Did NutriSystem Make The Right Choice? – J. LaRosa, Marketdata

Did NutriSystem Make The Right Choice? – J. LaRosa, Marketdata

Dec. 10, 2018

Today, a major player in the diet space, NutriSystem, announced that it has been acquired by Tivity Health (formerly Healthways). Tivity Health is a leading provider of fitness and health improvement programs. However, I doubt that most people in the U.S. know who the company is, including us at Marketdata.

I think NutriSystem made a mistake. We’ve seen this story play out before. Unilever bought Slim-Fast and turned a $600 million brand into a $200 million one, then ultimately sold the company to Kainos Capital. Nestle bought Jenny Craig, couldn’t grow it, then sold Jenny to Curves. Will the same story play out for Tivity and NutriSstem? We’ll see.

Upon closing of the acquisition, Tivity Health expects to maintain all existing Nutrisystem brands, as well as Nutrisystem’s Fort Washington, PA location. Additionally, Dawn Zier will become President and CEO of Tivity Health reporting to Tivity Health CEO Donato Tramuto. She will be responsible for Tivity Health’s nutrition and fitness divisions and will join the company’s Board of Directors.

The deal appears to be very good for CEO Dawn Zier, but the rest of NutriSystem…not so much. It’s likely that some NTRI staff will get shed as they usually do in a merger. And, will the new parent company give enough marketing and advertising support to the brand to maintain sales and market share? Maybe. Maybe not. There will be a strong temptation to cut that $200+ marketing budget to raise profits.

Was this move by NTRI an effort to broaden its appeal beyond weight loss to total wellness, a move that Weight Watchers has made recently? Possibly. Or, was this a move reflecting some panic over the firm’s lack of growth in 2018? Does NTRI management think that it can leverage Tivity’s members to grow its customer base? Possibly.

A merger with a larger healthcare company, such as Cigna, Aetna, Kaiser Permanente, or CVS Health, would have made more sense, due to their much larger database of members and customers. In any case, NTRI is NOT a medical weight loss program and many of Tivity’s and other healthcare firms’ clients, have serious medical issues. We just don’t see the big synergies here.

My prediction… The U.S. economy will enter a recession in 2019 or 2020, during which time consumers will cut back on costly weight loss programs. NutriSystem sales will stagnate against cheaper DIY programs, diet apps, and Weight Watchers. Tivity will find that the acquisition is not as accretive to profits as they thought and lose interest, selling NTRI to a private capital firm, or NTRI goes independent again, within three years.

For In-Depth Weight Loss Reports, see Marketdataenterprises.com, or contact John LaRosa at: 813-971-8080. Marketdata has published 50+ diet market studies since 1989, as well as consulting, custom research projects, teleconferences and more.