Low-carb diets may walk, not run in 2005

MUST REWRITE THIS ; CAN'T USE WSJ

The Wall Street Journal

January 12, 2005

HEALTH

Low-Carb Diets Will Weigh Less
On Most Food Producers' Results

By CHRISTINA CHEDDAR BERK
DOW JONES NEWSWIRES
January 12, 2005

NEW YORK -- 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% 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 million to seven million adults will start a low-carb diet in the first quarter. That is about 20% 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, according to the analysts.

Sales of some high-carb foods improved as carb-counting waned, but consumers are continuing to avoid some categories with weaker nutritional profiles, food-industry analyst David Adelman said.

In addition, some food categories benefited from the introduction of low-carb alternative products, he said, citing yogurt and frozen entrees as examples.

"However," Mr. 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 such survey conducted by Morgan Stanley. The firm's research has shown about 7.8% of U.S. adults were on a low-carb diet in the fourth quarter, about 9.3% during the third quarter, about 10% in the second quarter and 9.1% during the fourth quarter of 2003.

Mr. 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% of its volume came from low-carb dieters, he said.

Meanwhile, Mr. Adelman continues to have a cautious view of the U.S. packaged-food industry, because of continuing challenges such as competition from store brands and changing consumer preferences.

Write to Christina Cheddar Berk at christina.cheddar@dowjones.com1

URL for this article:
http://online.wsj.com/article/0,,SB110548151540323215,00.html

Hyperlinks in this Article:
(1) mailto:christina.cheddar@dowjones.com
Copyright 2005 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.

More News:

All news »

What are your comments?

You cannot post comments until you have logged in. Login Here.

Comments

No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments