Across the aisle from the usual sugar-laden fare in 7-Eleven sits the latest confection to join the Atkins diet craze, a high-tech chocolate bar called Z-Carb. The Z is short for zero — as in "Zero Carbs, Zero Guilt, Zero Laxative Effect"--but we'll get to that last bit later. A Z-Carb is half the size of a Milky Way and twice as expensive and, if the history of dietary snack substitutes is any guide, ought to taste like a Post-it note, only blander. Not so. This is a no-sugar, no-carbohydrate treat that people can't get enough of. Since reaching 7-Eleven's shelves in June, the Z-Carb has sold almost as well as Nestle's venerable and heavily marketed Butterfinger candy bar.

Fatties, take note: the Z-Carb, made by boutique chocolatier HVC Lizard Chocolate in Norwalk, Conn., is part of the bulging cornucopia of ersatz sweets that is helping change the way millions of Americans snack. Catering to adherents of the high-protein, low-carbohydrate Atkins diet, foodmakers are filling out the $40 billion diet industry with alternative versions of their favorite sins, from marshmallows and margarita mix to biscotti and beer. And thanks to increasingly successful formulations of sugar substitutes, many members of this new generation of munchie killers are downright delicious. "They've come to my rescue," says Dallas resident Frank Edwards of Da Vinci Gourmet's sugar-free flavored syrups.

This new wave of no-guilt snacks has direct links to the efforts of Dr. Robert Atkins, whose get-thin-quick regimen became famous in the '70s for letting dieters have their steak and eat it too. Atkins controverted conventional dietary wisdom by asserting that eating fatty foods like bacon wasn't what caused weight gain. The real culprit, he said, was carbohydrates — the sugar and starch that are especially abundant in junk food. An estimated 25 million dieters have tried to follow his edict that if deprived of carbs as a source of energy, the body will burn fat. Although doctors and dietitians dismissed the Atkins plan for years — many blamed it for everything from bad breath to kidney damage — the fat-intensive diet was recently validated when short-term studies showed a lack of negative health effects.

Atkins died in April at age 72 after slipping on an icy sidewalk. But a resurgence in his diet's popularity has opened up the market for a slew of small, private health-food companies, which have been introducing Atkins-friendly prepackaged foods at a rate of almost three new products a day since January, according to Productscan, a marketing-intelligence firm in Naples, N.Y. Also tasting opportunity are food-and-beverage heavyweights like Anheuser-Busch, which launched a low-carb version of Michelob beer, and boxed-chocolate maker Russell Stover, which put out a line of low-carb candies. Says Gerry Morrison, president of Carbolite Foods in Evansville, Ind.: "This trend has expanded from die-hard low-carbers to a general population that is becoming much more carb-conscious." Indeed, in all-you-can-eat America, where 64% of the population is overweight, fully one-third of adults who say they are concerned about their girth have tried cutting carbs, reports Natural Marketing Institute, a consulting firm in Harleysville, Pa.

Small entrepreneurs like Carbolite were among the first to profit from the Atkins revival. The private company, which started in 1993 with Morrison and a friend peddling low-fat foods from the back of a pickup truck, switched to low carb five years ago. Carbolite chocolate bars were introduced in 2000 and became a best seller in drugstores. Revenues at the firm, which has 15 employees, reached $45 million last year and are expected to top $70 million this year, Morrison says.

Ironically, the company Atkins himself founded to commercialize his dietary theories nearly missed the low-carb bonanza. Atkins Nutritionals, based in Ronkonkoma, N.Y., was selling mostly diet books and vitamins until 2000, when the success of the Carbolite candy persuaded executives to create more prepackaged foods. The company hired marketing veteran Paul Wolff as CEO, and since then it has launched nearly 100 low-carb products, from sliced bread to soy-based snack chips to a superpremium ice cream sold under Atkins' Endulge brand. Wolff says the "aggressive" pace of product rollouts will continue. "We're out to change the way the world eats," he says.

Although manufacturers have improved the taste of diet snacks since sugarless candies first hit the market, the artificial sweeteners involved can still give food developers — and dieters — fits. Most sweets rely on a family of sugar substitutes called sugar alcohols, which are slowly digested carbohydrates that have minimal impact on insulin levels. But as most diabetics know, too much of this fake sugar can cause intestinal discomfort. Some Hershey's lovers learned that lesson the hard way earlier this year when, after 10 years in the lab, the world's third biggest chocolate maker introduced sugar-free versions of its flagship chocolate bars and Reese's peanut butter cups. For its sweetener, Hershey settled on a sugar alcohol called lactitol, which happens to be the brand name of a British laxative. "I had one — ONE — of the mini Reese's, and was not fit for human or feline companionship for the next six hours," a user confided on eGullet.com, a website for food fans.

Chemists believe they have solved the laxative problem with a new sugar alcohol called erythritol. It's already in use in the Z-Carb bar as well as in Carbolite's new At Last! bars. But obstacles to further industry growth remain. For one thing, there's uncertainty about which products can legitimately be labeled as "low" or "lite" in carbohydrate content. The industry claims fiber and sugar alcohols that don't affect insulin levels shouldn't be counted as regular carbohydrates. But the U.S. Food and Drug Administration says a carb is a carb and has sent letters chastising companies, including Carbolite, for misbranding their products. After spending $500,000 last year trying to persuade the agency to change its regulations, Carbolite gave up this past winter and started renaming its products under the label Carborite.

Meanwhile, the Atkins diet still has its detractors; long-term studies of its overall health effects are just beginning. Despite the static, the low-carb phenomenon is starting to pinch the rest of the diet industry, which for decades has focused on lowering fat and calorie consumption. Weight Watchers International last month blamed the Atkins craze for declining attendance at its consumer meetings in North America. And Unilever, the world's third largest food company, attributed disappointing sales of its low-fat Slim-Fast line to the low-carb boom. Some foodmakers are adapting — last month the American Italian Pasta Co. announced it would produce low-carb pasta dishes for Atkins Nutritionals — while others are trying to mobilize. In May tortilla manufacturers gathered at a seminar called "An Industry in Crisis: The High-Protein, Low-Carb Diet and Its Effects on the Tortilla Industry."

Atkins Nutritionals president Scott Kabak says his company is just beginning to swipe market share. "We don't really see a ceiling for the business," he says. But fads have been known to come and go in the diet industry. "Based on prior quick-fix diets, few people will be able to maintain such abnormal eating patterns," says Irma Zandl, president of the Zandl Group, a trend consultancy in New York City. "We give low-carb mania another 12 to 18 months to peak." Then again, people have been underestimating the staying power of the Atkins diet for decades.

• Julie Rawe