How Nutrisystem lost flab and got into fighting shape
Shedding pounds is big business. And Fort Washington-based Nutrisystem is gaining ground on Weight Watchers in the battle of the bulge, thanks to CEO Dawn Zier's embrace of technology and data.
In the weight-loss business, where shedding pounds has become more technology-driven with apps and other devices to monitor food intake, Dawn Zier seems right at home at Fort Washington-based Nutrisystem, a brand enjoying a resurgence under her leadership.
In her five years as chief executive officer, the MIT-trained Zier has used technology and data to execute a company turnaround that has sent Nutrisystem's stock up more than seven times and tallied 16 consecutive quarters of growth.
A partnership with Walmart that began in 2013 and put Nutrisystem products in 3,700 stores made the product more accessible, while acquiring South Beach Diet in late 2015 gave Nutrisystem a second big brand. Analysts say acquiring South Beach Diet helped fuel late 2015 and 2016 growth in the company's stock, based on expectations that South Beach would develop sizable revenues.
"It's a privilege to be at the helm of a company that empowers people – both women and men – to take control of their health and wellness and become the best version of themselves," Zier said in the boardroom at Nutrisystem's headquarters, where nearly 600 employees work.
Now 45 years old, Nutrisystem is at a crossroads. Lake Street analyst Chris Krueger lauds it for becoming a "multibrand, double-digit growth story." Yet it remains No. 2 behind Weight Watchers in the nearly $15 billion weight-loss services industry. Total revenue for Nutrisystem in 2016 was $545.5 million, compared with Weight Watchers International Inc.'s $1.2 billion.
Weight Watchers is also seeing strong growth under its new CEO, Mindy Grossman. And a woman with a monster following – Oprah Winfrey – bought a stake in the company in 2015 and agreed to pitch the brand.
Nutrisystem had reported revenue losses for several years when Zier started in the top job on Nov. 15, 2012. She brought in a new chief marketing officer, Keira Krausz, and chief financial officer, Michael Monahan, to develop a sustainable growth plan.
"Our biggest competitor is really the do-it-yourself dieter, the people out there trying — often to no avail — to lose weight on their own," said Zier, who won't mention Weight Watchers by name as competition.
The growth of both companies is proof that the industry is growing, say analysts – propelled by a not-so-healthy public.
As obesity grows, "consumers are increasingly turning to weight-loss programs," said Anya Cohen, an industry analyst for IBISWorld Inc. "The growing U.S. economy has armed consumers with more disposable income to spend on weight-management services."
Weight-loss service providers that operate online, such as Nutrisystem, "have performed well in recent years as consumers have become increasingly accustomed to using the internet for a variety of needs."
Nutrisystem's online focus is evident: It is consistently ranked on Internet Retailer's Top 500 list. More than 70 percent of purchases are made through digital channels, and mobile is the fastest-growing platform.
It also ships more than 185 million food items annually – boxed kits containing meals that are shipped and delivered on doorsteps. Indeed, Nutrisystem's 2013 deal with Walmart marked the brand's first foray into retail stores. The five-day Jumpstart Your Weight Loss kit to "lose up to 7 pounds in 2 weeks" sells for $44.98.
When Zier arrived, "I did what my engineering training taught me," she said. "First, identify what you're trying to fix. Then, break it down into components and analyze what's working and what isn't."
Such an approach isn't surprising, given Zier's background: She holds an MBA and a master of science in electrical engineering and computer science from MIT. She did her undergraduate work in the same field at the State University of New York at Stony Brook.
Among Zier's first moves was to establish what she called a FACTS-based culture — an acronym that stands for focused, accountable, consumer-centric, team-oriented, solution-based. "We wanted to reinforce the point that we need to make sure our conversations and decisions are fact-based," Zier said. The Nutrisystem customer call center fields as many as 15,000 calls a day.
The top three innovations she is most proud of are Fast 5, a kit designed to fast-track a 5-pound weight loss in a week; the Turbo 10 program that includes Turboshakes, which are packed with probiotics to support digestive and immune health; and, launched this year, the South Beach Diet menu from scratch.
About 75 percent of Nutrisystem's customers are women, and 25 percent are men, the latter group boosted by former NFL quarterback Dan Marino's hiring as a pitchman. Entertainer Marie Osmond also has represented the company for a long time.
The average customer is between 45 and 55 and aiming to lose 40 pounds.
"We're in the business of transforming lives," Zier said. "For many of the women that I speak with, their struggles with weight permeate all parts of their life. It is not only a physical battle, but an emotional and financial one, as well."
Zier said she, too, has had success using Nutrisystem products. "I am personally familiar with the weight-loss journey that many of our customers go on," she said.
"I'm inspired by all the women who have told me that when they lose 15, 20, 30 pounds they feel healthier and gain immeasurable confidence that transcends all aspects of their life," she said. "That's empowerment."
She is also keenly aware of the elite club she belongs to: According to the 2016 Fortune 500 list, 4.2 percent of corporate CEOs are women.
Zier said Nutrisystem's philosophy will continue to be about portion control and behavioral change.
That helped Karen Nutkowitz, 40, lose 30 pounds five years ago. The mother of three was on the program for a year, picking up her food packages from a shopping center in Northeast Philadelphia.
"It was all about portion sizes and self-control," said the food server for the Philadelphia School District. "The food was great. It was delicious."
She said she was able to maintain the weight by preparing healthier meals, such as grilled chicken with a salad.
But her boyfriend, John Ferragut, 54, had less success when he went on the Nutrisystem program for six months last year. "I was still hungry" after meals, Ferragut said. He has since switched to just having Atkins protein shakes for lunch and a light dinner.
Frank Badillo, research director at MacroSavvy.com, which tracks socio- and macro-economic trends, said that since 2013, spending on food services has shown three straight years of growth exceeding 5 percent, benefiting Nutrisystem.
Zier said a shift began in 2010 and went mainstream in 2015 with the help of social media, where weight loss became less about vanity and more about proper nutrition and living longer and healthier.
"Health is the new wealth," Zier said. "It's the single most valued thing you can't buy, and the dynamic plays out in our industry. At the same time, there's a greater sense of accountability when it comes to taking care of yourself so you can take care of your family."
Zier and her husband, Steve, an electrical engineer, have two children, a son, 22, who just graduated from college and is in the data analytics field, and a daughter, 19, who is a college sophomore.
With Nutrisystem's focus on innovation, data-obsessed, technology-loving Zier will do whatever she can to provide the tools to help women lose weight and maintain a healthy diet.
"Thinking and acting like an entrepreneur makes all the difference," said Zier, who was named chair of the American Heart Association 2017 Go Red for Women Initiative in Philadelphia. "The best is yet to come."
Average customer is 45 to 55 years old.
75 percent of Nutrisystem customers are women.
The company ships 185 million food items annually.
Nutrisystem interacts with 1.5 customers a second either online or through its call center.