As gas and commodity prices rise, consumers are finding themselves with fewer spare dollars to reduce their spare tires. As a result, marketers of organized diet programs such as Weight Watchers and Jenny Craig are expected to feel the pinch.
"It's definitely a discretionary dollar," said Michael Binetti, a UBS analyst who lowered earnings-per-share guidance for Weight Watchers last week. Even though the iconic diet program enjoys an advantageous position in that it has strong brand equity and low start-up costs, Mr. Binetti said the 20% of Americans who describe themselves as being on a weight-loss regimen have increasingly been reporting that they are "on their own diet."
Weight Watchers President David Kirchhoff told investors last month that he remains confident in his company's ability to deliver strong results despite "uncertainty in the economy."
What they cost
Other dieting programs such as Jenny Craig charge several hundred dollars in start-up costs, and then members must pay for their food. Weight Watchers charges monthly membership fees between $10 and $15 per week, and their dieters can choose to buy food from the company, products made by licensed vendors, eat out or cook at home.
Jenny Craig is a closely-held private company that declined to comment for this story. Weight Watchers did not respond to requests for comment.
John LaRosa, research director of Marketdata Enterprises in Tampa, Fla., said dieters don't "give up" on losing weight when they need to tighten their belts, "but they will shift toward less expensive do-it-yourself methods instead of doing a structured program like Jenny Craig that might cost $1,100 to $1,200 over three to four months." Mr. LaRosa said some penny-pinchers will go out and buy the hot new diet book, get supplements from GNC, diet pills from the drugstore or join one of the many free online programs.
There's certainly no dearth of dieters. Mr. La Rosa said 72 million Americans are or will be on a diet this year. That's up from 55 million a decade ago.
Success in past recessions
Recessions haven't always been bad for Weight Watchers. The company launched its highly successful "points" system in 1997, but the program was still popular in 2001. Under the system, every imaginable food from celery sticks to banana splits has been assigned a points value. Members are given a number of daily points to eat based on their height, weight and activity level. The system attracted members, Mr. Binetti said, but there just hasn't been much innovation since then.
Despite a flashy new campaign from agency McCann Erickson, New York, this year, Mr. Binetti said that Weight Watchers is still grasping for "new news." The company, which spent $127 on measured media in 2007, according to TNS Media Intelligence, has been outflanked by Jenny Craig in the past year.
Need to reconnect
"They've seen a multiyear slide," Mr. Binetti said of Weight Watchers. "What they need to do is reconnect with new dieters and make it more convenient for customers to embrace the weight-loss plans."
After controversial but highly publicized campaigns with Kirstie Alley and Valerie Bertinelli, Jenny Craig moved its $55 million account from JWT, New York, to Y&R, Irvine, last winter. The company, which still works with Ms. Bertinelli, has added Queen Latifah to its roster.
Jenny Craig has had its share of bad news lately. Unconfirmed reports have circulated that Ms. Alley, who lost 75 pounds on the program, has ballooned up to 240 pounds. Though she is no longer under contract to Jenny Craig, publicity about a weight gain is the last thing the company needs. "If she gains it back, [potential clients] say, 'I guess Jenny Craig wasn't that successful over the long term,'" Mr. La Rosa said.