Flat Is The New Growth For The U.S. Weight Loss Market – For Now – Seeking Alpha

Going to post an unusually long except from this one, as it’s all pretty interesting stuff.

We’ve changed the way we diet, mostly from economic necessity but partly from a big increase in the ability to do the rough equivalent of many of the popular programs totally on our own with cheap or free smartphone apps and web sites.   Not to mention a flood of new books with built-in programs you can do on your own.  There’s money being made, because we know we’ve gotten used to the idea that we will actually have to pay financially, temporarily, to lose weight long term.

When it comes to dieting, Americans are simple: they want a product or program that works, that works quickly, is easy to use, is safe, and has as low a cost as possible. After all, dieting is hard. It takes effort, commitment, and a lifestyle change. And to top it off, you have to PAY for all this work and deprivation!

This do-it-yourself cycle (83% of America’s 108 million dieters by our estimate) has grown since 2007. The DIY share 10-15 years ago used to be 70%. This shift is due to necessity. The recession hurt disposable income, as workers were laid off or shifted to part-time work. A typical $1,000+ 3-4 month weight loss program became a luxury for budget-conscious, time-pressed, and stressed out consumers hit by rising gas prices, unemployment, and a payroll tax increase in Jan. 2013.

Contrary to simplistic analyses by some that blame it all on newly popular apps such as MyFitnessPal and others, the real reasons for the current diet business funk are more numerous and more complicated. Following are the reasons why Marketdata believes that market growth has disappeared:

* We are in a false economic recovery. The overwhelming share of new jobs created are part-time, in the service sector, with low pay of about $12/hr. A $25,000/year job doesn’t leave a lot of room for a $1,000 diet plan. The Administration doesn’t seem to be doing much to help small business (where 80% of America’s new jobs are created), so we don’t think this situation will improve over the next three years.

* The Affordable Care Act will induce employers to shift workers from 40 hr. workweeks to 29-hour weeks, thereby classifying them as part-timers, who are not eligible for health insurance. This will depress wages further.

* Fad diets and diet books are as plentiful as ever: gluten-free diets, HCG drops, acai berry drinks, pure green coffee bean extract, medical tongue patches, etc. These are heavily promoted via email, mail order, retailers and the Internet. They compete with “legitimate” weight loss programs (i.e. Weight Watchers, Nutrisystem, Jenny Craig, Medifast, etc.).

* Free and low-cost diet websites and apps for smartphones compete and have become increasingly popular with DIY dieters. They are being well-funded, as in the case of MyFitnessPal recently obtaining an $18 million investment and claiming 40 million users.

* Dieters are confused by so many weight loss options and claims. Celebrity endorsements don’t carry the same weight as they used to. Consumers know they are being paid millions, are getting the diet program free of charge, and have the means to hire a personal trainer and chef if they desire. This is not reality for most consumers since they can’t afford it.

* There is a trend toward eating “cleaner,” and away from processed packaged foods, including shelf-stable diet foods sold by Jenny Craig, Nutrisystem and others. In fact, sales of frozen entrees such as Lean Cuisine, Healthy Choice and other brands have been flat for about five years now.

* There is a lack of weight loss programs for niche groups. The big diet companies are still focusing mainly on the core customer — a 35-year old housewife with several kids and 30-40 lbs. to lose, willing to spend $1,000 on a diet program. Guess what? This group has shrunk. Where are the diet programs for Blacks, Hispanics, overweight teens, people with food allergies, and seniors? We do see more focus on male dieters and seniors by companies such as Nutrisystem, but not by Weight Watchers. Typically, women represent 80-85% of dieters using structured programs. Men tend to do it themselves, working out more at the gym, skipping meals, and using anonymous methods such as meal replacements.

* For the 2013 “diet season” (Jan. 1st to Memorial Day), none of the big diet companies launched anything truly new or compelling. The companies just came out with minor tweaks to their programs and hit us hard with celebrity-filled ads a la Mariah Carey, Jennifer Hudson and others. This wasn’t enough to attract lots of dieters.

via Flat Is The New Growth For The U.S. Weight Loss Market – For Now – Seeking Alpha


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