"As I look back, I can see clearly how the low carbohydrate market boom/bust is a classic example of the total lack of "market and customer" understanding by the low carb manufacturers.

"Full steam ahead! There are huge dollars out there!" was the specialty manufacturers' mantra just one short year ago. Their panic focused on getting into the "big box stores" — that's where the money is... (or at least they thought.)

Oh sure there is money there — just not for them anymore.

A major component of producing a sustainable revenue stream is that manufacturers need products that seduce the customer to purchase and, most importantly, to return to buy it repeatedly. Rare are the single-sell success stories in our market.

Low carbohydrate food manufacturers and distributors crept into being, slowly increasing their revenues through specialty retail shops and websites. At the same time, they were building a base consumer who was returning time and time again. These people were actually willing to seek out and find the manufacturer through friends and internet postings. They would spend an obscene amount of money for their "low carb" products. Ah, the (artificially) sweet smell of money!

In no time the competition popped up and the scramble to create new product lines increased. Still they came. Still they bought! Finally the big time — the big box store was drawing nigh!"

(click here to continue reading this piece by John Hynds.)

Brett Railey has run lowcarbdieters.com for many years now, and for a time operated a retail outlet as well in the Orlando, Florida area. The store is now closed, but the online venture continues. Here are Brett's thoughts:

"I feel that the future of low carb as an industry is dependant on businesses returning to our roots, and rolling the clock back 6 or 7 years to when low carb food was a "niche market."

When we first opened LowCarbDieters.com, there was no "industry" and very few marketable products. We had to search out unique products that fit into our way of eating and then find a way to get the product out to our customers. While this was not an easy task, we were rewarded with a loyal customer base whose dieting success depended on our ability to service them. The retailers success was found in our capacity to offer a product that could not be purchased at the local grocery store. If the product was truly unique, customers found us through networking in chat rooms and bulletin boards.

Due to the success of the low carb diet, there are more low carb dieters now than ever. This success brings us more opportunities to offer distinctive products that are not widely available, many times manufactured by smaller companies who can't compete in the mass market. Our future depends on the realization that we can no longer be "all things to all people" coupled with our ability to specialize in finding quality products. We further need to limit the variety of products offered to those items not available on every street corner."

Elaine Payne, along with her sister Lynn Whitfield, opened the country's first low carb specialty store in South Carolina. Her store, as well as her online venture, have seen the best and worst of this business. Here, Elaine shares her vision of the future for low carb:

"If the low carb industry can weather the downsizing that is currently underway, we may find that its future success depends upon learning from its past mistakes. Despite the recent media hype and attention, low carb has always been, and should have remained, a niche market. Business plans and expansions should have been made with that in mind, but greed and other factors corrupted the growth of the low carb industry. The core group of dedicated low carb dieters is still out there and with that in mind, manufacturers and retailers alike can approach the business of low carb as being a smaller, but hopefully more predictable market.

The future of the low carb industry will become more apparent as soon as the glut of overproduced, expiring products are gone and the shakeout of the retail market is over. As small stores close, and the mass market clears its shelves of low carb products, the question of how to get quality, low carb products to the consumer will once again be the familiar issue.

As a retailer, I deal each day with the problems of manufacturers who have gone out of business, a dwindling supply of distributors, and frustrated customers who can no longer find their favorite low carb products.

A successful future for the low carb industry will depend upon building a new partnership and understanding between those of us in the industry who are committed to staying and succeeding in this business."

Andrew DiMino of CarbSmart has seen the bumpy ride in a way that many other retailers have not. He was able to get a number of lucrative licensing deals for the CarbSmart name, including one from Breyer's Ice Cream, and one from Bayer. He expanded his online business to include two retail stores in Reno, Nevada and Huntington Beach, California. But this past year's rollercoaster was not a kind one. It left him faced with closing the Reno location, and more importantly with stress levels at a point that it caused him to suffer a stroke. He continues to recover and considers himself both blessed and smarter as a result. Here's what Andrew had to say:

"I believe that neither the industry nor the lifestyle is dead. It was, howver, definitely time for the low carb marketplace to change.

When the diet was first created, its purpose was to promote weight loss, and to improve one's health. For the first 25 years of the lifestyle, there were no "low carb" labeled products. You either followed the Atkins' plan by the book, or you found products in the grocery store that just happened to be low in carbohydrates.

As the popularity of the diet grew over the last six to seven years, the first people who created low carb products were dieters who lived the lifestyle and wanted to share their creations with the world. These first low carb entrepreneurs, myself among them, were looking to create and sell products made for those few people who followed the diet and needed something more than just eggs, meat and cheese. They knew they were servicing a niche market, and approached their ventures knowing there was some money to be made helping others live the same lifestyle they did.

Then negative aspects of the industry grew to unstoppable levels when those who did not understand the lifestyle, and how and why it works, saw nothing but dollar signs. To them low carb was just another way to make obscene amounts of money by capitalizing on a "fad."

It hit its lowest point when companies like Kelloggs and General Mills released cereals, cookies, and snack items filled with white flour, high fructose corn syrup, and even sugar and called them "low carb." The lack of sincerity and desire to actually help the people who need true and healthy low carb products turned the industry on its ear.

Their products' debut did not make living a low carb life less successful or less important, nor did it change the basic truth that it worked. It simply changed the way people incorporated these products into their lifestyle.

The industry was forced to see that this is a specialized lifestyle and not meant to be a mainstream way of eating for America. Low Carb products were indeed meant to be available in wider distribution, but not nearly so many products in so very many stores.

So my thoughts on the future of the low carb?

Continued scientific proof will show that the concepts of carbohydrate restricted dietary regimes are valid. We will see more clinical and medical studies that support its efficacy, and it will be more readily accepted by the public.

Although low carb products will continue to be available, the consumer will now demand products that are stricter in their ingredients, taste better, and are lower priced. Products will be made by specialty companies that only manufacture Low Carb or other diet products and they will be more properly sold by specialty retailers that understand the lifestyle.

Kantha Shelke is a principal at Corvus Blue LLC, a Chicago-based food science and research firm that specializes in competitive intelligence and expert witness services. The company is retained by progressive businesses and professional organizations to help them succeed in what matters most. Kantha's view of this industry is multi-faceted, and her thoughts on this issue were of particular interest to us:

"The popular press reports that the low-carb diet industry was a fad and that low-carb diets are on their way out. In reality, however, the wisdom of the low-carb regimen is seeping steadily into the shopping habit-behavior of consumers who care about their long-term health and wellness and it's becoming more of a lifestyle than a diet.

How do we know this? By simply watching what consumers are eating these days – and clearly, they are adopting (and recommending to their circles of influence) the essence of low-carb diets – i.e., the practice of minimizing simple carbohydrates and replacing empty calories with nutrient-dense protein-rich foods. The general public is increasingly receptive to great tasting alternatives and is demanding tastier foods that are good for you. Restaurants are increasingly catering to patrons’ requests for foods that have little or no simple carbohydrates and which comply with either South Beach or the Atkins principals.

Sales of low-carb foods in 2005 will probably not mirror the double- and triple-digit growth rates seen in the previous years – but the emerging market will certainly seek level ground and not die as a category. How can it – when a majority of Americans face overweight issues and when many of them rely on food-based solutions to keeping pounds off.

Slowly but surely, we will see changes in the food industry. Savvy companies will reformulate their products and change their marketing practices while they strive to introduce foods that are healthier for you. So, we will see less of creative labeling and more of truly nutritious and good tasting foods in the marketplace.

We don’t have to wait long to figure out the direction of this category. The first quarter, generally the peak season for diet products, will tell us which foods discerning consumers are seeking for their health and wellness."

We caught up with Linda Langdon of Low Carb Creations while attending a show in San Francisco last week. We posed the same question to her, and Linda's answer came easily and quickly:

"I think we'd all been living in a bubble for awhile there. And when the bubble burst, we found ourselves back in reality... where we should always have been. Had we as an industry gone overboard? Well, let me ask you this question, "Have you ever heard of a "Low FAT Specialty Store"?!

So, as you can see, there's no one clear answer as to what the future holds for low carb in the short term. In the long term, it's not going anywhere. Products with a lower carbohydrate profile will have a place on America's store shelves from this point forward. But most of us have learned a valuable lesson that can serve us well in the future. And for those that haven't learned? Well, we all know the often repeated refrain that those who cannot learn from history are doomed to repeat it.

                                             

Note: We also asked this question of Dan Maiullo, formerly of Keto Foods, for his perspective, and he opted to write an entire article about it... Turn to Page 12 to read Dan's article on The Future of Low Carb.