After 53 years, Weight Watchers (WTW) kind of hates the way it looks—and honestly, it should.
While millions of healthy strivers have been busy slapping on bracelets that count their steps and sync their workouts with their diets, Weight Watchers just keeps tallying calories and trying to get people together for morale-boosting meetings, just as it has done since 1961. It’s a coffee klatch business in a yoga world. The question is: Can Weight Watchers get with the times?
“It’s really at a crossroads here,” said Morningstar analyst R.J. Hottovy. “The popularity of some of these services has almost commoditized the weight-management industry.”
The value of Weight Watchers over the decades has rested on a food-analysis program it calls PointsPlus, which rations meals and snacks, based on a proprietary formula that measures protein, fats, carbohydrates, and fibers. The company wisely casts the net wide in terms of what foods it can crunch, and it has even developed a pair of apps—including bar-code scanners—to help users keep track.
There’s been little effort to factor exercise into the mix, even as a new crop of wearable computers kick out calorie-burn data based on a person’s daily activity, measured down to the step. Such companies as Nike (NKE), Jawbone, and Fitbit sold an estimated $330 million worth of activity trackers last year, according to NPD Group.
Most of Weight Watchers’ revenue still comes not from any app or device but from the fees it charges its customers to get together for an hour and talk about eating. The theory is that moral support brings results. “Tools alone, technology alone, food programming alone will never reach the levels of success that are possible when they are combined with human engagement to guide and provide accountability,” Weight Watchers Chief Executive Officer James Chambers said on a conference call this week.
That accountability isn’t cheap. For unlimited meetings, Weight Watchers charges $14 a week or $43 a month; once a customer has maintained a target weight for six weeks, payment is no longer required. Last year, the company collected half its revenue from those charges. That’s a fee for sitting, talking, and feeling—no wonder members are disappearing.
Slightly more promising is the company’s online-tracking services, for which it charges from $15 to $19 a month. A rash of startups, however, will provide similar services at no cost.
MyFitnessPal, a free service that tracks both meals and activity, has drawn strong reviews. So far the startup has made its money by selling ads and convincing venture capitalists to get on board. Dieters who just want a free tool to track nutrition, meanwhile, are increasingly turning to FatSecret and Cron-O-Meter. These platforms are doing to Weight Watchers what Craigslist did to newspaper classifieds in the early 2000s.
The Weight Watchers Web platform isn’t even that great, considering the premium price it seeks to charge. Daniel Crow, the company’s chief technology officer, called the website a “mid-2000s” model.
To recap: Weight Watchers is relatively low-tech, time consuming, and kind of expensive. It has lost 14 percent of its “active subcribers” in the 12 months through March. Its sales in the first quarter dropped 17 percent to $409 million, following a 6 percent drop in revenue last year. Weight Watchers could lower prices, but it’s hard to beat free. The alternative is to offer more value.
On that front, the company is rushing to integrate its platform with the leading activity-tracking devices. “They’re effectively turning fitness apps from a source of competition to an asset,” Hottovy said. “Though pricing is still a hurdle they’re going to have to overcome.”
Weight Watchers also recently bought Wello, a startup that connects customers via video feeds to remote personal trainers. Instead of a 12-person huddle for food talk, Weight Watchers members may soon be cranking out push-ups and burpees under the remote supervision of a trainer named DonnyBrocs.
The company is also hustling to make inroads as a health partner for insurance companies and employers, a segment that is less likely to bolt to a Silicon Valley startup. Weight Watchers currently makes about $75 million a year from business customers, a number it hopes to push up to at least $300 million by 2018.
One bull case for Weight Watchers: Demographics are in the company’s favor. From 1980 to 2008, the share of overweight adults worldwide surged from 23 percent to 34 percent. In the U.S., that number is hovering near 70 percent. That’s a big pool of potential customers if the company can step out of the last century.