WeightWatchers CEO's Risky Bet: Banking the Company's Future on Ozempic and Wegovy
WeightWatchers, the $550 million weight loss company, is embracing the changing landscape by placing its faith in the revolutionary drugs Ozempic and Wegovy, signaling a shift away from traditional diet culture
WeightWatchers is taking a chance on the idea that diet culture is no longer relevant. Enter the era of Ozempic. The weight loss industry has been transformed by diet medications, with the amount of Americans using semaglutide medication increasing by 40 times in the last five years. This marks a departure from the previous emphasis on diet and exercise for weight loss.
Wegovy and similar medications are poised to permanently alter the $76 billion diet industry and its underlying foundation of wealth. Even consumer staples and retail giants such as Coca Cola and Walmart are feeling anxious about this. Sima Sistani, the 44-year-old CEO of WeightWatchers, is well aware of this and understands that WeightWatchers must adapt in order to survive. She acknowledges that WeightWatchers cannot compete with Wegovy, which is why she is choosing to collaborate with it.
Upon joining the company last year, Sistani implemented radical changes, putting an end to thousands of the company's in-person workshops, closing storefronts, and repositioning the focus towards new weight-management drugs like Wegovy. Additionally, she secured a substantial deal to acquire a telehealth business capable of issuing virtual prescriptions for these weight loss drugs to patients. This shift posed a potential threat to WeightWatchers' established reputation, but Sistani is confident that the company is not losing its footing.
"Our strength lies in assisting individuals with weight management. That is our foundation," she explained. "We must remain true to ourselves and authentic to our purpose."
With this foundation, the company has managed to navigate a way forward, despite the changing landscape.
"I believe we have been purposeful in our growth," expressed Sistani to CNN. "We are committed to ensuring that all of our stakeholders recognize the advantages of this transformation and change."
Sima Sistani, CEO of WeightWatchers.
Erica Shroeder
In-person meetings, the Covid pandemic and wellness culture
The company was already undergoing changes when, in February 2022, she assumed control amidst a crisis. The Covid-19 pandemic had temporarily halted in-person meetings, the company had attempted - and failed at - promoting body positivity, and the rise of the semaglutide-fueled weight-loss trend had just begun.
The long-standing diet brand, with a history of over 50 years, was projected to incur a loss of approximately $250 million in 2022.
In an attempt to align with the shifting views on body acceptance, the company rebranded as a holistic wellness brand in 2018, in response to the burgeoning body positivity movement. However, this strategy ultimately proved to be unsuccessful.
"According to Sistani, the wellness pivot failed because it was simply a marketing strategy, not a substantial product change. We didn't alter our approach enough to truly become a wellness company," mentioned Sistani.
An Ozempic (semaglutide) injection pen
Jaap Arriens/NurPhoto/Shutterstock
The company's over-reliance on in-person workshops and lack of digital presence was negatively impacting its financial performance, especially in the time of social distancing.
She noted, "Approximately 80% of our members had transitioned to digital-only, yet our app still operated as if it were meant for in-person gatherings."
Sistani wasted no time in implementing drastic changes, such as discontinuing meetings, shutting down stores, and endorsing the use of semaglutide drugs.
In March, she took an even bolder step to transform the company: WeightWatchers secured a $100 million-plus deal to acquire Sequence, a telehealth business that provides virtual prescriptions for weight loss drugs when deemed suitable for patients.
These medications have demonstrated that living with obesity is a chronic condition, and scientific understanding has evolved to support this. It is important to be clear about this, regardless of the impact on our business. It is not solely a matter of willpower," she stated. "We now have a better understanding and it is our responsibility to take action in order to help people feel positive and reduce the stigma surrounding discussions about obesity."
According to analysts at Goldman Sachs, the purchase of Sequence and the use of semaglutides are preventing the company from collapsing. The bank's analysts predict that by 2031, approximately 15 million adults in the US, representing about 13% of the adult population, will be taking these medications, excluding diabetic patients.
Projected revenue growth for WeightWatchers is estimated to reach $455 million by 2025. Sistani is of the view that without her intervention, WeightWatchers would have faced a fate similar to that of its competitor, Jenny Craig, which filed for bankruptcy in 2023. Subsequently, portions of Jenny Craig have been acquired by Wellful, the parent company of Nutrisystem.
The market seems to agree; shares of the company are up about 78% so far this year. In 2022, the stock tumbled about 76%.
Adam Rockmore of Fandango, Sima Sistani and Ged Tarpey of Twitter
Angela Weiss/Getty Images for Variety
Sistani suggests that although weight loss medications have become increasingly popular, there is still a shortage of well-informed practitioners who can safely prescribe them. She believes that WeightWatchers could help fill this role.
Semaglutide, known as Ozempic when approved by the US Food and Drug Administration to treat type 2 diabetes, has also been used off-label for weight loss. The weight loss version, Wegovy, was approved in 2021. These medications work by replicating a hormone that induces a feeling of fullness, but they can lead to potential side effects such as gastrointestinal discomfort. Long-term risks are still being studied. It's important to note that these medications are not standalone solutions and require a comprehensive approach to diet and exercise for sustained weight control. Moreover, if you discontinue their use, the weight often returns.
Many doctors in the US lack training in obesity medication, leading to a lack of clarity, safety, and trust for those considering these treatments. Sistani believes that WeightWatchers can serve as a reliable source in this regard, offering transparency and a superior experience for individuals on obesity medication.
WeightWatchers employs clinicians, researchers, a scientific advisory board, and a medical advisory board to ensure the safety of the experience, manage any side effects or complications, and provide medications to those in need. Despite this, WeightWatchers has undergone multiple transformations over the past decade as it seeks to establish its identity.
Oprah Winfrey, a long-time spokesperson and investor, had to backtrack on her previous comments about weight loss drugs being an "easy way out" after WeightWatchers began offering them for sale. This shift toward medication-based solutions has left some long-time users of the program feeling betrayed, as it moves away from in-person meetings.
Jamie Yonash, the owner of the lifestyle blog Life is Sweeter by Design, which primarily covers WeightWatchers-related topics, stated that the acquisition of Sequence by WeightWatchers deeply disturbed many of its members. "I have been inundated with feedback from members who feel a sense of betrayal. They are dismayed that WeightWatchers would endorse weight loss medications, as it appears to contradict the company's long-held core values," she emphasized.
She expressed concern about the shift to primarily digital programming, stating that not all members would benefit from it. Emphasizing the importance of human connections and interactions, she highlighted that these are often lacking in a digital setting.
Other influential figures within the WeightWatchers community also expressed bewilderment over the changes. Biz Velanti, the founder of the well-liked blog and social media account MyBizzyKitchen, conveyed to CNN that there is a widespread desire for rapid solutions, such as medication, rather than putting in the effort required to track food consumption and exercise for weight loss goals.
The future of WeightWatchers
As the future of WeightWatchers continues to unfold, one thing is clear: it will not revolve around weekly meetings and weigh-ins. It will not be focused on selling diet snacks as a consumer packaged-goods company.
Sistani emphasized that evolution is inherently challenging, but she also stated that it is not a risky endeavor. Instead, she described it as a "bold bet that is informed with data and then infused in every single part of what we do."
Weight Watchers food products
Michael Nagle/Bloomberg/Getty Images
The company's most recent corporate earnings report revealed a net income of approximately $43.7 million for the third quarter of 2023, a significant improvement from the net loss of $206 million reported in the same period last year. Operating income for the quarter was $30.6 million, compared to an operating loss of $254.5 million in 2022.
Subscriber growth also saw a 6% increase year-over-year, reaching 4 million. However, the company experienced losses in subscription revenues and a decrease in gross profit for the year.
When she assumed control, Sistani stated that WeightWatchers was primarily focused on marketing. Now, with a new perspective, it has transformed into a consumer-centric business.
"We aim to expand in ways that appeal to a more digitally savvy consumer," Sistani explained. "There will be a focus on building community and hosting workshops, but they won't necessarily be led by coaches. It's more about engaging with people in the places they prefer. Whether it's a leisurely stroll in the park on a Sunday or even a visit to the grocery store, there are numerous opportunities for us to organically cultivate these connections and meet people where they are."
