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New Year Slim Down
As another year dawns, many Americans take stock of their lives and make commitments toward personal betterment for the year ahead. New Year’s resolutions abound this time and the goal of better health and, in particular, shedding pounds, appears to be one of the most popular. With that in mind, consumers will likely turn to commercial weight loss programs, but it remains to be seen if economic concerns will continue to hamper this type of somewhat discretionary spending.
The recently concluded year proved difficult for companies within the weight management space including Weight Watchers International (WTW) and NutriSystem (NTRI), which both likely suffered an overall setback in sales. Despite the different business models these two companies employ, consumers were hesitant to commit funds toward such partially non-essential purchases such as these. Weight Watchers’ lower entry point and weekly meeting focus with no additional food purchases required fared better than some of its competitors. NutriSystem’s costly price point and initial month long commitment may have been out of reach for some potential clients, prompting the company to enhance incentives and reformulate packages to offer a shorter introduction period. Too, the company picked an inopportune time to launch a semi-customized food program that included additional fresh frozen entrees, but the high price point of $399 per month shocked buyers and stalled growth.
Meal replacement company Herbalife (HLF), whose products encompass both weight management and nutritional supplements, among others, performed admirably in 2009, with just a small dip in sales. The multi-level marketing nature of the company offers some appeal to consumers in down economies, thanks to potential part-time supplemental income opportunities. The company has also sought to transition to a more interactive model through the development of nutrition clubs by its distributors. These clubs seek to reinforce a daily consumption format and thereby improve long-term product volume levels. Despite anemic economic conditions, up-and-coming meal replacement provider Medifast, (MED) recently closed out a banner year. Within a crowded market space, this small player has taken market share with a varied portfolio of meal substitutions and an enhanced subscription free on-line community that anyone can join, even those not on the Medifast program.
Although the recession is all but officially over, consumers will likely continue to be wary of loosening their pursestrings too much, as financial uncertainty and high unemployment linger. Moving ahead, trial offers, promotions, discounts and other enticements probably will remain part of the sales equation until the economy is on steadier footing, in turn pressuring performance in the year ahead. While the desire to reach personal weight loss goals does not cease even in times of financial weakness, many New Year’s resolutions will likely go unfulfilled and these companies may be thin on performance in 2010.