Discuss briefly industry size (in dollars) and annual growth rate (%); Where is the industry in its life cycle---emerging, early growth, rapid growth, early maturity, maturity, decline?
During the past five years, the Weight Loss Services industry has benefited from the growing number of overweight or obese Americans. Currently, about 69.0% of adults are considered obese or overweight, according to data from the Centers for Disease Control and Prevention (CDC). According to a CDC Vital Signs report, obese individuals incur higher medical expenditures per capita compared with healthy individuals, prompting public payers to focus on lowering the prevalence of overweight and obese beneficiaries to cut costs. Many physicians have also promoted weight loss as a form of preventive care to lower patients' risk for obesity-related ailments, such as heart disease, stroke and Type 2 diabetes. Nevertheless, the industry has contended with rising competition from do-it-yourself weight loss apps and nutrition plans, which have cut into industry revenue growth. Further exacerbating this trend, many clinics and hospitals have offered similar services, including nutrition programs, exercise planning and counseling, constraining industry revenue growth.
As a result, during the five years to 2016, industry revenue is expected to contract at an annualized rate of 1.0% to $2.3 billion. In 2016, however, revenue is anticipated to rise 2.1%, partly due to healthcare reform, which has required health insurers to cover obesity screenings and counseling without cost sharing (e.g. co-payments), making industry services more accessible to consumers. As a result, more obese individuals have received weight loss guidance from physicians and had access to referrals for services, including weight loss clinics. As a result, some health insurers have partnered with industry operators by referring patients and providing them with weight loss clinic membership discounts. Profit is expected to decline from 11.1% of industry revenue in 2011 to 7.8% in 2016, due to the poor performance of many key players, which have traditionally kept the average profit margin high for the industry.
The Weight Loss Services industry is in the mature phase of its industry life cycle. Industry products are well established and weight loss companies need to differentiate their product to generate robust sales volumes, which is typically indicative of an industry in the mature life cycle stage. During the 10 years to 2021, industry value added (IVA), which measures an industry's contribution to the overall economy, is expected to grow at an annualized rate of 0.7%. Comparatively, GDP is anticipated to grow at an average annual rate of 2.3% over the same period.
Industry growth
The number of companies operating in the industry is also expected to grow over the next five years. While the industry is already highly competitive, demand for weight loss services is expected to increase. In response, more weight loss companies will enter the industry, resulting in the number of industry enterprises increasing at an estimated annualized rate of 2.8% to 17,140 during the five-year period. Along with this growth, the number of employees is anticipated to rise at an annualized rate of 2.5% to 80,948, as large-scale operators continue to expand their reach and repurchase franchises. In particular, many small, independently operated enterprises will enter the industry to cater to relatively untapped markets, such as men’s weight loss programs. Additionally, many weight loss companies will enter specific regions, such as the Midwest and South, which have a greater number of obese individuals compared with the national average.
Currently, the majority of this industry’s clients are women, although a higher percentage of men are classified as overweight in comparison. According to a 2010 (latest data available) study from the Centers for Disease Control and Prevention, the proportion of men that are overweight or obese is about 73.3%, compared with 63.9% of women, with both figures anticipated to increase over the next five years. However, despite more men being overweight or obese, an estimated 90.0% of Weight Watchers’ members are women, a trend that is consistent for the majority of weight loss companies. In response, Weight Watchers has indicated that it will focus on men’s weight loss, with industry operators expected to follow their lead, given that men’s weight loss represents a large, untapped market for the industry.
Life Cycle Reasons
Industry value added is experiencing slow growth
There is the slow entrance of new companies, which can be attributed to the key players' comprising a smaller share of revenue
Competition is intensifying from app companies
Highlight key trends in the industry. These can be found in the trade literature. Are costs going down or up? What about prices? Discuss any new products or developments, the rate of new product development, new markets and customers, new selling approaches, new pricing methods, new requirements or regulations, new entrants and exits, new technologies, and any other national or economic trends and factors that could affect the venture’s business positively or negatively.
While the obesity rate is rising, which may incite more individuals to purchase industry products, weight loss companies will be subject to rising competition. In particular, the proliferation of weight loss apps and nutrition plans will cut into demand for weight loss services. Still, the number of industry operators is expected to grow at an annualized rate of 2.2% to 17,140 over the 10-year period as new industry entrants attempt to tap into an industry that is becoming less concentrated. In the prior period, large weight loss companies, such as Weight Waters and NutriSystem, controlled a significant share of industry revenue. However, these companies' respective market shares have contracted, resulting in the industry becoming more fragmented.
As we pointed out in the paragraph above, industry revenue is anticipated to rise 2.1% versus the previous 1.0%, partly due to healthcare reform, which has required health insurers to cover obesity screenings and counseling without cost sharing (e.g. co-payments), making industry services more accessible to consumers.
According to data from WebMD and the CDC, about 42.0% of Americans are projected to be obese by 2030, up from 34.9% of adults in 2015 (latest data available). During the five years to 2021, industry revenue is forecast to increase at an annualized rate of 2.6% to $2.6 billion. While women currently account for the majority of weight loss clients, many industry operators will aim to attract male customers, as this demographic is a relatively untapped market for the industry.
During the next five years, the Weight Loss Services industry is expected to rebound from the previous five-year period. As more health-conscious individuals become aware of how weight loss plays an integral role in health and overall wellness, industry revenue will grow. Further benefiting industry revenue, many physicians and health insurance providers will promote weight loss as a form of preventive care in order to lower healthcare costs. For example, according to the Centers for Disease Control and Prevention, weight loss can lower an individual’s risk of heart disease, high blood pressure, diabetes and certain cancers, among other health ailments.
Over the five years to 2021, industry revenue is forecast to grow at an annualized rate of 2.6% to $2.6 billion. As more individuals become time strapped over the period, many obese or overweight individuals will purchase weight loss services to achieve their fitness, weight and nutritional goals in short time increments. Profit is expected to rise from 7.8% of industry revenue in 2016 to 9.1% in 2021, as many weight loss companies raise their membership rates, rather than offer discount and promotional pricing like the previous period.
Rising rate of obesity
Over the next five years, childhood obesity is expected to become more prevalent in the United States. According to data from WebMD, the incidence of childhood obesity is expected to reach 20.0% by 2030; however, some programs, such as Michelle Obama’s Let’s Move campaign, aim to lower the obesity rate by 5.0%. Over the five-year period, the incidence of adult obesity is expected to follow a similar upward trend. Generally, the rising rate of obesity can be attributed to growing portion sizes, increasingly sedentary lifestyles and unhealthy diets.
Nevertheless, the healthy eating index, which measures Americans’ compliance with the US Department of Agriculture’s recommended diet, is anticipated to rise at an average annual rate of 0.1% during the next five years. While the revitalization in consumers’ discretionary incomes will allow more individuals to afford healthy, high-protein meals, time-strapped individuals will still demand convenient, high-calorie foods. Moreover, as a larger share of the US population will have weight problems, demand for weight loss services will rise, particularly meal plans provided by the industry.
Determine the key success factors for the industry and draw conclusions. What are the winners able to do consistently that the losers or also-rans to not do?
Weight Watchers International Inc. is the largest provider of weight loss services in the United States, with over one million members. The company was founded in New York in 1963 and is currently headquartered in New York. The company offers services in over 25 countries, including the United States, the United Kingdom, Germany and Australia.
Weight Watchers has several services and products that it offers to members, including weight management plans, meetings, nutritional products, a weightwatchers.com subscription and mobile services. Its weight management plans are offered through the company's PointsPlus and ProPoints plans. The PointsPlus system assigns specific point values to food, based on its protein, carbohydrate, fat and dietary fiber content. Under the PointsPlus program, consumers are taught various techniques on how to lose weight by eating foods that are healthier and more satisfying. The ProPoints program was launched in Europe at the end of 2009 and, at the end of 2010, the company introduced the PointsPlus program in the United States and Canada. Additionally, Weight Watchers offers weekly meetings so that members can support one another and discuss experiences with weight-management challenges. In 2015, the company acquired Weilos, a California-based company that developed a mobile platform for health and weight loss.
The company also sells a range of products, including protein bars, snacks and cookbooks, as well as food and restaurant guides. Weight Watchers additionally has two internet subscription offerings, Weight Watchers Online and Weight Watchers eTools. Weight Watchers Online provides personalized resources so clients can follow weight-management plans via the internet. For example, eTools is an internet application that streamlines weekly meetings for clients.
Weight Watchers has been expanding its product offerings and geographic reach over the past five years. The company is expected to begin focusing on men's weight loss, as this presents a relatively unexplored market for the company, since 90.0% of the company's members are female. In 2011, the company began marketing its online offerings to men and signed Charles Barkley as a spokesperson in order to better target the men's market.
Conclusion:
Weight Watchers and the other key players have turned themselves into household names through their consistent marketing efforts and through offering a simple solution to an ongoing problem. They hit all of the main areas of weight loss from food to support.
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