturers shed the new lines as quickly as dieters hope to shed pounds.

According to Mintel's Global New Product Database, 800 low-carb products were introduced at the height of the trend in the third-quarter of last year. An Information Resources Inc. trend report published in August showed that "carb-branded activity" totaled $1 billion in sales, a dramatic increase over the previous year.

CLEARING SHELVES

While some manufacturers have yet to pull their products, many retailers are doing it for them. One Midwest retail exec said she is "discontinuing almost anything that has low-carb written on it" including the entire line of Unilever's Carb Options.

But many are pulling products. PepsiCo unit Frito-Lay in December phased out its Edge line of low-carb Doritos, Tostitos and Cheetos after only six months on the market, Kraft has pulled its lineup of seven CarbWell cookies including low-carb Oreos and Chips Ahoy as well as its CarbWell cereals and cereal bars, and Kellogg has yanked its own Keebler Sensible Low-Carb Cookies.

Even Unilever-which was the first out with a major line of more than 30 low-carb versions of some of its top brands-has pulled back. Last year the company bet big to push Carb Options by spending $24 million in media, according to TNS Media Intelligence. Although a Unilever spokeswoman said the company "remains committed to the Carb Options line," executives close to the company note that sales of 60% of the line have slowed precipitously despite Unilever dropping its premium prices to mirror those of the regular items. As a result, Unilever is expected to scale back to all but a handful of items in categories such as salad dressing, pasta sauce and peanut butter and to support those products minimally.

Katherine Prouty tracks discontinued low-carb products and where to find existing products on her blog at lowcarbfreedom.com, which in March hit an all-time high number of readers with a daily average of 646 people. Ms. Prouty offered that, while there are plenty of people out there looking for low-carb foods, the demise of many of the low-carb products is a result of companies striking out on the three most important variables: taste, price and effectiveness at helping dieters lose weight.

Opinion Dynamic Corp. research showed that 16% of a group of 900 respondents surveyed last week claimed to be on some form of a low-carb diet. But the research firm's VP Larry Shiman said rather than looking specifically for products branded low-carb, those carb-aware people are focusing more on products that feature carb-diet-friendly attributes such as low-sugar and whole grains.

Marketers are already trying to adapt. Kraft will relaunch a few of its CarbWell cookies, including Oreo, under its SnackWell's Sugar-Free line and plans to focus marketing for its new 20-plus product line of South Beach products around a more general-nutrition message of having the right carbs, the right fat and lean sources of protein.

Atkins Nutritionals, trying to avoid the fate of its key competitor, Keto Foods, which went out of business earlier this year after a meteoric rise and fall in sales, is likewise trying to reposition itself by focusing on its products' ability to deliver high protein, high fiber and low sugar. Atkins is severely cutting back on the $34 million it spent to advertise it raft of low-carb products last year, a portfolio that has shrunk along with its competitors'.

A Frito-Lay spokesman said the unit will focus on its lower-calorie products, like its Baked line, letting its naturally low-carb products like pork rinds and Oberto meat snacks meet the needs of the niche low-carb consumers.

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