Adjust to Market Decline or Die

Atkins Nutritional Inc. filed for Chapter 11 bankruptcy protection in September 2005. The market leader in low carb food products was faced with increased competition from large suppliers like General Mills and Kraft Foods and new more moderate low carb diet plans like the South Beach diet. Was this why it failed?

Dr. Robert C. Atkins the namesake founder of the diet plan and tireless promoter until his death in April 2003 may have inadvertently caused in the decline of low carb diets. He died of a fall in the streets of New York but the coroner indicated he suffered from congestive heart problems and hypertension, illnesses many medical practitioners warned Atkins dieters about since its inception. Shortly after his death, his family sold the majority control of the company to private equity funds that engaged new management. In 2004 they decided to take on the competition and launched marketing campaigns to build the business. This resulted in a $300 million loss. Why did they fail?

According to Business Week, 9.1% of Americans were on a low carb diet in February of 2004 dropping to 2.2% by July 2005. Rather than tightening their belts and adjusting the business to the lower market - Atkins Nutritional Inc. with new investors and management was investing to build market share.

The first step in strategic planning is to know whether your market is growing or declining, (and why), and adjusting your investment accordingly. Even the market leader has to react to changes in the overall size of the market if it is to survive.