Lean times bring slim pickings for diet food companies
A Jenny Craig booth at The American Heart Association's Wall Street Run & Heart Walk on May 30, 2013 in New York City.
A candy company may be getting out of the diet business. Swiss food giant Nestle is rumored to be interested in selling weight-loss company Jenny Craig. The company has yet to confirm the sale. But it did say last week that it plans to dump underperforming businesses.
Morningstar equity analyst Erin Lash says Americans are turning to Jenny Craig less and less.
“Jenny Craig has been a business that had a tough go over the last few years. And so, the rumors aren’t all that surprising,” says Lash.
Sales at Jenny Craig have been declining for the past three years in a row, according to John Larosa, who tracks the diet market for Marketdata Enterprises.
“You have to buy their company brand of food, which costs $400 a month. And in this economy, dieters just don’t have that kind of money to spend on a weight-loss program anymore,” says Larosa.
In fact, Larosa describes the company’s business model this way.
“Jenny Craig is basically a food company. Ninety percent of their revenues come from their company brand of food,” says Larosa.
Consumers are spending less on designer diet foods, and spending more on technologies like Jawbone and Fitbit. Those monitor people’s bodies with electronics, so people like my colleague Megan Uebelacker, can track their weight-loss minute by minute.
“So far today, I’ve walked 6,589 steps, I have burned 1,393 calories, and walked 2.81 miles,” says Uebelacker.
Also, a bunch of new websites offer diet guidance for cheap or free. Larosa says 85 percent of dieters now prefer to lose weight on a do-it-yourself program. Trying to trim their waistbands without cutting into their wallets.
On the corporate side, massive companies are also trying to slim down. Analyst Erin Lash sees a trend among consumer-products companies like Nestle.
“Unilever has been doing it for quite some time within their food business,” says Lash. “Campbell’s Soup also has been divesting a few businesses. So it’s not uncommon in the packaged-food space or the consumer-product space overall to divest underperforming brands.”