6 of 6
BACK NEXT
Eliminate the middleman - and keep reinventing
Like a dieter stuck at a demoralizing plateau, Medifast (No. 47) could have given up.

During the 1980s, Medifast sold weight-loss products and nutrition bars through a network of health-care professionals who prescribed them to the clinically obese. But in the mid-1990s health insurers stopped covering many diet-food products, including Medifast's. Revenues plunged from $14.4 million in 1997 to $6 million the next year. CEO Brad MacDonald cut his staff from 200 to 11, and sales stagnated for the next five years as he fended off bankruptcy.

MacDonald knew Medifast had to rethink its business model. He decided that shaping up the firm would require a different distribution method: selling directly to consumers. With the help of a new recruit, controller Mike McDevitt, Medifast built a customer-service call center, added e-commerce functionality to its Web site, and poured money into online and print direct-response ads. By 2007, the firm's overall sales had shot up to $84 million.

But more obstacles lay ahead. In early 2007, Barron's magazine reported that MacDonald had adopted a pseudonym to tout his firm on Yahoo Finance message boards - and that he had instantly handed the CEO title to McDevitt when caught. The publication also questioned the efficacy of Medifast products. Between the competition and the bad press, Medifast took a financial hit: It came close to being delisted by the NYSE in late 2007, when its market cap fell below the exchange's required threshold.

Medifast has once again crawled back from the brink, launching a network of franchised weight-control centers and increasing its advertising spending. Medifast's stock has risen slowly since March. First-quarter revenues are up 25% over the same period last year, putting the firm on track for annual 2008 sales of more than $100 million.

Read more about Medifast: A diet food vendor scores by blowing up its business model

More galleries

LAST UPDATE: Jun 17 2008 | 10:33 AM ET
Find Business Answers
or
Ask a Question



Sponsored by
FSB 100: Full list Our annual ranking of America's fastest-growing small public companies. More
Hall of fame These five businesses made it to the $1 billion mark. More
Hall of shame Not all companies are able to maintain their torrid pace. Meet four businesses that struggled. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.