Carb Your Enthusiasm

No question about it, low-carb diets have taken over the collective consciousness and the U.S. food industry. Whether it's Atkins or carbohydrate-restrictive diets that boast an effective weight-loss alternative to traditional low-fat, carb-rich plans, consumers eager to shed fat are flooding the marketplace in search of low-carb products. With an estimated 1 in 4 Americans on some low-carb diet and 17 million with diabetes, entrepreneurs have found a new health haven.

While major fast-food and casual-dining restaurants have scrambled to jump on the low-carb bandwagon, entrepreneurs took off running long before big corporations even made a move. Gerry Morrison, 41, and Jeff Greder, 40, started Carbolite Foods Inc., offering the first low-carb, sugar-free soft-serve ice cream in 1999, when low-fat diets were still the rage. Recognizing a shift in the diet industry, they quickly expanded their Carborite line to focus on an array of low-carb products, including shakes, bread mixes, candy bars and cookies. And they've watched revenues from their Evansville, Indiana, company skyrocket from $800,000 in 1999 to a projected $150 million for 2004.

Still adding new items to their 100-plus line, Carbolite will also be looking at licensing arrangements with restaurant chains. Though competition is definitely heating up among entrepreneurs and corporations alike in the $15 billion low-carb food market, Morrison is undeterred. "In a sense, we've launched 15 different companies that now carry low-carb candy-unheard of before we came around," he asserts. "But we feel we led then, and will continue to lead in the industry and in the creativity of low-carb products."

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Retail low-carb startups like Castus Low Carb Superstores are also popping up at a rate of about one per week, says Dean Rotbart, executive editor of industry newsletter LowCarbiz (www.lowcarbiz.com). While untapped opportunities for entrepreneurs exist, Rotbart notes, "too many people are trying to jump into this industry [in] the wrong places." Receiving a dozen calls per week from entrepreneurs looking to start low-carb product lines or stores, Rotbart deadpans, "That train already left the station." Instead, he points to areas like raw ingredients, support groups and even lifestyle products-LowCarbiz is launching a line of low-carb characters on gym bags, golf balls, etc.

Rotbart urges entrepreneurs to look at the low-carb phenomenon as a lifestyle rather than a diet, as he believes "we're seeing a revolution in the American menu." With food scientists promising tasty low-carb products, this train appears to be unstoppable. Find out how you can benefit from the low-carb phenomenon in the May issue of Entrepreneur.