Atkins Nutritionals Inc., the company behind the low-carbohydrate Atkins diet craze, has filed for Chapter 11 bankruptcy protection, blaming slumping demand and increased competition.

The company, which filed for bankruptcy on Sunday in the U.S. Bankruptcy Court in New York, said there was still a bright future in weight loss and nutrition and it would focus on nutrition bars and shakes.

The Atkins diet, based on the research of Dr. Robert Atkins, promotes eating protein over carbohydrates and was so popular from 2002 through early 2004 that it was blamed for the bankruptcies of several pasta and bakery companies.

In its heyday, the company listed Goldman Sachs among its backers and analysts predicted an initial public offering. Its trademark red “A” logo appeared on a range of packaged foods and was featured in advertising for Subway sandwich stores.

But Atkins Nutritionals said demand began to slump in the second half of 2004 and rival products flooded the marketplace, prompting the company to restructure and replace its management team.

The death of company founder Robert Atkins after a fall in April 2003 led to a spate of negative publicity when the public learned that he had been overweight.

Critics have argued that the high-protein diet encourages people to eat too much fatty food like bacon, and could pose health risks. One man sued the company last year claiming that the diet caused him severe Heart disease. Atkins Nutritionals has maintained the claim is without merit.

For the 12-month period ended Dec. 31, 2004, Atkins said it had total assets of $301 million and liabilities of $325.1 million, according to court documents. For the same period, it recorded a loss of $340.9 million, including an asset impairment charge.

The company said it secured $25 million in debtor-in-possession financing arranged by UBS. Five other potential lenders refused to extend credit to the company, Atkins Nutritionals said in its filing.

Atkins said the “overwhelming majority” of its lenders had agreed to a prearranged plan to restructure its debt, and it would file a reorganization plan shortly for bankruptcy court consideration. Its lenders have agreed to receive equity in the company in exchange for reducing debt, the company said in a statement.