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Posted: April 01, 2010

Small biz: CEO improves prognosis for Atkins

Mike Taylor

atkins.jpg

Stephen Phinney, Dr. Eric Westman, Dr. Jeff Volek

The three doctors introduced at the Oceanaire Seafood Room in downtown Denver looked triumphant as they accepted applause for the difficult operation they had performed. Now it was out of their hands.

The Feb. 16 spectacle had the feel of a medical breakthrough along the lines of the Jarvik 7 artificial heart, and from a diet-business standpoint, maybe that's what it was: the unveiling of the new Atkins diet book co-authored by the three doctors, Eric Westman, Stephen Phinney and Jeff Volek. Just one step in resuscitating a former diet-industry giant.

Dr. Robert Atkins died in 2003 when he slipped on some ice and hit his head, and for awhile it looked like the Atkins Diet he pioneered and the business based upon it were headed for a similar fall.

The low-carb Atkins Diet was once such a cultural phenomenon that restaurants piggybacked on the craze by touting low-carb entrees as "Atkins friendly" and affixing a red "A" to menu items. Pasta and bread sales suffered on account of Atkins' influence. At its height, an estimated one of every 11 North American adults was on the diet. Sales of Atkins products in 2003 were pegged at more than $200 million.

But then the Atkins empire seemed to lose its way. Some 70 new Atkins products were hastily introduced in the months following Dr. Atkins' death, and they were roundly criticized for their poor taste. The Atkins Diet itself came under fire from some heart doctors and nutritionists for allowing liberal consumption of foods such as butter, meat, cheese and eggs.

Slim-Fast, Jenny Craig, Nutri-Systems, Weight Watchers and other foes seized market share. Battered by declining sales and increasing competition, Atkins Nutritionals filed for bankruptcy in 2005 and completed Chapter 11 reorganization later that year.

That brings us to 2010, the new Atkins book, a new slogan - "Sweet. Sexy. Science." - and the effort to resurrect the brand, led by Monty Sharma, CEO of Denver-based Atkins Nutritionals Inc.
If anyone is ideally suited for the rebuilding job it would seem to be the 45-year-old Sharma. As CEO of Golden-based EAS (Energy Athletics Strength), Sharma and his team doubled sales to $300 million and cut operating costs by $27 million, setting the stage for the company's sale in 2004 to Abbott Laboratories.

Then, as CEO of Los Angeles-based Naked Juice, he expanded distribution and repositioned the ultra-premium brand as a mainstream offering, culminating in Naked Juice's sale to PepsiCo in 2007.
As with the EAS and Naked Juice ventures, Sharma is teaming with North Castle Partners, a Connecticut-based private equity firm focused on products and services that benefit from "healthy living and aging trends." North Castle announced the acquisition of Atkins Nutritionals in 2007 and immediately named Sharma CEO.

Atkins Nutritionals moved its headquarters from New York to Denver because most of Sharma's team members from his EAS days are here. Plus, he says, "It's a very healthy city. There's a very heavy recognition of a healthy lifestyle in Denver. I think this is a great place to recruit talent, too."

Reformulating the Atkins products, improving their taste, was the first step. Educational tools were created for the website, atkins.com. Then, the book. "Our new bible, if you will," Sharma says.
"The fundamentals of what Dr. Atkins proposed are still rock solid," Sharma says of Atkins' first book, the old testament, if you will. "But science has evolved. We've learned a lot from studies that have been done, how the body works and what the body does with fat, what the body does with proteins and carbs. So we needed to take that and incorporate the new science into the new Atkins."

Sharma acknowledges rebuilding Atkins poses a bigger challenge than what he faced at EAS and Naked Juice, two fledgling, "aspirational" brands. But success will be measured similarly.
"How many people are we bringing into our diet, how successful are they with the diet, and are they happy with us?" Sharma offers as barometers. "And do they continue to progress through all the phases of weight loss and into the lifestyle? That's really all we're about. If we're able to add a million new consumers this year, I would consider that a success in 2010."

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Mike Taylor is the managing editor of ColoradoBiz. He writes about small-business money issues and how startups are launched. Email him at mtaylor@cobizmag.com.

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