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The Battle For Your Bulge

By Margaret Webb Pressler

This should be a feeding frenzy for the weight-loss industry. The health

consequences of obesity, a national epidemic, are more powerful reasons to

shed pounds than fitting into last year's bathing suit ever was. Employers

are pushing workers to downsize, and the IRS now allows tax deductions for

certain weight-loss expenses.

Yet Weight Watchers, Craig and Slim-Fast -- the traditional giants of

the industry -- have been struggling to compete with a low-carbohydrate

craze that is proving to be harder to lose than a couch potato's spare tire.

" People walk into our centers and say, 'Gee, my friend lost 15 pounds

in two weeks and she was eating bacon and steaks,' " said P. ,

chief executive of Craig Inc., the privately held California company

that offers a low-calorie, nutritionally balanced diet based on its own

portion-controlled meals, which cost about $70 a week.

But responding to the low-carb threat can be risky. That's because for

years, the three largest weight-loss programs have competed with fad diets

precisely by not changing, and by being there like an old friend when the

fad passed.

Gigi Skowron, 56, a District resident who last year tried both the low-carb

Atkins Diet and its popular rival, the South Beach Diet, just returned to

Weight Watchers because she was worried that the high-fat diets were going

to be harmful " somewhere down the road. " Stopping at Weight Watchers'

Rockville location on a recent lunchtime, she said the routine of weekly

weigh-ins helps. " It's psychological, " she said. " You have to pay $14 a

week, so you want to make sure you get your money's worth. "

What especially worries the traditional weight-loss industry is the

staying power of the low-carb diet. " Unless something comes out from the

medical community saying there's something wrong with the Atkins Diet, I

don't see any end to it, " said La, president of Marketdata

Enterprises Inc. in Tampa, an industry research firm. Well, many in the

medical community have, in fact, said there are problems with the Atkins

approach, but enthusiasm for its delivery of quick weight loss has kept " Dr.

Atkins' Diet Revolution " in print continuously since 1972.

Slim-Fast has been hit hard. The privately held meal-replacement program

that was introduced in 1977 has built its business around the convenience

and simplicity of drinking a shake rather than eating a meal. But " easy "

isn't enough for customers anymore. According to data collector Information

Resources Inc., sales of Slim-Fast's traditional meal-replacement shakes and

powders slipped 27 percent last year, to $290 million.

" I think it's kind of like, 'Been there, done that, what else is new,' ''

La said of consumer sentiment about Slim-Fast.

Slim-Fast Foods Co. officials declined to discuss the company's recent

financial record. But it has been heavily promoting on its Web site and in

newspaper ads a new line of shakes and snack bars " for use as part of a

low-carb diet. "

Craig, meanwhile, still advocates a balanced approach to dieting. A

new management team has been making major changes since the company was sold

by Sid and Craig in 2002. Sales had been flat or declining for much of

the past five years, chief executive said in an interview. But

increased marketing to corporate customers, a home-delivery program called

Direct, the sale of new franchises and the hiring of celebrity

spokeswoman Joy Behar helped push sales up last year and in January of this

year, he said.

wouldn't cite figures on sales or profits, and said he " wouldn't know

how to estimate " how much better things would be if the company weren't

facing the low-carb groundswell. He said he's expecting big gains when what

he thinks is a fad ultimately passes.

The real testing ground remains the 550 Craig weight-loss centers.

The company is trying to stave off the low-carb market grab by improving

food quality, partnering with cookbook author and spa chef Cary Neff, and

carefully training employees about how to respond to low-carb questions.

Weight Watchers International Inc., the only publicly traded member of the

trio, has been similarly fighting for members, whose fees are its main

source of revenue, but with little success, according to recent analyst

reports. After strong growth for three years, membership fell 3.1 percent in

the fourth quarter of 2003, not counting members gained through franchise

acquisitions. Product sales were down 8 percent, and the company's stock is

also in the doldrums, dropping about 18 percent in the past six months.

And this when 26 percent of Americans report being on some kind of diet,

according to market research firm NPD Group.

Weight Watchers countered the low-carb message by relaunching its

FlexPoints system last fall, which allows for greater flexibility in the

program -- based on counseling members how to eat a nutritionally balanced,

low-calorie diet -- and makes it easier to follow. Such an approach is a

necessity, analysts say, when the diet du jour allows eggs and sausage for

breakfast.

In January -- high season in the weight-loss world -- Weight Watchers also

offered a promotion called FastTrack. Designed to offer rapid weight loss in

the first two weeks of joining, it included " a quick and easy guide to

higher protein eating. " Analyst Greg Capelli with Credit Suisse First Boston

called it a version of " if you can't beat 'em, join 'em, " and said it helped

spur membership growth. When the promotion ended, though, so did the bump in

attendance, and now Weight Watchers says its first quarter will show another

slight loss in membership.

" Short-term, they're obviously suffering through the pain of not having a

low-carb option at a time when it's a very hot diet, " Capelli said. CSFB has

an investment-banking relationship with Weight Watchers, but Capelli does

not own Weight Watchers shares.

The low-carb phenomenon exploded in part because it allows dieters to eat

fun, fattening foods, but also because Atkins Nutritionals Inc. began

pushing scientific studies backing its approach in 2001, just as the

nation's interest in losing weight began to surge. In 2002, the company

introduced several nutrition bars, which gave the company even more name

recognition. And, ironically, the low-carb diet got another public relations

boost when its creator, C. Atkins, died in an accident a year ago.

Through it all, though, some medical practitioners have continued to

believe that low-carb diets have been overhyped and that interest in them is

bound to wane.

" Atkins has been around for 15 or 20 years in one variety or another, " said

Arthur , medical director of the Obesity Management Program at

Washington University. " It's just a gimmicky way to change your caloric

intake. The only thing that makes a difference is how many calories you

consume. "

explained that " you wreak nutritional havoc eventually with a

high-fat diet, " and predicted that a balanced weight-loss approach will come

back into vogue. He commended programs such as Weight Watchers and

Craig for " giving people sound, thoughtful nutritional advice, " along with

structure, support and motivation.

And companies with such a traditional approach are just waiting for the

public's fascination with low-carb diets to come to an end. Weight Watchers

officials wouldn't be interviewed on their competitive situation, but in a

recent conference call with analysts, President Huett predicted " this

low-carb diet craze has now peaked, and the seeds of its decline are in

place. " She said it usually takes about six months for low-carb dieters " to

recognize these diets are unsustainable, " so this year should bring the

first wave of defections.

Atkins officials are undeterred by such predictions, and say that while the

overwhelming excitement about low-carb diets may calm down, the diet is here

to stay as a lifestyle.

" There are people out there that want you to believe that this is bad for

you, and the reason they want you to believe that is because otherwise their

economic interests are threatened, " said Matt Wiant, chief marketing officer

for Atkins Nutritionals.

" I think that the hysteria will settle down, and then that low-carb will be

a permanent part of the way people eat, " he said.

Huett at Weight Watchers, though, said the introduction of so many low-carb

supermarket products may hurt the low-carb lifestyle in the long run.

People " eating unrestricted amounts of low-carb packaged foods and snacks

[will] realize that their waistlines are actually expanding, " she said.

That's what happened with the mass introductions of low-fat products 10

years ago. And her company is getting ready: Its newest marketing campaign

is built around the hopeful theme " Welcome Back. "

© 2004 The Washington Post Company