Circle Group Holdings Inc (CXN)

[2bStealthy]

Area firm's fat-free cookies are gobbled up by Nestle
By Jordan Sokol Daily Herald Staff Writer
Posted 1/16/04

Consumers mouths are watering for a new line of gourmet cookies made with Z-Trim, an all-natural fat replacement with no calories.

Within the last week, Mundelein-based FiberGel Technologies Inc., a subsidiary of Circle Groups Holdings Inc., has launched an oatmeal and chocolate chip cookie with The Cookie Garden, the Des Plaines gourmet cookie producer.

Apparently, Nestle has noticed. The mammoth food company announced Thursday that it has signed an agreement with FiberGel to buy Z-Trim on a long-term basis. Nestle and Circle Group would not disclose details.

That catapulted Circle Group's stock up 32 percent, or 83 cents, to close at $3.42 on the Over the Counter Bulletin Board market, just shy of its 52-week high of $3.55.

"It's great to get recognition from the consumers and now from a big food company," said Greg Halpern, CEO of Circle Group.

Z-Trim is made by processing cornhusks so that when mixed with water they form a calorie-free gel that can be substituted for fat in foods. The process has generated significant interest.

"In the past year, Z-Trim has become more known about by weight conscious consumers looking for healthier foods which don't sacrifice delicious taste," Halpern said.

The company began offering Z-Trim to consumers for home cooking this past week. The Z-Trim diet program includes a cook book and a four-ounce supply to help consumers create healthier, fiber-enriched meals at home that can be purchased for $19.95 at www.ztrim.com, he said.

Meanwhile at the Cookie Garden, the response to chocolate chip cookies was so overwhelming that President Dave Anfuso said he couldn't pass up the additional line of oatmeal cookies.

"If you love oatmeal cookies, these are about as good as it gets, and like the chocolate chip cookies, they will be healthier and more filling than other gourmet cookies," Anfuso said.

Halpern expects that more food companies will follow in the footsteps of Nestle and Cookie Garden.

Convincing the big food companies of Z-Trim's potential is crucial because the commercial market is bigger than the consumer market, said Sid Doolittle, the founding partner of McMillan/Doolittle, a Chicago retail consulting firm.

"There is such a strong market right now for reducing calorie content," Doolittle said. "The hold-up for these products has been that they usually don't enhance the taste of the finished product."

Halpern is fully aware that food marketers have met failure in their search for the perfect fat substitute.

In 1998, Proctor and Gamble introduced a food additive called Olestra that replaced fat mainly in snack foods. Olestra was not only a limited, unnatural product with unwanted side effects, but it was plagued by bad timing, Halpern said.

"The fat substitute market was not as good several years ago as it is now," Halpern said. "Being ahead of your time is the kiss of death in emerging technology."

Z-Trim should benefit from its non-chemical makeup and the growing concern about rising obesity rates, Doolittle said.

Halpern is confident his product is the best to hit the market and the timing is perfect.

"Hopefully, this is only the beginning," he said. "We are focused on tackling obesity and are confident that we are one of the key solution makers."

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