AR-News: [US] The Bull About the Beef

[Andrew Gach]

The Bull About the Beef
Has the Atkins diet really transformed the American economy?
By Charles Duhigg
Posted Monday, September 15, 2003, at 7:49 AM PT

When Unilever PLC, the British food giant that owns Slim-Fast Foods,
announced in July that U.S. profits had dropped 23 percent, it quickly
pointed an accusing finger at the Atkins diet, the trendy weight-loss plan
high in protein and low in carbohydrates. Atkins, Unilever's chairman
explained, has set off shock waves in consumption that have cut Slim-Fast's
profits, and there's no way to fight a fad.

Suddenly, Wall Street is blaming the diet craze for all sorts of economic
upheavals, and the deafening buzz is almost enough to drown out economic
sense. Time, the Economist, USA Today, and countless media outlets-marveling
at the idea of slimming pork chops and heavy cream-have touted the
commercial impact of the Atkins plan. The diet has been blamed for falling
wheat prices and booming beef sales.

But is there really an Atkins economy?

Three months ago, the British Federation of Bakers made headlines when it
announced that bread sales have declined 2 percent per year since Dr.
Atkins' book was re-released in 1997. Wheat consumption has dropped from 147
pounds per person to 139 pounds in the past six years. And in May, the
Tortilla Industry Association held a high-profile seminar titled "An
Industry in Crisis: The High-Protein, Low-Carb Diet and Its Effects on the
Tortilla Industry."

Atkins-friendly foods, on the other hand, are booming. News reports have
credited Atkins for an increase in U.S. beef sales in 12 of the past 14
quarters. Prices on cattle futures have climbed from 65 cents per pound in
2001 to 82 cents per pound today (suggesting the beef market has grown by $3
billion in 3 years). Consumption of bacon and eggs are at 10-year highs.
Beef jerky sales are up more than 40 percent in the past two years, and
pork-rinds have tripled their market share to $496 million per year.

Entrepreneurs are rushing to join the party. Atkins Nutritionals Inc., the
food company started by Atkins before his death this year, sold $100 million
worth of 90 low-carb products last year. Weight Watchers is introducing a
low-carb pasta. Michelob hawks its new beer Ultra with the slogan, "Lose the
carbs. Not the taste." (Michelob refuses to specify how the beer is selling
but says it has "exceeded expectations.") And in California, New York, and,
improbably, Texas, you can get freshly prepared Atkins meals delivered hot
to your door. No one can specify the size of the Atkins market, but experts
estimate it's at least $1 billion per year.

"It's rare that a diet will have an impact on national trends," said Harry
Balzer, the author of the annual Eating Patterns in America. "Atkins is the
exception."
But Atkins is winning more credit than it deserves, say economists. It's an
example of how media excitement about a cultural trend leads to
misinterpretation of an economic trend.

The Research Institute on Livestock Pricing reports that the average
American per-capita consumption of beef has increased 1.8 pounds per year
since 1997-another 525 million pounds per year. If the 6 million Atkins
dieters are consuming all that additional beef, then they are eating 87.5
pounds more meat per year than they previously did, which would mean they're
now eating steak and burgers at every meal except breakfast. And that's just
beef. Pork, chicken, eggs-if all the increases in Atkins-friendly foods are
due to Atkins dieters, it's a wonder anyone has lost weight: They would have
to be eating almost nonstop. (And those who note the surge in
Atkins-friendly food tend to ignore an equally vigorous countertrend: Sales
of Krispy Kreme donuts grew an amazing 25 percent last year, to $492
million, with cookies, potato chips, and other Atkins-verboten products
following suit.)

So, why the increase in demand for beef, pork, and chicken? Atkins probably
plays a small part, but it may have much more to do with everyday economics
than any fad diet. Convenience, more than anything else, is what drives
consumer trends, say experts. "Time is of the essence," said Balzer. "The
trend in the last 15 years has been towards more convenient options. Cereal
bars, toaster pastries, frozen breakfast sandwiches-that's where the growth
has been."

"Today's family has two working parents," said Wayne Purcell, professor of
agricultural and applied economics at Virginia Tech.* "They want something
easy to prepare, and the meat industry is finally providing that."

Meat is suddenly convenient. Beef Magazine reported that last year more than
500 new "beef convenience" products were launched, and sales of frozen and
heat-and-serve beef have hit $1.5 billion, up from virtually nothing a
decade ago. For the first time beef is transitioning from a commodity to a
branded product, with quality improving as a result. "Ten years ago people
just bought steak, and it might be pretty tough," said Purcell. "Now they
buy Omaha Steaks filet mignon, ready to heat up in minutes. Companies are
putting out much better meat in order to compete."

http://slate.msn.com/id/2088210/