Can the Atkins diet raise GNP?

Commentary about business and finance.
Sept. 15 2003 10:49 AM

The Bull About the Beef

Has the Atkins diet really transformed the American economy?

Illustration by Robert Neubecker

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?

Advertisement

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 evidence most commonly cited to prove the Atkins diet is roiling the economy is a study by the Natural Marketing Institute that claims 25.4 million Americans—12 percent of the adult population—have tried the Atkins diet. But those numbers deserve a little skepticism. NMI's executive project director, Joe Marra, said the company doesn't specifically ask about the Atkins diet. Rather, under the methodology used by NMI in its survey of 2,000 families, anyone who forgoes bread for a few days in an attempt to lose a few pounds is considered an Atkins dieter.

But almost everyone else, including experts from the consumer information giant NPD Foodworld, pegs the number of Atkins dieters at closer to 3 percent of the nation's adult population—about 6 million people—based on statistical sampling.

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."

But if the Atkins diet is supposed to help America lose weight, the push for convenience has the opposite effect. Economists at the National Bureau of Economic Research and University of Chicago persuasively argue that one of the biggest reasons for the nation's current obesity epidemic is that food is now so much cheaper and easier to prepare. "Forty percent of the recent growth in weight seems to be due to agricultural innovation that has lowered food prices," write Darius Lakdawalla of the RAND Corp. and Tomas Philipson of the University of Chicago.

It's simple supply and demand: When supply becomes more prevalent, demand is easier to satisfy. We're not eating more steak because of the Atkins diet, they say. We're eating more, simply because we can.

Correction, Sept. 15, 2003: The piece originally referred to Virginia Tech University. In fact, the school is officially named "Virginia Polytechnic Instituteand State University," and known casually as Virginia Tech. (Return to the corrected sentence.)

Charles Duhigg is a reporter for the New York Times, based in New York, and the author of the book The Power of Habit: Why We Do What We Do in Life and Business.

  Slate Plus
Working
Nov. 27 2014 12:31 PM Slate’s Working Podcast: Episode 11 Transcript Read what David Plotz asked a helicopter paramedic about his workday.