“It’s not about diet, it’s about nutrition.” This is how Atkins Nutritionals is marketing its products as it emerges from Chapter 11 bankruptcy protection and sets about its gargantuan recovery project. But is a brand this strongly associated with a diet craze that has fallen from grace fit for rehabilitation? David Robertson investigates.

Possibly the most influential food company of recent years re-emerged into public view last month after a traumatic period of restructuring. Atkins Nutritionals, the company set up by low-carbohydrate advocate Dr Robert Atkins, emerged from six months in Chapter 11 bankruptcy protection and promptly launched a US$40m advertising campaign as part of its rebuilding programme.

The New York-based company has downsized in order to survive and its reappearance on the public stage last month may, justifiably, have brought a shudder of fear to bread and pasta makers throughout the world.

As everyone must now know, the Atkins diet champions protein over carbohdrates as a quick way to lose weight. Bacon: yes. Rice: no – it could have been a diet drawn up by children.

The media latched onto Atkins and the phenomenon went global, throwing certain sectors of the food industry into turmoil. Potato growers, pasta makers and bakers blamed Atkins for falling sales. Interstate Bakeries, the makers of Twinkies, said the low-carb craze was partly responsible for its bankruptcy, as did the New World Pasta Company. Even Krispy Kreme blamed Atkins for its headaches, largely unfairly as it turned out.

Meanwhile, food giants such as Kraft, General Mills, Unilever and Kellogg behaved like kids who have just discovered hula-hoops are back in fashion: they went crazy for the new fad.

In 2003, more than 3,000 low-carb products hit supermarket shelves as the major food corporations rushed to change recipes and introduce new product lines. Restaurants started printing low-carb menus, fastfood chains offered burgers minus the bun and forecasters claimed the value of this new market could reach $25bn a year. And Atkins Nutritionals rode this wave of excitement, growing from a small vitamin and mineral supplier run by Dr Atkins into a major food producer. Goldman Sachs and Parthenon Capital bought 80% of the business and presided over a huge expansion in the product range, to 340 lines, and staff, up to 370 people.

Atkins had radically changed the food industry within just a couple of years, but it wasn’t to last. Nutritionists were criticising this unhealthy, high-fat diet; there were unpleasant side effects to the diet like bad breath; and the biggest problem was that people struggled to stay the course. It turned out that they actually wanted buns with their burgers; they liked pizza with a base; and, possibly worst of all, following Atkins meant no fries!

The Atkins bubble burst almost as quickly as it arrived and the major food companies started pulling low-carb products or rebranding them as “low-sugar” or “low-calorie”. Atkins Nutritionals was caught out by this sudden change in fortunes. It had borrowed heavily to fund its rapid expansion and when demand for its Atkins-branded frozen meals and desserts evaporated, the company was forced into Chapter 11 bankruptcy protection.

In court papers, the company revealed debts of $300m and blamed the drop in demand and brutal competition from the food majors for its failure.

The sense of schadenfreude that accompanied Atkins Nutritionals’ bankruptcy was understandable. This company had helped send numerous producers of carb-intensive products to the wall, but now it too was in trouble having been caught out by its own ambition – a turn of events that would, no doubt, have pleased many more in the food industry had they not been too busy rediscovering the delights of Pizza Hut to notice.

Now, six months on, Atkins Nutritionals has gone on its own diet to shed the weight gained during its binge period. Atkins Nutritionals’ new management team completed the restructure in January: the number of staff has been cut to 65, the product range to 60 and the company is now owned by a group of its lenders.

Moving forward, Atkins Nutritionals will focus on just two product lines: health bars and health shakes, marketed under the Atkins Advantage brand. The company has also dropped references to its products being part of a “low-carb lifestyle” and, instead, is repositioning itself as a general health and wellness provider.

Beth Neumann, Atkins Nutritionals’ chief marketing officer, explained: “We believe the brand, Atkins Advantage, has a major opportunity to evolve into a health and wellness brand. Consumers are better educated than ever about health and nutrition and while they do think about carbs, they also think about other things like sugar, protein and fibre.”

Atkins has the most popular health bar in the US (chocolate peanut butter) and in the health bar and shake category it is ranked second or third (depending on the figures) behind Slimfast and Powerbar.

In its new advertising campaign, and in its work with retailers, Atkins Nutritionals is promoting its benefits as more than just low-carb. The company points out that its health bars and shakes are lower in sugar and higher in protein and fibre than those offered by rivals.

Neumann says: “The people who buy these sorts of products want to know that information and when they realise the other nutritional benefits our products provide, they are very impressed.”

Of course, this sort of relentless positivity is to be expected. But despite this optimism there are substantial problems facing the company.

Marketing experts quizzed by just-food see the greatest challenge being to disassociate the company’s products with the famous diet plan in the public’s mind. Consumers may refuse to try an Atkins Advantage product if they gave up on the diet, or if it didn’t work for them. Atkins Nutritionals is obviously aware of this problem, which is why it is working so hard to promote its wider nutritional benefits.

Neumann says: “In the evolution of this brand the historical message [low-carb] is still out there but now we have gone to another level and we are saying, did you know we’ve got all these other things going for us? The message we want to get out is that it’s not about diet, it’s about nutrition.”

Funnily enough, that was exactly what nutritionists were saying when Atkins was busy sowing the seeds of its own downfall during the low-carb boom.