Weight Watchers Lures Companies Seeking to Trim Costs

Weight Watchers Bets NYSE Can Slim Like Jennifer Hudson
NYSE Euronext is paying half of the cost for its employees to join Weight Watchers. Photographer: Jin Lee/Bloomberg

Barbara “B.J.” Buckingham only joined Weight Watchers because her employer, the Cleveland Clinic, offered it for free. The reimbursement analyst has since shed 30 pounds and is halfway to her 168-pound goal.

“If my employer is going to go these lengths, I’m committed,” said Buckingham, 61.

After years of targeting individuals, diet companies are focusing on employers looking to cut health-care costs by slimming down workers. Weight Watchers International Inc. persuaded American Express Co. and NYSE Euronext to offer subsidized weight-loss programs for employees. Nestle SA’s Jenny Craig and Nutrisystem Inc. have programs that lured companies such as AT&T Inc. and Wells Fargo & Co.

“CEOs get it,” Weight Watchers Chief Executive Officer David Kirchhoff said during an investor conference last month. “They are tired of watching their health-care premiums go up 8 percent a year.”

The U.S. weight-loss industry may increase 4.5 percent to $65 billion this year, according to Tampa, Florida-based researcher Marketdata Enterprises Inc. Nearly half of the U.S. adult population is on some sort of diet, Marketdata estimates. More than one-third of Americans are considered obese, according to the Centers for Disease Control and Prevention in Atlanta.

Weight Watchers, which boosted revenue 25 percent to $1.82 billion last year, saw its share price jump 47 percent in 2011. Nutrisystem fell 39 percent.

Potential Sales

While corporate clients present potential sales in the long term, any increase in revenue will be small until more businesses get on board, said Kurt Frederick, a San Francisco-based analyst at Wedbush Securities Inc.

Weight Watchers, founded half a century ago by overweight housewife Jean Nidetch, centers around meetings led by trained staff. Dieters use a point system for eating, with foods rich in protein and fiber counting less toward their daily limit, while fats and carbohydrates take up more.

Weight Watchers struggled through the recession, with revenue declining 8.9 percent in 2009. In 2011, the New York-based company boosted sales and profit using celebrities, such as Jennifer Hudson, to tout its programs.

Revenue from diet sessions has stagnated for three years as customers shifted to the cheaper online version, which more than doubled its sales during the same time. An online membership costs $18.95 a month, less than half the $42.95 for a monthly unlimited meetings pass.

At Work

While Weight Watchers first began holding meetings at worksites in the 1980s, last year it began “in earnest” to sell corporate programs, Kirchhoff said during a conference call this month. In 2011, the company’s so-called At Work business accounted for about 12 percent of its North American meeting attendance. The company holds 45,000 weekly weight-loss meetings worldwide.

Weight Watchers touts health-care cost statistics from other clients and tries to get companies to start programs at their headquarters and enlist their satellite offices later, Tom Futch, vice president of health care solutions at Weight Watchers, said in a telephone interview. It also advertises in HR Magazine and sets up at trade shows to sell its programs, he said.

Jenny Craig, which started its corporate wellness program in 2004, said it gives discounts to employees of some of these clients, which include AT&T, Wells Fargo, CVS Caremark Corp. and Verizon Communications Inc. It sells its program as being personal -- providing weekly one-on-one consultations. About 8 percent to 10 percent of its client base are corporate accounts.

Nutrisystem Meals

Nutrisystem gives people “perfectly portioned” meals without having to count points, calories or attend meetings, Meredith Bandy, a company spokeswoman, said in an e-mail. She declined to name specific corporate clients or say how much revenue that part of the business accounts for.

Starting this year, American Express began paying for its employees to join Weight Watchers for one year. In the past, it only offered a discounted program. So far, more than 5,200 workers have signed up in 2012, compared with fewer than 2,000 last year, said David Kasiarz, senior vice president of global compensation and benefits.

“We wanted to have something with broad appeal,” Kasiarz said. Charles Barkley has advertised Weight Watchers men’s program with the tagline “Lose Like a Man.”

Getting employees to sign up takes gentle persuasion. Hudson’s Weight Watchers counselor, Liz Josefsberg, gave a pep talk at American Express’s employee Weight Watchers fete on Feb. 2. Nutrisystem recently signed Janet Jackson to promote its diets, while Jenny Craig is using Mariah Carey.

Gaining Weight Back

Most dieters gain the weight back, which may not bode well for companies looking to reduce health-care costs over time.

“The question is, ‘Are the people who sign up for the program actually going to use it and lose weight?’” said Frederick, the Wedbush analyst.

It may be better if companies don’t cover 100 percent of the costs for workers to join diet programs, he said. NYSE Euronext is paying half of the cost for its employees to join. When people have to pay for at least some of it themselves, they’re more likely to stick with it because they “have some skin in the game,” Frederick said.

Weight Watchers declined to say how many corporate clients it has signed up, though it is fielding daily phone calls from interested companies, Futch said.

“It makes a lot of sense that they look at this channel,” said Mitchell Pinheiro, an analyst at Janney Montgomery Scott LLC in Philadelphia. Having corporate clients may even lend some credence to the weight-loss programs, he said.

“It creates better credibility,” he said. “You know this isn’t the celebrity bathing-suit diet.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE