Weight Watchers

Weight Watchers

Weight Watchers
Recognizing the value of a unique business model and building upon the 40+ year heritage of the world’s leading brand in the growing weight management industry.

Background

Weight Watchers International, Inc. (WWI) was founded in 1961 and was acquired by H.J. Heinz Company (Heinz) in 1978. Prior to its sale in 1999, the company generated a majority of its revenues through fees paid by its members when they attended weekly meetings. Weight Watchers® meeting membership grew until the early 90’s when US attendance began to decline until hitting bottom in the mid-90s. In 1997, the business began picking up again as the company introduced a new weight management system, the POINTS® plan. In 1999, as Weight Watchers was approaching its previous peak penetration levels from the late 80’s, Heinz decided to sell WWI while retaining a license for the Weight Watchers Smart Ones® frozen entrée business. From the outside, it looked like a cyclical business at its peak. Nonetheless, in September 1999, we won the auction for WWI with a purchase price of approximately $750 million (well in excess of Wall Street’s $500 million to $600 million expectations).

Key Insights and Vision

  • Weight Watchers meetings were a tremendous business model with the unique combination of low fixed costs in a very seasonal industry, high margins and strong barriers to entry (e.g. its trained staff of leaders who had each reached their weight-loss goal with Weight Watchers).

  • The dramatic downturn in US attendance during the early and mid-90s had been caused by the introduction of Jenny Craig-style pre-packaged meals into Weight Watchers meetings. This had run counter to WWI’s heritage of education and support leading members towards adopting a sensible and sustainable healthy lifestyle.

  • Weight Watchers was cushioned from external shocks because of the loyalty of its customer base. Historical customer data analysis performed by the Invus team when WWI was acquired in 1999 showed that former members routinely and predictably returned to Weight Watchers when they needed its help and support.

  • The introduction of the POINTS plan was a fundamental modernization of the Weight Watchers approach. Weight Watchers now had a flexible weight management system that could fit the busy lifestyles of its target customers. The growth from the POINTS plan was just beginning.

  • Given Weight Watchers standing as a leading global brand in the weight loss arena, we saw an opportunity to transform the company from an orphan-subsidiary of a major food company to a stand-alone company that would aggressively pursue a series of transformational opportunities.

  • Linda Huett, the Head of Weight Watchers UK where the POINTS plan had been developed, was an excellent candidate to lead all of WWI as a standalone company.

Company’s Strategic and Operational Achievements

  • Instituted an ownership and incentive program which resulted in the company’s top 40 managers having a meaningful stake in the company
  • Grew US organic attendances well above its prior peak and weathered the external shock of the low-carb craze
  • Acquired fourteen Weight Watchers franchise operations, increasing the company owned share of the US business from 40% to approximately 83% based on attendances at Weight Watchers meetings
  • Significantly grew international membership revenues outside the traditional Anglo-markets of the US and UK
  • Through a newly formed entity, WeightWatchers.com, developed the leader in weight management internet subscription products
  • Leveraged experience gained through WeightWatchers.com to successfully launch Monthly Pass commitment plan, a subscription based prepayment plan that gives members unlimited access to Weight Watchers meetings and free access to web based weight management tools. Monthly Pass, which is continuing to launch across other markets, has already demonstrated its ability to significantly increase attendance and revenue per member
  • Today consumers spend over $3.0 billion on Weight Watchers branded products and services, including products sold at meetings conducted by WWI and its franchises and licensed products sold in retail channels

Outcome

  • From the time of our acquisition in 1999 to 2009, WWI grew, revenues on a consolidated basis from approximately $360M to approximately $1.5 billion, and operating income from approximately $80 million to approximately $400 million
  • The price per share in September 1999 was $2.13 per share as adjusted to reflect WWI's 2001 stock split. The company went public in 2001 at $24 per share.
  • After leading WWI from 1999, Linda Huett, who had spent 25 years with the company beginning when she signed up as a member, retired as CEO at the end of 2006. David Kirchhoff, the then-head of WeightWatchers.com and WWI's international operations, was promoted to the CEO position
  • We have sold down from our 95% ownership position, but continue to own 55% of the company as we still see tremendous growth potential going forward

For more information on Weight Watchers please visit www.weightwatchers.com