Weight Watchers looks to fatten up post-recession

By Shelley DuBois, reporter


FORTUNE -- If you see a plate of food and think about points, then you're probably familiar with Weight Watchers. It's the company behind the diet-method-turned-lifestyle-guide that revolves around a simple way to count calories, group meetings, and increasingly, a community online.

Weight Watchers (WTW) had a rough start to 2010. In the first quarter, the company's revenues slipped to $338 million, down 0.7% from the same period in 2009. Its net income fell 5.8% at $44.6 million.

But Weight Watchers CEO David Kirchhoff, who is also a point-counting member, believes the company is ready to bounce back. He spoke with Fortune about recessionary eating habits, new support groups in Shanghai, and why grapes are the best dietary bang for your buck.

You just announced a new study about Weight Watchers at the International Conference on Obesity in Sweden. What was the study?

It was a randomized trial done in the U.K., Germany, and Australia. 772 people were put into one of two groups. One group would do Weight Watchers. The other side would be sent to a nurse practitioner who would explain to the patient how to start losing weight.

The people that were in the Weight Watchers arm lost a bit more than twice as much weight as people who were on the doctor arm of the study. A combination of doctor plus Weight Watchers turned out to be incredibly compelling. It makes sense, because the doctor can create a sense of urgency and the momentum for the patient to begin the process of adopting a healthy lifestyle.

Does this mean you're going to start pushing doctors to recommend Weight Watchers?

It's never been an explicit strategy of ours. But if you're a doctor, you know Weight Watchers, and you know patients who've had success on it. Our view is that Weight Watchers can be an incredibly useful tool for the doctor.

Is it important to Weight Watchers that your customers transition off of the system of counting points and back to being able to monitor their eating habits regularly?

I can reflect on that both as a member and from an official Weight Watchers perspective: It depends on who you are and how you're wired.

Do you count points?

It's totally my safety net. I mean, I've regained weight. I'm actually up three pounds. I know, this company has turned me into a girl. Men are doing that more and more, they're going to where women are when it comes to food and fitness.

That sounds stressful.

It can be. On the other hand, I look at a big bunch of grapes and say, "It's only two points," and I'm psyched! I think grapes are the best food bargain of all time.

Doesn't your business model depend on people being overweight?

You really have to believe me when I make the following statement: There's nothing on earth that I would rather have happen than being put out of business because obesity went away. Sadly, I don't see it happening anytime in the near future. The reality is, there are 1.6 billion people on this planet who are overweight or obese, and it's getting worse everywhere. If you had told me ten years ago that China would have a burgeoning diabetes and obesity issue, I would have said you were crazy.

What does a Weight Watchers meeting look like in China?

It's fascinating. I don't understand a word of it, but it's the same. All of the interactions are the same. We didn't know how the Chinese consumer was going to react to it, if they would bond. And they do. You hear laughter -- people are talking and sharing experiences, and they're losing weight.

If obesity is such a problem, why didn't Weight Watchers do very well at the beginning of this year?

The economy is tough on everybody. You know who the economy wasn't tough on? People who sell candy bars and hamburgers. Confectionary did well and fast food has done pretty well. I think one of the things that happens in a severe set of circumstances is that is people want to comfort eat.

We found ourselves at the wrong end of two things. One is, consumer discretionary spending dropped off a cliff, and I also believe that there was a certain amount of comfort eating and people not thinking about their health.

And I swore when I took this job that I would not whine about the weather. But I literally have no choice because we had such a bizarre winter in the U.S. We ended up closing 46% more meetings in the first quarter than we've done in the previous year.

So what's the rebound marketing strategy?

In December we launched Jennifer Hudson as our new spokesperson. We saw since the last earnings call that it had an immediate effect on the business. We went from being significantly in the negative to back to breaking even as we went into the month of April. To top of page

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