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Low-carb craze loses insanity, but it's still strong

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The low-carb craze is claiming casualties -- and more are likely -- as growth slows.

A year ago, Atkins Nutritionals couldn't crank out low-carb products fast enough. Now, online retailers are discounting them.

A year ago, entrepreneur Brad Saltzman planned to open 12 Los Angeles low-carb stores. Because of poor consumer response, he's sold one and listed his only other on eBay in June for $150,000. No bids came.

Some new low-carb products are starting off slow. One is Pepsi's Edge, the company said last week. ''There will be a shakeout,'' says Matthew Wiant, senior vice president of Atkins, founded by the Atkins diet creator.

Low carb is still strong. Nationwide, sales of foods labeled low carb hit $1.3 billion for the 12 months ended July 10, up 283% from the period a year ago, says researcher ACNielsen. For the 13 weeks ended the same day, however, sales were up just 20% from the previous 13 weeks, when sales were up 122% from the 13 weeks before that. More than 10% of adults follow some Atkins diet vs. 3.8% 16 months ago.

Anheuser-Busch last week cited its new low-carb Michelob Ultra, in part, for a solid quarter and 1.9% jump in domestic sales to wholesalers. T.G.I. Friday's recently expanded its low-carb menu. Dreyer's Grand Ice Cream just dished up $70 million for low-fat, low-carb Silhouette Brands.

The question no longer seems to be whether the low-carb craze has topped out but where it will settle. Anheuser-Busch expects it to stop hurting beer consumption next year. Kellogg CEO Carlos Gutierrez last week said it had peaked but that carb-rich products had yet to recover.

Atkins' Wiant expects two-thirds of products introduced in the past year to be gone within two years. Mark Swartzberg, beverage analyst for Legg Mason, has more hope for low-carb beers than low-carb soft drinks.

Brad Haley, marketing chief for Carl's Jr. and Hardee's restaurants, expects low carb to become quietly ubiquitous. ''If you don't have it, people will go elsewhere,'' he says. Carl's Jr. and Hardee's introduced lettuce-wrapped burgers last year and have added more low-carb items since. Sales have leveled, but the products attracted new customers, Haley says.

As often happens when industries grow superfast, little players suffer first when growth slows. Sales at HealthyLifeStyles, with two California low-carb stores, are down 35% from the peak late last year, President Rick Branchini says.

Saltzman jumped into low carb just when big foodmakers and supermarkets did -- hurting specialty stores. He counts his losses at about $200,000. ''The market changed -- fast,'' he says.

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