Marketdata Was Right About NutriSystem & Tivity Health

May 21, 2020

As Marketdata analysts predicted just about a year ago, Tivity Health’s acquisition of NutriSystem has not worked out well. As of May 7, 2020 Tivity’s board has decided to explore “strategic alternatives” for the Nutrition business (translation: they want to sell the business unit), including a possible transaction and has engaged Lazard as its financial adviser…. “And there's a clear recognition that since we bought Nutrisystem, it has not performed as we had anticipated that it would.”

We got it right, just two years ahead of time! We predicted a sale by Tivity within three years.

When NutriSystem announced that it was going to be acquired by this regional healthcare provider, the operator of the Silver Sneakers program, we asked why? The merger didn't make sense. Tivity Health mainly caters to an older demographic, and we didn't think the synergies would benefit NutriSystem sales, since most dieters are younger than 65.

We also pointed out that twice in the past, when larger companies with a broader focus than weight loss acquired a weight loss company, they proceeded to drive the business into the ground due to a lack of understanding about marketing and competition in this tricky sector. Nestle bought Jenny Craig in 2006, for $600 million. Sales soon fell and Nestle wound up selling Jenny Craig in late 2013 to a private equity firm, North Castle Partners, for less than it bought it.

Nestle boss Paul Bulcke also told investors there would be disposals, though he did not give names. “We want to be in business, not in agony,” he said.

In a similar situation, Unilever bought the Slim-Fast brand for a whopping $2.3 billion in 2000, and sales slumped. At the time, Slim-Fast was a $600 million/year brand. In the case of Slim-Fast, Unilever said it was targeting the health and diet food market as part of a huge restructuring program. Slim-Fast was privately owned by Daniel Abraham, who collected a windfall sum for the firm.

Unilever would up selling it in 2014, at a loss, to Kainos Capital, a U.S.-based private equity firm focused on the food and consumer sector. Subsequently, in Oct. 2018, Global nutrition group and MLM company Glanbia purchased Slim-Fast from Kainos Capital for the bargain price of 300 million euros ($350 million).

So, history has not been on the side of successful acquisitions of diet companies. The writing was on the wall, easy to see. But, the deal went ahead anyway.

Commentary

Marketdata's predictions and forecasts, and early identification of emerging trends in the U.S. weight loss market have been very accurate. Why? ...because we are specialists and have tracked this sector every day for 31 years since 1989. Some of it is just common sense, not rocket science. Some of it is because we use a wide variety of sources, phone interviews, and industry "insiders" (former diet company managers, franchise owners, reporters, other analysts, trade associations, press releases, special reports and surveys, 10Ks and annual reports, conference calls and more). And some of it is due to the fact that we know the nuances of this market and look at short and long-term historical patterns and company developments.

Want Deep Insights of the Weight Loss Market? -- Then contact us for our reports, custom research and consulting. Our website: marketdataenterprises.com. Call us: 813-971-8080, Tampa, Florida.

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