NEW YORK – Atkins Nutritionals Inc (search), the company behind the Atkins Diet, filed for bankruptcy as U.S. consumers have tired of the once-sizzling fad.
Atkins Nutritionals, which filed for Chapter 11 bankruptcy (search) on Sunday in New York bankruptcy court, said there was still a bright future for the company in weight loss. It plans to pare back its operations to focus on selling nutrition bars and shakes.
Based on research done by weight-loss guru Dr. Robert Atkins (search), the Atkins diet promotes eating proteins like meat and cheese while excluding carbohydrates such as bread and pasta.
Atkins and other low-carb regimens such as the South Beach (search) and Zone diets were so popular from 2002 through 2004 that the trend was blamed for the demise of many eateries and the bankruptcies of several public pasta and baked goods manufacturers.
At the same time, however, the diet received widespread criticism from nutritionists who said it encouraged people to over-eat fatty foods like bacon.
In its heyday, Atkins listed Goldman Sachs Group Inc. (GS) among its backers and analysts predicted an initial public offering. Its trademark red "A" logo appeared on a range of packaged foods and was featured in advertising for Subway sandwich stores and the T.G.I. Friday's restaurant chain.
The low-carb craze peaked in early 2004, when over 9 percent of U.S. adults claimed to be on such a diet, according to market research firm NPD Group. That figure declined to 2.2 percent last month.
"The low-carb trend has sort of died on the vine," said Bob Goldin, executive vice president at Chicago-based food industry consulting firm Technomic Inc.
Atkins has said demand for its products began to slump at the end of 2004 as rival food companies, including heavyweights like Kraft Foods Inc. (KFT), flooded the market with everything from low-carb Oreo cookies to cereal.
At the same time, Atkins faced increased scrutiny by critics. In particular, the death of company founder Robert Atkins after a fall in April 2003 led to much negative publicity when reports claimed he had been overweight and suffered from a heart condition.
Last fall, the New York-based company hired a turnaround specialist and cut jobs to boost efficiency. It also brought in new management — though former H.J. Heinz Co. (HNZ) executive Neil Harrison left earlier this year after just three months at the company's helm.
Mark Rodriguez, who became Atkins' chief executive in June, said in a statement that the company has "adjusted our organization to accommodate a smaller business." He was not available for further comment, a spokesman said.
For the 12-month period ended Dec. 31, 2004, Atkins said it had total assets of $301 million and liabilities of $325.1 million, according to court documents. For the same period, it recorded a loss of $340.9 million, including an asset impairment charge.
The company said it secured $25 million in debtor-in-possession financing arranged by UBS. Five other potential lenders refused to extend credit to the company, Atkins Nutritionals said in its filing.
Atkins said the "overwhelming majority" of its lenders had agreed to a prearranged plan to restructure its debt, and it would file a reorganization plan shortly for bankruptcy court consideration. Its lenders have agreed to receive equity in the company in exchange for reducing debt, the company said.