Slimmer Revenues

1 August 2005



Atkins Nutritionals Files Chapter 11

In a nation like America, where most adults are encumbered by an extra ten or hundred pounds around the middle, selling dieting product should be a slam-dunk path to profitability. The experience of Atkins Nutritionals, which took off thanks to a convenient fad, shows that this is not the case. The company filed Chapter 11 bankruptcy last week because its bottom-line was way too thin.

Robert C. Atkins founded the company in 1989 to exploit the commercial potential of the high-protein, low carbohydrate diet that bears his name. And for a decade or so, the privately-held company chugged along on its own. Then, the fashionably thin and those who want to displace less space decided they had had enough of wheatgrass juice and tofuburgers. They wanted bacon and cheese and everything else they had denied themselves. And thus a fad was born. Atkins Nutritionals was in the right place, promoting the right idea at the right time.

Because it is a privately-held entity, exact figures are difficult to discern. However, it is safe to say that during the Atkins diet boom from 2002 to 2004, business grew at a breakneck pace. And the lesson here is a difficult one for many businessmen and women to grasp. Sudden growth is a challenge to be met, not just a phenomenon to be admired from afar. Indeed, it is not too far off the mark to compare it to growth in a person – sudden, unexpected growth of tissues can be a sign of cancer, not of health.

In the case of Atkins Nutritionals, demand was fickle. Just as quickly as things come into fashion, they go out of style, e.g. hula hoops, pogs and fiscal restraint among Republican presidential candidates. Ever interested in slimming down, America got on the Atkins bandwagon, and some lost the weight they wanted to lose. Some even kept it off. But the rest of the relaxed-fit jeans crowd decided it didn’t work for them and moved on. And an interesting thing happened before that; when demand was at its peak, new suppliers entered the market – which is how the free market is supposed to work. This competition ate into Atkins revenues.

So as of December 31, 2004, the company had assets of $301 million and liabilities of $325.1 million and recorded a loss of $340.9 million for the year. Management has secured $25 million for day-to-day operations and may be able to revive some of the company’s fortunes. But the great opportunity passed, and it was mishandled. And that is why Chapter 11 exists.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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