Low-carb diets set for slower rise

Cattle Market & Farm Reports, Editorials
Jan 14, 2005
by WLJ
Consumers may once again turn to low-carbohydrate diets to shed unwanted pounds this month, but the trend is unlikely to be as significant for food and beverage manufacturers as it was last year, according to the findings of a Morgan Stanley survey.
Morgan Stanley’s consumer staples analysts surveyed 2,500 U.S. adults in late December. About 13 percent of those surveyed expected to start a diet in early 2005, and about one-third of those were expecting to choose a low-carb diet plan.
Based on the findings of their survey, the analysts estimate six to seven million adults will start a low-carb diet in the first quarter. That is about 20 percent below last year’s level, the analysts said.
“Even as the low-carb movement subsides, manufacturers can’t ignore this segment, said Bill Pecoriello, a beverage industry analyst at the firm.
“While we believe the popularity of low-carb dieting is likely to continue to drop gradually, the number of people who continue to monitor their carbohydrate intake is likely to stay significant.
Not all food and beverage categories hurt by the low-carb trend will recover in the same way.
Sales of some high-carb foods improved as carb-counting waned, but consumers are continuing to avoid some categories with weaker nutritional profiles, said food industry analyst David Adelman.
In addition, some food categories benefitted from the introduction of low-carb alternative products, he said, citing yogurt and frozen entrees as examples. However,” Adelman said, “we remain skeptical that the low-carb versions of products in high-carb categories will meaningfully contribute to long-term category growth.”
This was the fifth time Morgan Stanley conducted this survey. The firm’s research has shown about 7.8 percent of U.S. adults were on a low-carb diet in the fourth quarter, about 9.3 percent during the third quarter, about 10 percent in the second quarter and 9.1 percent during the fourth quarter of 2003.
Pecoriello expects beverage companies such as PepsiCo Inc. and Anheuser-Busch Cos. to gain the most from the declining popularity of low-carb diets.
“Consumers who drop off a low-carb diet are more likely to go back to consuming beer, fruit juice, snack bars, pretzels and cereal than other categories such as carbonated soft drinks,” he said. However, other headwinds are slowing beer category growth and sales of Anheuser-Busch’s Michelob Ultra are declining, as 40 percent of its volume came from low-carb dieters, he said.
Meanwhile, Adelman continues to have a cautious view of the U.S. packaged food industry, because of ongoing challenges such as competition from store brands and changing consumer preferences.