Slow and steady at Medifast

Survivor: Medifast took hits from Atkins' successes but outlasted weight-loss rival.

August 02, 2005|By Tricia Bishop | Tricia Bishop,SUN STAFF

All the attention paid to the Atkins diet didn't much faze Bradley T. MacDonald, even though the competing weight-loss program hurt sales at his Owings Mills business last year. He was certain it wouldn't last - in fact, he suspected the attention would do Atkins in.

"I saw problems when Atkins started Atkin-izing TGI Fridays" in 2003, he said. "At that point, you knew that there was problems."

Yesterday, his hunch proved true. Atkins Nutraceuticals Inc. - founded on the controversial low-carb, full-fat diet pioneered by the late Dr. Robert C. Atkins - filed for bankruptcy protection in New York, unable to survive its strategy of going after a mass market and purporting to be a lifestyle. In a statement yesterday, the company said it would now concentrate on selling nutritional bars and shakes.

MacDonald knows his business is a fickle one, with fads rolling in and out with the tide. For a time, people ate grapefruit for every meal. Some subsisted on tuna and egg whites, and others chose Atkins, where you can eat bacon everyday for breakfast with a side of butter if so inclined.

MacDonald is proud to say his publicly traded company, Medifast Inc., has survived them all, though sometimes just barely.

"I think people on the Atkins diet had absolutely turned away from it. Today, people are looking at weight loss and they're looking at health," said MacDonald. "There's many diets where you can lose weight, but at the end of the day, [the question is] `are you healthier?'"

Medifast, which specializes in a high-protein, mostly liquid diet, began life as Jason Pharmaceuticals in 1980. Its sales soared late in the decade after talk-show host Oprah Winfrey lost 67 pounds using a similar weight-loss plan, and then fell after she regained the weight. In the early 1990s, Jason Pharmaceuticals was itself on the brink of bankruptcy.

"That wasn't because of the business dynamics," MacDonald is quick to say. "That was because of the owner back at the time."

MacDonald doesn't intend to follow the same path. Instead, he's on a slow and steady course that may prevent Medifast from rising to Atkins' heights, but just may keep the company around for another quarter-century.

MacDonald came on board as chief executive officer in 1996, investing in the company a year later. As a retired Marine colonel, he knows something about discipline, and he knows fads - diets - don't last.

"We don't call it a diet," he said. "We call it a maintenance program."

The Atkins philosophy, 30 years old when it finally took off around 2002, suggests avoiding carbohydrates, such as bread and many fruits and vegetables, without much regard for fat.

Medifast parallels Atkins in some ways, recommending high intake of protein and controlled carbohydrates. But Medifast also eschews high-fat foods, delivering most meals in low-calorie shakes and bars meant to help the overweight slim down and diabetics manage their disease.

A two-year study commissioned by Medifast and conducted by the founder of Johns Hopkins Weight Management Center showed diabetics using Medifast lost twice as much weight as those who followed a standard diet.

The company recommends replacing breakfast and lunch with five Medifast meals - one taken every two hours, and a light dinner of greens and lean protein until a person's weight is under control. Then the meal replacements can be used for maintenance, as better choices than some of the fast-food options.

Medifast has been profitable for 22 consecutive quarters, MacDonald boasts, and it now has more than 100 weight-loss centers nationwide. But the company suffered somewhat during the Atkins craze: As sales growth slowed, Medifast's stock fell from a high of $18.49 in November 2003 to as low as $2.67 in March. It closed yesterday down 10 cents at $6.15.

"As long as we stick with our niche, we're going to have a good solid business," said MacDonald, who believes Atkins ran into trouble when it strayed from its quick-loss roots. Nutritionists agree.

"The Atkins diet was meant to be followed for a few months and then to transition into a more balanced diet," said Benjamin Caballero, director of the Center for Human Nutrition at the Johns Hopkins Bloomberg School of Public Health. "But by my interpretation, the success of that diet for people wanting to lose weight - 50 percent of the population does have a weight problem - was too tempting" to transition from.

Because of that, Atkins spawned a plethora of copy-cat competitors and, for a time, millions of dollars.

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