That big thud you heard several weeks ago was the collective dropping of hearts of every diehard snack food and wholesale bakery producer who held out hopes the low-carb diet trend had peaked and the whole reduced-carb craziness would run its course — sooner rather than later.

That loud noise was set off when Krispy Kreme Doughnuts lowered its profit expectations by 10% for fiscal 2005 as the result of new industry dynamics, specifically low-carb diets.

“For several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including bread, cereal and pasta,” noted Scott Livengood, chairman, president and CEO of the Winston-Salem, N.C.-based company.

“This trend had little discernible effect on our business last year,” he added. “However, recent market data suggests consumer interest in reduced-carbohydrate consumption has heightened significantly following the beginning of the year and has accelerated in the last two to three months. The phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged donuts to grocery store consumers.”

Loyalists of the full-carb campaign can no longer snicker about the consumer with the split personality who snarfs down low-carb bread and energy bars while inhaling yeast-raised glazed donuts at the same time. Chicago-based Information Resources Inc.’s InfoScan Reviews report that the donut category experienced a 0.4% decrease in volume for the 12 weeks ending April 18, 2004, compared to the same period a year ago, Krispy Kreme noted. For the 12 weeks ending January 25, the category had been up 7.4% in volume, the company reports. Something must be up.

Still, before the Chicken Littles declare the sky is falling, it should be noted that Krispy Kreme saw a 26.3% increase in systemwide volume in U.S. packaged donuts, while all other brands experienced a 7.2% decline. Krispy Kreme’s numbers were, for lack of a better term, just more normal. Systemwide sales for the first fiscal quarter ending May 2 were projected to be in the 24% range, which is impressive. The company stressed that it was just setting more realistic expectations for the market going forward. Besides, how long could it have sustained a growth rate in supermarkets of nearly 50% in year-over-year sales? The bubble had to burst at some time.

As Livengood explained, “Our current guidance assumes a continuation of the low-carb phenomenon that is affecting the industry. Needless to say, we are disappointed that external forces have caused us to revise our first quarter and 2005 earnings guidance.”

Certainly, Americans are more conscious of carbs. They have heard of the Atkins diet, they are buying up a slew of South Beach Diet books at Costco, and they are trying reduced-carb products. At least, that’s what dozens of bakery and snack food producers said at the Food Marketing Institute show in Chicago in May.

But is it just the carbs? Maybe Krispy Kreme’s consumers are cutting the fat, cutting the calories and cutting a lot more. Maybe it’s because those yeast-raised donuts that are being sold in supermarket aren’t as “hot” as the ones fresh out of the fryer.

Yes, Americans are cutting back on carbs, or at least, they think they are. They say they’re cutting back on full-carb white bread, cookies, crackers and chips, and they’re eating more pork rinds, nuts, meat snacks and whole grains. However, as in the past, Americans are expressing their right to diet in their own special way.

In many cases, they continue to indulge, as indicated by the increase in frozen desserts. They don’t exercise enough, and they don’t have a clue as to how many net carbs they’re consuming on a daily basis. That’s why obesity has become such a big issue, in more ways than one. It’s not only affecting bakers who serve retailers, but also those who supply foodservice customers as well.

“As far as foodservice goes, it’s my feeling that the Atkins, Zone, South Beach or whatever diet you have is just another example in the long history of Americans trying to lose weight by eating more,” said Michael Marcucci, CEO of Chicago-based Alpha Baking Co.

Maybe consumers aren’t embracing the bun-less Whopper at Burger King or at Carl’s Jr., but they are buying into Atkins wraps at Subway. In general, many tortilla suppliers report that they cannot make enough low-carb products at this time to meet the demand.

In general, Marcucci believes Americans are switching to tastier and healthier products such as whole grain breads, an opinion shared by many wholesale bakers. In many ways, the low-carb phenomenon is only a small part of broader, more fundamental changes in consumer eating patterns. That’s a point of view of many bakers.

“We believe that whole grain is becoming increasingly important to consumers,” noted Peter Reiner, senior vice president of marketing and R&D at Sara Lee Bakery Group. “The whole health and wellness issue is confusing consumers. One day, they hear that something is healthy. The next day, it’s not. We’re trying to simplify the message. We want to make it as simple as possible.”

In Sara Lee’s case, that message involved labeling its products as “heart healthy.” When Sara Lee introduced its Sara Lee Delightful bread with lower carbohydrates and calories, the St. Louis-based company also introduced three Sara Lee Heart Healthy breads — one new multigrain bread and two others from its line of Sara Lee branded breads — specifically its classic and home-style wheat. Compared with 18 or 20 months ago, Reiner said, whole grains have become more front-of-mind with consumers making the heart-healthy message more on-trend. Bakers just need to communicate their messages better to get more consumers to buy into these better-for-you products. That’s what Sara Lee did.

“We wanted a straightforward message of ‘Heart Healthy.’ We wanted to be straightforward about the benefits of these products. It’s simply descriptive, not fancy or convoluted,” Reiner explained. “There are more whole grains in these bread products that make them better for you.”

In many cases, lowering the amount of net-carbs, or total carbs minus dietary fiber and sugar alcohols, has resulted in products that are actually better-for-you from a nutritional standpoint that have rung a chord with many consumers. For example, Sara Lee’s Delightful wheat and white varieties are the top-selling carb-focused breads. With 9 gm. of carbohydrates and 45 calories, the Delightful products have quickly become the 11th and 16th best-selling loaves of breads overall in America, the company noted.

Other low-carb offerings have quickly emerged as a category favorite. In the tortilla category, Mission Foods’ low-carb tortilla assumed the No. 1 position within a month of its making its March debut. Asima Syed, Mission’s senior vice president of marketing, predicted that the low-carb offering could account for 20% of sales for the Irving, Texas-based company within the next 18 months.

“It’s going to be a very big part of our business,” she said. “Tortillas are healthy products to start with. Our customers were just looking for low-carb tortillas.”

Sara Lee and Mission Foods are not the only companies with carb-cutting success stories. In what company officials describe as the “most successful new product introduction in the history of our company,” Flowers Foods last year launched the Nature’s Own Healthline Wheat ‘n Fiber bread, which has only 7 gm. of carbohydrates per slice. More recently, the Thomasville, Ga.-based company came out with Nature’s Own Wheat ‘n Soy, and said that additional carb-conscious products are in the works. Flowers’ new Nature’s Own Healthline brand also includes sugar-free and light breads.

Kansas City, Mo.-based Interstate Bakeries Corp., the nation’s largest distributor of breads and cakes, introduced its lower-carb offering under the Carb Action name. Pepperidge Farm of Norwalk, Conn., came out with a line of soft reduced-carb breads and rolls under the Carb Style banner. United States Bakery, based in Portland, Ore., came out with Smart Nutrition breads that have fewer carbs and less fat. Alpha Baking launched a lower-carb bread called Carb Right.

In addition to carb reduction, some bakers are highlighting a host of other benefits as well. For instance, Meyer’s Bakeries has rolled out what it describes as the “next generation” of bakery products with reduced carbs. Its Carb ­ line of bagels in four varieties, English muffins and a unique snack bar taps current dietary trends by delivering fewer net carbs per serving. Specifically, they have been specially formulated to achieve a minimum of 50% reduction in net carbohydrates. They’re trans fat-free and are an excellent source of fiber. The bagels, for instance, contain up to 73% of recommended daily fiber.

Additionally, the Hope, Ark.-based company said the products qualify as a good source of protein and most are low fat. Calories have been reduced by a minimum of 30% and many are low in sugar. Carb ­ products are appropriate for some diabetic diets.

“We want to introduce products in the marketplace that we think will be both revolutionary and evolutionary, from a baking perspective,” said Bob Blaida, senior vice president of sales and marketing. “Carb ­ products closely mimic conventional bagels and other baked goods far more than competitive brands and deliver unbeatable taste.”

Los Angeles-based Tumaro’s Gourmet Tortillas now sells a line of Low-In Carbs tortillas with 5 gm. net carbs, no trans fat, 94% fat free and no cholesterol. Packaged in resealable zip lock bags, the products are Kosher, a good source of dietary fiber and available in Multi Grain, Green Onion, Garden Vegetable and Sour Cream & Salsa varieties, said Brian Jacobs, Tumaro’s vice president.

Perhaps one of the most high-profile producers of lower-carb bakery products has been Weston Foods U.S. Last year, it entered into an exclusive agreement with Atkins Nutritionals Inc. to produce and market controlled-carb baked goods. Initially, Weston rolled out varieties of its trademarked “Carb Counting” breads under the Arnold and Brownberry brands.

This spring, to help the carb-conscious indulge, Toronto-based Weston introduced six baked sweet goods that are endorsed by Atkins. Packaged in a light blue-and-white box with the Atkins logo displayed prominently on the front, the Entenmann’s carb-reduced sweet goods include blueberry breakfast muffins, butter loaves, chocolate-chip-and-nut loaves, chocolate chip cookies, fudge nut brownies and crumb-topped French butter cakes.

Others are getting on the bandwagon, too. Northfield, Ill.-based Kraft Foods Inc. introduced a number of new products with fewer carbohydrates, including SnackWell’s Carb Well Fudge Brownie, Fudge Striped and Fudge Graham cookies. The cookies have 9 gm. or fewer net carbs, 120 or fewer calories and the “great SnackWell’s taste.”

Minneapolis-based General Mills introduced Pillsbury Carb Monitor frozen dinner rolls with 7 gm. net carbs and 4 gm. of fiber. In June, it is rolling out Momentum Bars, which contain 3 gm. net carbs and 15 essential vitamins and minerals. The bars come in chocolate-peanut butter, double-chocolate and chocolate-caramel-nut varieties.

“Nearly 70% of consumers are monitoring their carb intake,” said Gayle Fuguitt, General Mills vice president of market research. “But whether they’re on a lower-carb diet or just watching the amount of carbs they eat, we know they want lower-carb options that are convenient and that taste good.”

Meanwhile, Old London Foods gently stepped into the low-carb arena with it’s Carb Sensible branded version of its Italia International Toast and a reduced-carbohydrate version of its Toastettes. Both have 3 gm. of net carbs per serving or 1 gm. per toast. To make the International Toast lower carb, the Bronx, N.Y.-based producer of toasted snacks added flaxseed to the product. Both products cost the same as the full-carb version. If the low-carb trend accelerates, the company has a couple other versions ready to market.

“With obesity being the overriding issue and getting the media play, everything is coming back into the fold as far as low salt, low fat, low carb, low in calories and low in sugar. People are getting more conscious about what they’re eating,” said John Wilcha, Old London’s chairman and CEO. “Low carb is going to morph into moderation. All of those trends from the last 15 years are all coming together and are going to be revived again because obesity is an extremely important issue.”

Although many firms have tried, it’s nearly impossible for researchers to determine exactly how many people are in the low-carb camp. Overall, at least a dozen surveys over the last year attempted to quantify the number of carb-counting Americans. Estimates range anywhere from 10 million to 50 million. In some cases, it might be a matter of definition. Researchers might simply ask consumers whether they are counting carbs, but neglect to inquire about the details. Some consumers might be on the strict Atkins or South Beach diet. Others might be doing as little as eating a low-carb tortilla, bunless burger or high-protein energy bar once a week.

Perhaps the most authoritative study on carb consumption was conducted by the NPD Group, which tracks what people actually eat instead of reporting what they say.

At any given time, the Port Washington, N.Y.-based company noted, only about 4% of the population, or about 10 million consumers, is on a low-carb/high-protein diet. Most people on the diets are between the ages of 35 and 64.

Moreover, most people who are attempting to reduce their carbohydrates are not slashing them enough. After tracking the eating patterns of 11,000 adults, the group reports that most adults on a carb-cutting diet actually ate an average of 128 gm. of refined carbohydrates a day. That’s considerably higher than the 20 to 50 gm. of carbohydrates some low-carb diets recommend for weight loss, but still less than the 210 gm. most adults average per day.

“Low-carb diets are a fad, much like the low-fat craze of the low carb ’80s and ’90s. The question is, ‘How long will it last?’” said Harry Balzer, vice president of the NPD Group. “In the meantime, every manufacturer will put out their version of low-carb products, and Americans will try them because that’s what we do. We like to try new things. People still want to lose weight by eating, but getting people to change their behavior is a very difficult thing to do.”

Meanwhile, in a recent ACNielsen Homescan Panel Dietary Awareness Survey, 17% of households report that someone in the family is currently on a low carb diet. However, in his May newsletter, supermarket guru Phil Lempert said, “More telling is that 19% report that someone in the household ‘tried and quit’ such a diet regimen, raising the question of whether this is the end of what has become the fastest-growing, on-shelf diet products phenomenon in recent history.”

All too often, the media, consultants and experts are too quick to identify a trend and then too quick to dismiss it. That begs the question: Is this the case with low-carb diets?

Certainly, it’s too early to tell, but what’s equally as important is that 60% of Americans are on some sort of diet at this time, according to Lempert. Moreover, 28.9% of these dieters are using a diet of their own design, according to the ACNielsen survey.

Most likely, those personally designed diets slash carbs, calories, fat or portions — or some combinations of these elements. Several bakers believe those carb-controlled products that address a number of these issues are likely to be the ones that survive in the long term.

“The low-carb trend is the brother or sister of low-fat, low-salt and low calories, and all of them are from the mother and father of moderation. Obesity is the issue [that] is not going away,” Wilcha said. Manufacturers, he added, are going to have to take the lead and find ways to influence consumers’ behaviors.

“Consumers themselves won’t change,” he said. “If you sell them an oversized portion of McDonald’s and extra fries, they’re going to take it and they’re going to eat it. If you’re not selling them those products — if you’re selling them portion-controlled and if you’re selling them products that are low-carb, low-fat and low-salt — they’re not going to have as many choices and they will eat those products.”

Gary Prince, president of Toronto-based Weston Foods U.S., breaks down carb counters into three categories: hard-core Atkins followers, those who have lost weight and are in the maintenance phase of the diet, and those who actually have changed their lifestyle and reduced their carbs for good. However, he said the real issue is not necessarily carb consumption, but rather, an over-consumption of calories and a subsequent lack of exercise.

“The real issue is obesity,” Prince explained. “What I believe to be true is that there are many carb watchers, and we’ll continue to have many carb watchers over the course of time because balance is what it’s all about. We’re in the front end of it all. It’s not going away any time soon.”

He said the Atkins-endorsed sweet goods allow consumers to enjoy the sweet life while monitoring their carb intake.

“People are going to indulge, and that’s what Entenmann’s is,” he said. “It’s a product for people to indulge, whether it’s a donut, cake or pie. To the extent that we can make those products a little bit better for you and give you the same indulgence, that’s good because people are going to indulge anyway.”

Syed from Mission Foods believes low-carb has staying power, although it might transform from a fewer-carb movement to a “balanced-carb” trend. “I don’t think it’s a fad,” she said. “I think the low-carb, balanced carb lifestyle is here to stay.”

Syed pointed to several strong drivers propelling the balanced-carb trend. First, there are the core “fitness fanatics” and those Americans who are actually following the Atkins and South Beach diets. Consumers who are interested in wellness are also cutting the carbs. Then there are the diet-restricted, or those who must reduce their carbs because they’re overweight, have diabetes or other health issues. Finally, there are perpetual dieters who surf from one fad to another.

Moreover, as more carb-focused products emerge, she said, the trend will become more mainstream and may eventually appeal to a broad array of ethnic groups.

“Initially, the low-carb trend was aimed at more affluent, educated, Anglo Americans,” Syed explained. “At this time, Hispanics are not adapted to a low-carb lifetyle.” That may change as Hispanics adopt that other American propensity to overeat and not exercise, Syed noted. If weight gain and diabetes becomes an issue, then cutting carbs will emerge as an alternative for other ethnic groups.

“What’s going to drive the low-carb diets is the rise in diabetes due to being overweight,” she said. “Hispanics are going to be moving into it with the entry point being health restricted.”

What could derail the low-carb trend are potential health risks and other long-term issues resulting from being on these trendy diets. Some nutritionists and health experts note that a high-fat, high-protein diet can contribute to heart or kidney problems. In fact, the Atkins group has recently made several announcements urging Americans to eat less fatty foods and eliminate the 44-oz. Porterhouse steak routine and eat more balanced and sensible meals. Of course, Atkins Nutritionals may be motivated by the popularity of the South Beach diet, which emphasizes the consumption of more fish than meat.

Additionally, financial issues could be a concern for lower income consumers. Following the Atkins diet requires eating more expensive foods, such as meat, certain vegetables and fish. Many carb-reduced breads cost around one-third more than their full-carbohydrate counterparts because the new versions use more expensive ingredients and are more difficult to bake.

According to some reports, eliminating more affordable carb-based products can easily double the cost of a household’s weekly food budget.

The low-carb movement could also be derailed by government regulations that are planning to come up with an official definition of what can be called “low carb” and what can’t. Already, several companies have received warning letters from the Food & Drug Administration. On the other hand, many reduced-carb producers may be their own worst enemy by calling a product low carb when it’s really not. Consumers and retailers have no patience for such dishonesty.

Meanwhile, retailers can’t seem to be able to stock enough lower-carbohydrate items. Some retailers are waiving slotting fees, offering special displays or even special sections of their stores to the carb movement. Some specialty stores offer nothing but low-carb products. Wal-Mart is clamoring for more and more. There are even vending machines that feature only low-carb products.

Then again, low-carb is only one trend. Consumers may diet, but they also like to indulge. Of course, that’s the problem with so many American dieters. It’s so difficult to change their fundamental behaviors over the long run.

“There’s a lot less of a stall effect that is occurring with those things than there is with your basic commodity products,” said Jerry Smiley, a principal with Strategic Growth Partners in Roselle, Ill. “People will give up their Ho-Hos, but not their Cheesecake Factory cheesecake. They’ll give up their soft hamburger bun at Wendy’s, but they won’t give up the artisan bread at Costco.”

Right now, Smiley added, the smart play is to have continued product innovation that caters to both the consumers who are on a reduced-carb diet and the ones who are not.
“Not everyone in the world is on a low-carb diet,” Smiley said.
“And not everyone in the world will stay on a low-carb diet.”—Written by the SF&WB staff.