Economic Analyst Says Low-Carb 'A Very Big Bad Investment' In Response To Atkins Bankruptcy

Steven Syre believes low-carb is a "very big bad investment"

It was just a matter of time before the economic analysts began weighing in on the future of low-carb. Ever since Atkins Nutritionals, Inc. filed for bankruptcy protection on August 1, 2005, the media and health "experts" have been vigorously stirring the waters of dissent in an attempt to scare away potential investors from shelling out the dough to support low-carb products for the tens of millions of people who are still livin' la vida low-carb in 2005 and will continue to doing so in the years to come.

However, Steven Syre wrote a not-so-nice advice column for investors about prospect of good low-carb investment opportunities in his latest Boston Capital column entitled "Choking on a low-carb bet." Syre authors two of these columns weekly for The Boston Globe and often covers topics involving investment and business.

Syre noted that Parthenon Capital, which boasts $1.1 billion in assets as a private equity firm with offices in Boston and San Francisco, has had "one gigantic bomb" among its list of investments in recent years.

"In this case, the bomb was called Atkins Nutritionals Inc.," Syre wrote in his column.

Explaining that Parthenon "jumped into Atkins with both feet" in 2003 as its popularity was soaring, Syres added that in collaboration with Goldman Sachs Capital Partners the investment firms acquired 80 percent interest in Atkins Nutritionals, Inc.

"The rest is a very sad story," Syre lamented in his column. "Atkins wasn't just a bad investment. It was a very big bad investment."

Going on to explain that Parthenon placed one-fifth of its total fund into Atkins Nutritionals, Inc. with a "very public investment," Syre said that was the kind of investment you "never want to get wrong."

But they did get it wrong now that Atkins Nutritionals filed for bankruptcy. Their investment seems like it was all for naught.

While I applaud those investment companies for taking the risk on a low-carb company at a time when it seemed that there was nothing standing in the way of long-term growth, I have to take issue with Syre's point of view regarding the lack of opportunities that the low-carb industry presents the investment world.

One thing that firms such as Parthenon and Goldman Sachs failed to realize is the fact that not everyone who follows a low-carb program, including the Atkins diet plan itself, purchases the products they make. While the Atkins Advantage bars and shakes have sold moderately well for Atkins Nutritionals, Inc. and will continue to do so in the coming years, many of the products they carried simply did not appeal to those of us who are livin' la vida low-carb.

Even as I was losing my 180 pounds in 2004 on the Atkins diet, I hardly ever bought the Atkins products because they were much more expensive than other cheaper and I might add better products. But the fact that some low-carb products failed to sell is not an indication of the failure of the diet.

It's sad to say, but Atkins Nutritionals, Inc. did not keep their finger close enough on the pulse of what low-carbers wanted and needed to sustain their low-carb lifestyle. Some people think this is ironic considering the founder of that company, Dr. Robert Atkins, was the man who singlehandedly put low-carb on the map for the past three decades. But like any good business idea, you have to keep making products that are relevant and better for the consumer base that wants them. If not, then other companies will come in and take up the slack where your company is lacking. That's exactly what happened as many low-carbers simply shunned the Atkins products for the most part.

If the Atkins company isn't where low-carbers are going for products to help them on their low-carb lifestyle, then what companies are reaping the benefits of this large and growing customer clientele? That is a very good question to ask the answer to which Syre should particularly take note of for the benefit of his investment readers. The products that are selling and growing among low-carb purchasers show that low-carb is here to stay for at least a little while longer than many might think.

Although I am not an economic analyst or professional businessman with a great crystal ball about what is hot and what is not in the realm of investment opportunities, my personal experience having been on this diet as a method for weight loss and now weight maintenance has led me to believe these five companies and product sectors are ones that should be given a second look by investors looking for a way to tap into the low-carb market while simultaneously remaining profitable:

1. GoLower

GoLower is a relatively new company started in 2003 and based in the UK which features unique and delicious bars that taste surprisingly good and contain a high amount of fiber, an essential part of many effective diets. They are marketed not only as low-carb, but also as low-sugar and for people following a glycemic index (GI) diet. Headed by two business professionals who strongly believe the low-carb sector has still been mostly untapped, GoLower is primed to take the lead among the viable low-carb products on supermarket shelves not only in Britain, but also in the United States in the coming months. Wise investors should pump their money into GoLower and watch them and their money grow in the coming years.

2. CarbSmart

While many other names have come and gone in the past few years as low-carb grew to a fevered pitch, one name has stood the test of time and is still going strong. That name is CarbSmart. The licensed named CarbSmart appears on some of the best-tasting "diet" ice cream you'll ever eat, a popular vitamin supplement that I have personally taken ever since it first appeared on the market over a year ago, and some delicious low-carb pasta that helps fill that need for the low-carb eater. The longevity of these products is attributed to their commitment to being both marketable and sustainable. While even more "low-carb" products exit the store shelves in the coming months, look for CarbSmart products to continue to lead the pack and provide the continuing low-carb consumer with options. It's a great time to invest in this product.

3. Z-Carb

I am amazed by how many people still haven't heard of the company that makes the very best-tasting low-carb chocolate bars on the market today -- Z-Carb. Made with erithyritol, a sugar alcohol that does not create the unpleasant gas effect caused by ingredients such as maltitol and lactitol which are commonly found in most low-carb candies, Z-Carb bars have been the best-kept secret in the low-carb industry for years. A friend of mine at work told me about them early on in my low-carb weight loss plan and I've been hooked ever since. The company was fortunate enough to get distribution through Wal-Mart, Walgreens, Rite Aid, and 7-11 stores, just to name a few. With a little capital invested into this company, the return on the investment could be enormous as it can be marketed not just to people following low-carb, but also diabetics who need to watch their sugar intake and other diet plans. Remember the name -- Z-Carb.

4. Meat, cheese, and egg companies

It goes without saying that certain companies stand to profit when a diet comes along that highlights and encourages consumption of their products as part of the program. That's exactly what happened to the meat, cheese and egg industry when the low-carb lifestyle hit it big a couple of years ago. These companies saw enormous profits and are still reaping the benefits of that success today, despite negative spin from the media. In fact, one beef market industry analyst recently predicted that the low-carb growth will continue in the coming years to build on the 15 percent growth seen since 2000. Cheese companies are experiencing a huge sales boost while poultry farmers are also enjoying some of the best times they have seen in decades with egg sales. The low-carb lifestyle is driving the demand for these products and prudent investors should get in on the action.

5. Low-Carb books

If you want to see real evidence that the low-carb lifestyle is still relevant in 2005, just take a glance at some of the bestselling health books over at Amazon.com. Low-carb titles include The South Beach Diet at #9 and #48 overall, The South Beach Cookbook at #11 and #57 overall, The Fat Flush at #59, and The GI Diet at #83 (rankings as of 9-11-05). The interest is there and many other books are on the horizon. One area that I believe has not been fully realized are low-carb weight loss success story books. Where are they? I haven't seen any on bookstore shelves that show real people who have gone through a low-carb program and experienced major success. It's not that there aren't stories available for people to tell. A good investor would recognize this and put their money into a publishing company willing to share these stories with the whole world. I don't just say this because I have a book coming out about my weight loss success story, but I genuinely believe the marketshare is there for the taking with the right resources behind it.

There are other products and companies that could have been highlighted and many others will continue to sprout up to fill the voids in the low-carb market. We low-carbers are very discerning and we will simply not accept products that do not meet a certain standard. Investors who put their money where their mouth is and help prime the companies who are properly servicing the low-carb consumer will indeed see a return on their investment.

You can share your comments about this subject with Steven Syre by e-mailing him at syre@globe.com.