August 18, 2022

WW failed to cash in on the diet craze in 2021

As Oprah Winfrey mulls her New Year’s resolutions for 2022, WW International might have one…

As Oprah Winfrey mulls her New Year’s resolutions for 2022, WW International might have one to suggest: “Sell more diet plans.”

The company formerly known as Weight Watchers saw its sales and membership shrink in 2021 despite a forecast for growth from chief executive Mindy Grossman last spring. While WW blamed the flop on consumer habits during the pandemic, industry experts noted that Winfrey was remarkably quiet during the slide.

Now, as WW enters its peak selling season, the Big Apple-based company is pinning its hopes on a revamped diet program and a boost from Winfrey, its lead pitchwoman, who is also an investor and board member at the company.

The 58 year-old firm, which offers a subscription- and point-based program and sells packaged foods, shed customers last year despite the fact that people packed on extra pounds during the pandemic — and CEO Grossman was quick to deflect blame.

Departing CEO Mindy Grossman has said she will help WW find a successor.
AP

“People wanted to focus more on their enjoyment than immediately going into a weight-loss program, particularly in the summer months,” Grossman insisted on an August earnings call when it was clear that WW’s hot streak was over.

Another explanation for the summer doldrums: Winfrey had stopped her seasonal shilling for WW last May. It’s a far cry from her early days with Weight Watchers in 2015, when she took a 10 percent stake, scooping up 6.4 million shares at $6.79 apiece and sending them soaring each time she dished about her weight loss online. 

It’s not the first time that Winfrey has gone silent while the company flailed. The media mogul has a marketing contract with the company until 2023 and has agreed to serve as an adviser through May 2025. Her stake in WW, however, has lately shrunk to just 2 percent, according to securities filings.

“She has the capability to help the business,” Michael Stone, chairman of the Beanstalk Group, told The Post.

A selection of WW brand frozen meals
WW is betting Winfrey’s renewed shilling for the brand will help sales.
Jochen Tack/imageBROKER/Shutterstock

But Winfrey likely took a step back from publicly shilling for WW beyond the company’s peak recruitment period, Stone said, over concerns about the credibility of her own brand.

“She has to be careful not to commercialize herself too much,” according to Stone.

Reps for Winfrey didn’t respond to requests for comment.

Celebrity endorsements have long been key for WW. In recent years, it variously has tapped DJ Khaled, Robbie Williams, Kate Hudson and Sarah Ferguson to pitch its diet programs. Late Show host James Corden, who became a brand ambassador in 2021, has said he lost 35 pounds after six months with WW.

But three months into his contract, Corden in April admitted on Instagram he was confused by WW’s “SmartPoints” system for keeping track of food intake and exercise.

James Corden shows off his weight loss
James Corden shows off his newly slim WW-inspired physique this past spring.
DIGGZY / SplashNews.com

“All the time I’m thinking about points, how many points is that, scanning points. I’m under points, over points. I’ve got my free points — and I’ve realized that I don’t know what a point is,” Corden said in an Instagram video.

2021 was the first time in “many years” that WW is expected to have ended a year with fewer members, DA Davidson analyst Linda Bolton Weiser told The Post. Subscribers were down 4.3%, to 4.5 million, in the quarter ended Oct. 2. Revenues were down 8.5%, to $293.5 million, although profits rose on cost cutting.

Meanwhile, WW’s competitors have expanded rapidly. Baltimore-based Medifast, which sells pre-packaged powders and bars combined with personal coaching advice, reported a 52% spike in sales in the third quarter to $413 million. Nutrisystem, a privately held company that sells pre-packaged meals and snacks, is also “growing healthily” according to Bolton Weiser.

Other privately held diet companies, including Atkins Nutritionals and SlimFast are having a “banner year” Goldman Sachs analyst, Jason English, said on a WW earnings call this summer, even as he questioned WW’s explanation for its slowing growth. 

English, for his part, said in August that WW’s “bigger challenge is not getting consumers focused on losing weight. It’s getting them focused on paying for a subscription-based service to lose weight.” 

Winfrey will reemerge in ads this month on TV and online, when WW ramps up a new marketing push that assigns new point values to foods and activities like dog walking – which counts as exercise now – and eating non-starchy veggies which allows dieters to raise their point caps.

A WW frozen tilapia dinner
The brand faces competition with other purveyors of diet meals such as Nutrisystem.
Tim Boyle/Getty Images

“Oprah and James will be amplifying the new program, highlighting what makes WW different,” Grossman said in a November statement, “and motivating others to join WW and commit to their health and well-being to weight loss.”

But WW is also among the few diet companies — with the exception of Jenny Craig — that has grappled with money-losing real estate. The company has slashed its chain of WW Studios — in-person meeting venues that became an albatross during the pandemic — to 450 locations from 800, saying it will rely instead on renting out churches and community centers.

WW has had to more swiftly pivot to a digital model where clients meet up online in groups, but those subscriptions generate half the sales as the in-person memberships, according to analysts.

After its growth came to a screeching halt just two weeks into the second quarter, WW dialed back its marketing investment sometime in the third quarter, the company said on earnings calls, to ensure that it had enough powder in December to push its new program.

The dramatic miscalculation cost 64-year-old Grossman her job of nearly five years and tanked the company’s stock, which is down 30 percent over the past 12 months.

“Given the poor recent financial and stock performance,” Grossman’s exit was “not totally unexpected,” Bolton Weiser said in a research note.

Grossman, a respected retail veteran who hailed from the Home Shopping Network, said in October that she will step down in early 2022 and help the company find a successor. 

https://nypost.com/2022/01/02/ww-fails-to-cash-in-on-the-diet-craze-in-2021/