Capstone - Write 9 pages
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Weight Watchers International
Strategic Management 405 Professor Daniel McGinley
Alonso Gadea Shuliang Li
Kevin Nguyen Nicholas O’Connor
Business Overview
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Vision : “To be the leading weight loss service provider by helping individuals to lose weight and sustain a healthy lifestyle.”
Mission Statement : Weight Watchers International will be chosen by all individuals that have a goal of improving their life through healthy living. Weight watchers will be easily accessible for all individuals desiring to improve their lifestyle and will receive exceptional service.
Overview: Weight Watcher International was founded in 1963 by James R. Chambers. Weight Watchers provides various products and services to assist weight loss and maintenance. Weight Watchers is the world’s leading provider of weight management services, operating globally by a network of company- owned and franchise operations. Weight Watchers build up their own membership system which holds over 200,000 support meetings monthly to assist their customers to learn about healthy lifestyle, behavior modification and physical activities. It is also an internet-based weight management providers because customers will find digital weight management products on their website, mobile sites and apps. Weight Watchers-branded products also can be sold through group meetings and licensed products are sold in retail channels and other publications. Weight Watchers’ revenue sources are service revenues (including meeting fees and online subscription revenues), in-meeting product sales, and licensing and franchising royalties. The primary revenue are subscriptions for monthly commitment plans for meeting and online subscriptions. Weight Watchers operate in numerous countries throughout the world. There are four segments based on an integrated geographical structure as follows: North America, Continental Europe (CE), UK and others.
Strategies
Problem Definition
Weight watchers has various problems and they have been struggling for the past four to five years. Weight watchers has always been a company that emphasized on helping individuals lose weight through dieting and weekly support meetings. Consumer tastes are changing and they are no longer valuing dieting as they once did. Dieting has began to be viewed as the prior generation's answer to weight loss. Consumers are now pursuing a more holistic approach, one that allows them to focus on more than just a number on the scale but taking into account their mindfulness, stress and anxiety, living more active lifestyle and making small changes in their
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daily behaviors that will lead to long-term success. Competition has been increasing as obesity rates continue to trend upwards in the U.S and in developed countries. Proliferation of technology has allowed startups like Fitbit to enter the market and help consumers in a different way by tracking their activity in a way that is relatively more private for consumers. We expect technology to continue to be a major influence in this industry and will only continue to play a bigger role in everyday life as consumers strive to improve their health. There has been a breakdown in the fundamentals of the company as such as customer service and IT problems. Weight watchers currently has a 1 star overall satisfaction rating on a website consumeraffaris.com which is an independent web-based consumer news and resource center.
Internal Analysis
Financial Performance: Over the last three years Weight Watchers has seen a decrease in their income and an increase in their debt. This is a scary sight for any company and now Weight Watchers is barely hanging on. Since Weight Watchers is not bringing enough income to pay back the money they are borrowing to finance the company, they must borrow even more money. Weight Watchers financial leverage is so bad that the creditors or the people they borrow money from might stop lending them money. Having Oprah invest in the company gave WW a little leverage. It showed creditors if Oprah is willing to invest in it then others should too. However looking closely at WW finance’s you will notice they owe $2.02 billion in long-term debt, as seen on the balance sheet. Their overall income in 2015 was a mere $33 million, compared to $257 million 3 years ago in 2012. The debt for Weight Watchers is the biggest elephant in the room; coming from a financial mindset. They can’t liquidate the company considering they only have about $93 million in tangible assets. So in order to improve their financial performance Weight Watchers must find a way to boost Sales to 2012 levels and start paying their huge burden of debt 2015 Financial Ratios:
Data provided by: http://quotes.wsj.com/WTW/financials Their Return on Equity for 2015 was 2.56% and their return on assets was 2.32%. Their debt-to asset ratio was 1.9 which implies that 190% of WW assets currently our financed by debt to creditors. The debt-to-equity ratio was 2.1 or for every $1 supplied by shareholders, $2.10 was supplied by creditors. The current ratio was 0.71, this is awful. Most financially secure companies at least prefer a current ratio of 2.0.
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SWOT Analysis Strengths
1. Globally operated: Weight Watchers operates in various countries using a multidomestic strategy. It has been doing so with a long time and has become efficient at adapting its product to other markets successfully. They have the ability to reach people all over the world .
2. Recognized and Trusted: Weight Watchers has been around since the 1960’s and has helped millions of people lose weight and improve the quality of their lives. According to an Article on U.S News & World report they were ranked #1 in three categories as follows “best weight loss diet, best commercial diet plan, and easiest diet to follow”(Weight Watchers). The U.S panel consist of health experts that includes but not limited to top nutritionists, physicians that specialize in diabetes, heart health and weight loss. Health experts rated Weight watchers based on three factors which were compliance, safety, and nutrition.
3. Leading internet provider: Weight watchers provides services for diet and fitness, tracking capabilities and a dynamic online community. Weight watchers takes pride in allowing consumers to enjoy any of the foods they love. This plan is supposed to teach individuals how to have their favorite foods in smaller portions and become more active. The tracking capabilities are perhaps one of the most important aspects of its online services. Their mobile apps give consumers easy access anywhere and anytime. WW is based off a point system instead of purely calories. Each member is given a number of points based on age, gender, height, weight and activity level. Members can then use these points to consume what they want or save them for a weekend splurge. WW has a dynamic online community which a variety of tools designed to help members stay on track of their fitness and health goals. Tools available include message boards, blogs and support groups. Individuals who are too busy for the weekly meetings will commonly access this tools. WW also gives consumers an ability to personalize their member homepage based on which tools they utilize the most.
4. Beyond the Scale: This is Weight Watchers most recent attempt at rebranding the company. This program was launched in December 2015 and they are trying to shift from purely helping individuals lose weight to helping them on other aspects of their life besides the numbers on the scale. They want to now help members live healthier by reducing stress and anxiety, overall become more mindful of life, eating better, and being more active. They will still help individuals lose weight if that is what they strive for.
5. Oprah: With the addition of Oprah she has opened the door for WW to target new segments such as the African american community who primarily watch her talk show or follow her tv network. The Oprah winfrey talk show is the highest rated television talk show in U.S history and as of February 2013 it is available to 89.1m households. Oprah is a global icon and has been one of the most influential people. Empowering women to
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become the best version of themselves for over three decades. Oprah currently holds a lot of credibility within Weight watchers as she lost 26 lbs herself using the beyond the scale program before deciding to purchase a 10% share in the company.
Weaknesses 1. Costs: The customers pay an average of $377 per year for weight watchers program to
lose weight, which is much more expensive than other competitors such as Jenny craig and Medifast. There are also free apps, such as myfitnesspal, that can help users to lose weight by tracking their calorie intake and provide healthy recipes. It is difficult to compete with free in any industry no matter how big a company or brand might be. Since weight watchers program is designed to help users lose weight most often than not when customers reach their target weight they feel that weight watchers no longer adds any value and thus will discontinue their membership. In the last quarter of 2014 weight watchers lost 15% of their active members and has been declining ever since. In the last quarter of 2015 active members dropped 12.7% and in first quarter of 2016 it dropped 4.6% bringing total subscribers to 2.4 million. In the past five years weight watchers active subscribers have declined by nearly 50% and has been declining every year since 2012. Customers will return to the program from time to time when they need help losing weight again but this process might take up to a decade. There are various examples of customers joining and paying for WW again 10 years later
2. Narrow Market: For the past half-century WW has focused on catering their programs and services to middle-aged caucasian women which made them successful but that is no longer enough to keep sales and revenues steady.
3. Long-Term debt: The company has a long-term debt of nearly 300 million in 2016 and 2.1 billion due in 2020. According to WW financial reporting majority of the debt due in 2016 has been paid off cutting it down to nearly $50 million. They also have enough cash on hand to pay off the remaining debt remaining in 2016. The real problem is in WW horizon in 2020 when they will owe a massive debt payment of $2.1 billion. With a large decline in revenues WW could be in serious trouble if they are unable to turn things around and begin to quickly generate more revenue in the next few years. There are various reasons why this long-term debt is of concern. It could stifle growth, cash flows, and make investors shy away from investing in the company. WW will be vulnerable to defaulting or bankruptcy.
4. Oprah: Although oprah brings a lot of attention to WW she also has the potential to make it shine or put them out of business. Oprah has struggled with her own weight throughout her entire life. She has lost weight before only to regain it all back and then some. It will be interesting to see whether she is able to keep it off for good this time around. If she is unable to do so the blowback could be devastating rendering her star power irrelevant.
5. Fundamentals: There are various negative reviews on consumeraffairs.com which is an independent web-based consumer news and resource center. Through various negative
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ratings online, we can see WW’s website often make mistakes of billing customers and their representative are lack of patient and training. Their customer service is weak and they also should work on fixing the IT problems that their customers experience so frequently. There are various complaints about their apps and online tools in which customers experience things like bugs, apps crashing, delays, or the tools failing to function properly.
Opportunities 1. Obesity: “ If America’s obesity trend continues at its current pace, all 50 states could
have obesity rates above 44 percent by 2030” (Auckland), according to a new report from Trust for America’s Health and the Robert Wood Johnson Foundation. The fact shows the obesity issues still become a problem in the future in U.S. With the rising of obesity, it would increases health care costs and obesity-related diseases. The U.S market still can be a big market for weight loss industry because of the rising number. People would like to try many methods to loss weight no matter if it could hurt their body in the past. However, right now they are aware of chasing a healthy way to lose and sustain their weight. Weight Watchers can meet their needs and help them build up a healthy lifestyle.
2. Strong Platform: Weight watchers has strong brand equity and if there is a company capable of transitioning from focusing on helping individuals lose weight to helping them improve their lives in a different but yet positive way it is weight watchers.
Threats 1. Proliferation of technology: explosion of new weight loss apps and online services that
promise dieters that can lose weight while staying at home. There are approximately more than 15,000 health and fitness apps available for smartphones and new do-it- yourself options like wearables.
2. Competition: Besides apps and technology there are other alternatives to weight loss such as bariatric surgery, diet pills, diet plans, fitness centers.
Porter's Five Forces Analysis Threat of New Entry: As of 2016 currently of the population in the United States are ⅔ currently categorized as overweight or obese and these trends do not seem to be reversing anytime soon. According to an article on stateofobesity.org over the past 35 years obesity rates have more than doubled in adults and obesity rates in children have more than tripled since 1980. This is being categorized as a major problem moving forward with no easy or simple solutions. Obesity rates are expected to continue to increase unless new laws and regulations are passed. According to an article on Huffington post “With increasing rates, the costs of preventative health care relating to obesity could rise from $48 billion to $66 billion in the next two decades,” (Gates).
External Analysis
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Regulations and Laws: As of 2015 many Americans will now be covered under the Affordable care act for any obesity treatment such as bariatric surgery, weight loss programs, and nutritional counseling. This means that the government will actively be looking at ways to improve their obesity treatments. Possibly making the Government a key driver of new trends.
Environmental Analysis: Technology has and is continuing to change the weight loss and fitness industries. Proliferation of health and wellness apps are changing the health and weight loss industries. These apps may also appeal to young consumers who might feel out of place in a program like Weight watchers where the average group leader is 48 years old.
Market Analysis: As of 2015 the U.S weight loss industry is valued at $64 billion. Obesity trends are on the rise with no signs of slowing down. In a survey conducted by foodinsight.org approximately 70% of americans mentioned that they were concerned about their weight. That being said there will be a lot of opportunity for companies in this market. In recent years there has also been less of a focus on diet plans and a more holistic approach meaning that consumers or the overall public is focused on their overall health first and calories second. Consumers are starting to chose fresher foods and are leaning away from frozen foods and diet packaged foods. According to a survey done by foodinsight.org 70% of americans are concerned about their current weight status which represents an opportunity for the industry that consumers may perhaps be seeking help on how to change their lives for the better. When comparing financial statements of top competitors such as Jenny Craig, nutrisystem, and Medifast it should be noted that there has been a decline in sales and revenue for nearly three consecutive years. This means that consumer tastes are changing dramatically.
Financial Analysis: After a close look of all of Weight Watchers finances they are in some big trouble regardless of the help from Oprah Winfrey. They have no financial leverage, they owe over $2 billion in long-term debt, but only bring in an income of a mere $33 million. That means there income is producing about 2% of the amount they actually owe. They need to find a new way to increase sales and decrease expenses. Or perhaps rather than taking out more debt to pay existing debt, they have an option to pay off existing debt with new equity. They can issue more stock or bonds. To be frank we believe Oprah Winfrey saved the company from going bankrupt. Having support as big as Oprah most likely convinced creditors to still lend Weight Watchers money to pay off existing debt.
Business-Level Strategy: 1. Differentiation: What makes WW different is their unique approach to helping people
lose weight. Weekly support groups are what keeps customers dedicated to losing weight and is what makes them different from any other company out there. There is something about the ‘human touch’ that keeps people motivated to stick to their goals and WW has managed to monetize these primal instincts for the past half century. They don’t want their customers to feel alone in their attempt to lose weight or improve their lives for the
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better. What consumers love about weight watchers are the weekly accountability, group support, balanced nutrition, and role models. Weight watchers is known for making individuals step on the scale during the weekly meetings in front of everyone. When people lose weight WW is known for having a friendly and supportive environment such as clapping for an individual who is making progress and will still cheer for them if they fail to make any immediate progress. In addition to making customers accountable and having a supportive environment their leaders and coaches are often people who have been lifetime members of weight watchers and have been through the program themselves which in turn makes them role models.
2. Sustainability: Weight Watchers has promoted sustainability by helping people adopt healthier lifestyles. They continuously assists and help support people in improving their health and quality of life. They continuously attempt to combat the global epidemic known as obesity along with the efforts of employees towards customers, have allowed WW to continually make an impact on the health and quality of people in communities around the world.
Corporate-Level Strategy: Corporate strategy is concerned with strategic decisions a business makes that affect the entire organization. Financial performance, mergers and acquisitions, human resource management and the allocation of resources are considered part of corporate level strategy.
1. Related Diversification: Weight watchers has not done a good job of diversifying into new product lines and we do believe in the situation they are currently in it would be wise to attempt and make their WW brand grow by expanding into products such as supplements, activewear, cook books or even food products like snacks, protein bars, etc.
2. Acquisitions: WW has done a solid job of acquiring companies that are doing well within the fitness or self-improvement industries. In May 2015 they acquired a fitness app developer called Hot5 which has developed two video workout apps known as hot5 fitness and vertical escape fitness. Both apps are designed to provide instant access to a variety of workout videos that include yoga, cardio, and bodyweight for a monthly or yearly fee. Weight watchers has marketed these two apps to their members since purchasing Hot5. Another company that WW acquired was a weight-loss focused digital health startup called Wello. This company connects individuals to professional trainers via video messaging. Consumers have the freedom to choose their trainers or a discipline that they prefer.
International-Level Strategy: Weight Watchers is a global company that offers a range of products and services related to dieting, weight loss, and weight maintenance. Weight Watchers presences in over 20 countries worldwide made it the top global provider in the weight loss industry The overall strategic approach is a multidomestic; each nation has a unique taste and promotional needs, which includes meeting services, food products, recipes and publication. ** (delete later) http://www.wikinvest.com/stock/Weight_Watchers_International_(WTW)**
Recommendations and Implementation
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1) Continue rebranding: With the new initiative known as ‘beyond the scale’ that was launched in December 5, 2015. Weight watchers is already attempting to rebrand itself as a company that has focused on weight loss and dieting for nearly half a century to a company that helps their members learn how to become healthier and focusing on things like eating whole foods, moving more, and being more mindful rather than just focusing on the numbers that show on the scale. This initiative is the right idea but not enough time has passed to measure the success of the program thus far. In the long-run we believe this idea is what will keep weight watchers relevant now and in the future.
2) Focus on Fundamentals: The breakdown in customer service and IT is of concern under any business model. Customer service is at the heart of any business and providing top quality service is what allows companies to grow and prosper in the long-run. It is crucial for weight watchers future that they address the low-rated service and listen to what the customers are saying about their service. Not only is the customer service is of concern but in this day and age to have poor IT on their online platform it is important that they also address their apps or website constantly crashing, bugs or customers having issues canceling their membership via the website. Upon taking a look at the board of directors we noticed nobody on the board of directors has experience in the technology industry which may be why it trickles down all the way down to the customer. It could be the primary reason weight watchers has been unable to address the technological problems.
3) Target new demographics: For nearly 50 years Weight Watchers has primarily served middle-aged women infact it was a middle aged woman who began this company. This company must take advantage of shifting from targeting women to focusing on targeting new demographics that are interested in changing their lifestyles. Taking advantage of Oprah's’ star power and the african american community that she brings with her could bring the company back to life. Not only is there vast opportunity to target the african american community there are other demographics such as overweight and obese teens, elderly and men that might be interested in improving their health but don’t know where to start. As obesity trends to go upward in many developed countries including the U.S there is no lack of opportunity.
4) Pursue new partnerships or strengthen new ones: Despite its recent struggles WW still has a lot of brand equity and will entice new businesses into partnerships. WW should pursue new partnerships with Government agencies such as the U.S department of Health and Human Services. Infact many people believe that this is long overdue. We also recommend that it continue to strengthen their partnership with Heinz and their product line known as ‘Smart Ones’ which provide nutritious, great tasting meals that are low- calorie and little fat. Heinz is a company that is commitment to the health and wellness of consumers all over the globe. The pride themselves in informing consumers about smart eating principles.
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Works Cited
Auckland, N.Z.: Auckland Transport, 2012. Healthamericans.org. Robert Wood Johnson Foundation. Web. 6 Apr. 2016
Gates, Sara. "American Obesity In 2030: Most U.S. Residents Will Be Obese Within Next 2 Decades (PHOTOS)." The Huffington Post. TheHuffingtonPost.com, n.d. Web. 06 Apr. 2016.
"Weight Watchers International Inc. WTW (U.S.: NYSE)." WTW Financial Statements. N.p., n.d. Web. 06 Apr. 2016
"WEIGHT WATCHERS® RANKED "BEST WEIGHT-LOSS DIET" AND "EASIEST DIET TO FOLLOW" BY U.S. NEWS & WORLD REPORT - BTS." WEIGHT WATCHERS® RANKED "BEST WEIGHT-LOSS DIET" AND "EASIEST DIET TO FOLLOW" BY U.S. NEWS & WORLD REPORT. N.p., n.d. Web. 06 Apr. 2016.
Scored 79/ 100 on presentation/ assignment