Ozempic and Wegovy have upended the diet industry. So why is the WeightWatchers CEO betting the company’s future on them?

CNN

By Nicole Goodkind, CNN

New York (CNN) — WeightWatchers is betting that diet culture is over.

Welcome to the age of Ozempic. Diet drugs have upended the weight loss business. The number of Americans taking semaglutide medication has increased 40-fold over the past five years, a contrast from decades of diet and exercise advice on how to lose pounds.

Wegovy and similar drugs threaten to forever change the $76 billion diet industry and the fabric on which it has stacked its riches. They even have consumer staples and retail titans like Coca Cola and Walmart fretting.

Sima Sistani, the 44-year-old CEO of WeightWatchers, is aware of this, and she recognized WeightWatchers had to evolve – or else. She knows she can’t beat Wegovy. That’s why she’s joining forces with it.

After she joined the company last year, Sistani began making radical changes: She ended thousands of the company’s notorious in-person workshops, closed storefronts and shifted the company’s focus to new weight-management drugs like Wegovy. She also landed a massive deal to buy a telehealth business that can issue virtual prescriptions to patients for these weight loss drugs.

It was a change that threatened to upend what WeightWatchers was best known for – the kind of risk CEOs rarely take unless they see an existential threat around the corner. But Sistani says the company isn’t losing its footing.

“What we do best is help people with weight management. That is the anchor,” she said. “I think we have to be true and authentic to that and who we are.”

And with that anchor, the company has been able to chart a path forward, even as the ground under it has shifted.

“I think we’ve been very intentional about our evolution,” Sistani told CNN. “We can ensure that all of our stakeholders see the benefit of this transformation and this change.”

In-person meetings, the Covid pandemic and wellness culture

Changes were already underway when, in March 2022, she took control of a company in crisis. The Covid-19 pandemic halted in-person meetings for a while, the company had tried on – and failed at – body positivity – and the emergence of semaglutide-fueled weight-loss phenomenon had just begun.

The legacy diet brand, more than half a century old, was on track to lose about $250 million for 2022.

The company had tried glomming onto the growing body positivity movement, haphazardly rebranding into a holistic wellness brand to keep up with changing attitudes toward body acceptance in 2018. That didn’t work.

“Part of the reason the wellness pivot didn’t work is because it was a marketing move. It wasn’t a product, and we didn’t change enough of how we showed up to really be a wellness company,” said Sistani.

The emphasis on in-person workshops and lack of a digital footprint was also hurting the company’s bottom line, especially in the social-distancing era.

“About 80% of the membership had moved to digital only, and yet we still had this app that functioned as though it was a companion to in-person meetings,” she said.

Sistani made radical changes, including ending many in-person meetings, closing stores and promoting semaglutide drugs.

In March, she made an even more radical change to revamp the company: WeightWatchers made a $100 million-plus deal to buy Sequence, a telehealth business that offers virtual prescriptions to patients for these weight loss drugs where appropriate.

“These medications have shown, and science has evolved to say, that living with obesity is a chronic condition. It’s important, no matter what it means for our business, to just be clear about that. It’s not willpower alone,” she said. “And what we are now saying is we know better and it’s on us to do better so that we can help people feel positive and destigmatize this conversation around obesity.”

Goldman Sachs analysts say that buying Sequence and embracing semaglutides is keeping the company from collapse. Analysts at the bank project that 15 million adults in the US will be on these medications by 2031, or about 13% of all adults in the country – not including diabetic patients.

They believe that these changes could generate $455 million in new revenue for WeightWatchers by 2025.

Sistani thinks if she hadn’t come in, the company would have followed in the footsteps of competitors like Jenny Craig, the weight management company that declared bankruptcy in the spring of 2023. Pieces of Jenny Craig company have since been sold to Wellful, the parent company of Nutrisystem.

The market seems to agree; shares of the company are up about 78% so far this year. In 2022, the stock tumbled about 76%.

Sistani says that while weight loss medications have exploded in popularity, there’s still a lack of knowledgeable practitioners safely prescribing them. That’s a role, she said, that WeightWatchers can fill.

Semaglutide was approved by the US Food and Drug Administration to treat type 2 diabetes as Ozempic, but it was also used off-label for weight loss. Wegovy, the version that treats weight loss, was approved in 2021. They work by mimicking a hormone that makes users feel full, but their use carries potential side effects like gastrointestinal discomfort. Long-term risks also remain under study. These medications are not stand-alone solutions and require a comprehensive approach to diet and exercise for sustained weight control. If you stop taking them, the weight often returns.

Most US doctors aren’t trained in obesity medication, and “there’s not a clear, safe, trusted way for people to understand whether they should be on these medications,” said Sistani.

WeightWatchers, she said, can be that source. “We’re a public company and so we have transparency of operations. We believe we can provide a much better experience for people on these medications.”

WeightWatchers has clinicians and researchers on staff and a scientific advisory board and medical advisory board to ensure that the experience is safe, she said, that that any side effects or complications are well-managed and that the medications are going to people who need them.

Still, WeightWatchers is a company that has shapeshifted more than once over the past decade as it struggles to find its identity.

Even longtime spokesperson and investor Oprah Winfrey had to walk back previous comments about weight loss drugs being an “easy way out” after WeightWatchers started selling them.

Some longtime users of the program feel betrayed by the pivot away from in-person meetings and toward medication-based solutions.

“WeightWatchers’ acquisition of Sequence really rattled many members,” said Jamie Yonash, who runs the lifestyle blog Life is Sweeter by Design, which focuses heavily on WeightWatchers-related content. “

“The feedback I have received is that they feel somewhat betrayed that WeightWatchers would promote medications for weight loss because it seems to go against the core values the company has held for so long,” she said.

Of the loss of in-person meetings, she said, “I believe that the move to almost totally digital programming is not in the best interests of all members. People need human connections and interactions, and those aren’t always achieved in a digital environment.”

Other WeightWatchers influencers were also confused by the changes. Biz Velanti, who runs popular blog and social media account MyBizzyKitchen, told CNN that “everyone is looking for the quick fix,” with medication. “Sadly, they don’t want to do the work,” she said, of tracking food or exercising to achieve weight loss goals.

The future of WeightWatchers

While the future of WeightWatchers is still being written, Sistani is certain of what it won’t be: It won’t be centered around weekly meetings and weigh-ins. It won’t be a consumer packaged-goods company selling diet snacks.

Evolution, said Sistani, is inherently difficult. But this isn’t a gamble, she added; it’s a “bold bet that is informed with data and then infused in every single part of what we do.”

In its most recent corporate earnings report, the company reported net income for the third quarter of 2023 at about $43.7 million. WeightWatchers reported a net loss of $206 million in the same period last year. Operating income came in at $30.6 million, compared to an operating loss of $254.5 million in 2022.

Subscriber growth also increased by 6% year-over-year to 4 million. Still, the company lost money on subscription revenues and its gross profit was down for the year.

WeightWatchers was a marketing-driven company when she took over, said Sistani. Now, with a new outlook, it’s a consumer-first enterprise.

“We’re going to grow in ways that resonate with a more digitally forward consumer,” said Sistani. “There will be community building and workshops, but they won’t have to be coach driven. It’s more about being in the places where people want to connect. Sunday walks in the park, or maybe even a trip to the grocery store. There are so many ways that we can create those relationships organically and meet people where they are.”

Correction: This story has been updated to correct the month Sistani became CEO and to clarify information around her changes at the company.

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