Nutrisystem 2006 Annual Report Download - page 10

Competitive Stren
g
th
s
We believe that our s
y
stem offers consumers a sensible approach to losin
g
wei
g
ht without the use o
f
f
addish, unhealth
y
or unrealistic wei
g
ht loss methods. We intend to capitalize on the followin
g
competitive
strengt
h
s to grow:
P
roduct E
ff
icac
y
.
We believe our customers are very satisfied with our products and believe they have lost
we
i
g
h
tw
hil
eus
i
ng our program. A customer survey con
d
ucte
db
yt
h
e Nat
i
ona
l
Bus
i
ness Researc
h
Inst
i
tute
in
December 200
5
found that clients lost an avera
g
e of 19.4 pounds in
j
ust under 12 weeks on the NutriS
y
ste
m
weight loss program and 92% of those surveyed would refer our program to others
.
S
tron
g
Brand Reco
g
nition. We believe that our brand is well reco
g
nized in the wei
g
ht mana
g
emen
t
i
n
d
ustry. Our company an
d
our pre
d
ecessors
h
ave
b
een
i
nt
h
ewe
i
g
h
t management
i
n
d
ustry
f
or more t
h
an 30
y
ears, an
d
we est
i
mate t
h
at our compan
y
an
d
our pre
d
ecessors
h
ave spent
h
un
d
re
d
so
f
m
illi
ons o
fd
o
ll
ars
i
n
a
dvertisin
g
over that time period
.
Low Cost, Highly Scalable Mode
l
. Unlike traditional commercial wei
g
ht loss pro
g
rams, which primaril
y
sell throu
g
h franchisee and compan
y
-owned centers, in our direct channel we
g
enerate revenue throu
g
hth
e
i
nternet an
d
te
l
ep
h
one. Our met
h
o
d
o
fdi
str
ib
ut
i
on removes t
h
e
fi
xe
d
costs an
d
cap
i
ta
li
nvestment assoc
i
ate
d
w
i
t
h
d
iet centers. We also minimize fixed costs and ca
p
ital investments in food
p
rocurement and fulfillment: we
o
utsource the production of our food products to a number of vendors and we outsource approximatel
y
87% of
o
ur
f
u
lfill
ment operat
i
ons to a t
hi
r
d
-party prov
id
er
.
S
u
p
erior Consumer Value Pro
p
osition. Our goal is to offer our customers a complete weight management
program t
h
at
i
s conven
i
ent, pr
i
vate an
d
cost-e
ff
ect
i
ve. Our customers p
l
ace t
h
e
i
ror
d
ers t
h
roug
h
t
h
e
i
nternet or
o
ver the phone and have their food delivered directl
y
to their homes. This affords our customers the convenienc
e
a
nd anonymity that other diets which rely on weight-loss centers cannot ensure. Additionally, we provide ou
r
customers w
i
t
h
a mont
h
o
ff
oo
d
,
i
nc
l
u
di
ng
b
rea
kf
ast,
l
unc
h
,
di
nner an
dd
esserts, w
hi
c
h
removes t
h
e con
f
us
i
on o
f
readin
g
nutrition labels, measurin
g
portions or countin
g
calories, carboh
y
drates or points. At a cost of about $10
a
day for three meals and a snack, we believe our weight management program offers our customers significant
v
a
l
ue an
di
spr
i
ce
db
e
l
ow t
h
ose o
f
our compet
i
tors. In a
ddi
t
i
on, we
d
o not c
h
arge a mem
b
ers
hi
p
f
ee, w
h
erea
s
man
y
of our competitors char
g
e such a fee
.
O
ur Industry
We
i
g
h
t management
i
sac
h
a
ll
enge
f
or a s
i
gn
ifi
cant port
i
on o
f
t
h
e U.S. popu
l
at
i
on. T
h
e 2003-2004 Nat
i
ona
l
H
ealth and Nutrition Examination Stud
y
estimated that
66
% of the adult population is overwei
g
ht and 33% is
o
bese, an increase from 47% and 1
5
%, respectivel
y
, in 1976:
1976 - 1980 1988 - 1994 1999 - 2000 2001 - 2002 2003 - 2004
0%
10%
20%
30%
40%
50%
60%
70%
47%
56%
65% 66% 66%
Overweight
5%
10%
15%
20%
25%
30%
35%
15%
23%
33%
31%31%
1976 - 1980 1988 - 1994 1999 - 2000 2001 - 2002 2003 - 2004
0%
Obese
A
ccor
di
ng to t
h
e U.S. Department o
f
Hea
l
t
h
an
d
Human Serv
i
ces, overwe
i
g
h
toro
b
ese
i
n
di
v
id
ua
l
sar
e
i
ncreas
i
n
gly
at r
i
s
kf
or
di
seases suc
h
as
di
a
b
etes,
h
eart
di
sease, certa
i
nt
y
pes o
f
cancer, stro
k
e, art
h
r
i
t
i
s,
b
reat
hi
n
g
problems and depression. However, there is evidence that wei
g
ht loss ma
y
reduce the risk of developin
g
these diseases
.
4