Nutrisystem 2007 Annual Report Download - page 11

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According to the U.S. Department of Health and Human Services, overweight or obese individuals are
increasingly at risk for diseases such as diabetes, heart disease, certain types of cancer, stroke, arthritis, breathing
problems and depression. However, there is evidence that weight loss may reduce the risk of developing these
diseases.
In addition to the health risks, there are also cultural implications for those who are overweight or obese.
U.S. consumers are inundated with imagery in media, fashion, and entertainment that depicts the thin body as the
ideal type.
Despite the high percentage of overweight or obese individuals in the U.S., the popularity of dieting would
seem to indicate consumers’ desire to be thin. According to Gallup surveys, approximately 45% or an estimated
99 million people in the United States were dieting during 2007. Of those, approximately 63 million people were
attempting to lose weight and 36 million people were attempting to maintain their weight. Approximately 7%
participated in commercial weight loss programs and 57% conducted some form of self-directed diet. We believe
the NutriSystem program is well positioned to attract both types of dieters.
Competition
The weight loss industry is very competitive and consists of pharmaceutical products and weight loss
programs, as well as a wide variety of diet foods and meal replacement bars and shakes, appetite suppressants
and nutritional supplements. The weight loss market is served by a diverse array of competitors. Potential
customers seeking to manage their weight can turn to traditional center-based competitors such as Weight
Watchers, Jenny Craig and LA Weight Loss, online diet-oriented sites such as eDiets.com and
WeightWatchers.com, self-administered products such as the over-the-counter drug Alli and programs such as
Atkins and the South Beach Diet and medically supervised programs.
We believe that the principal competitive factors in the weight loss market are:
• the availability, convenience and effectiveness of the weight reduction program;
• brand recognition and trustworthiness;
• media spending;
• new products;
• program pricing; and
• the ability to attract and retain customers through promotion and personal referral.
Based on these factors, we believe that we can compete effectively in the weight management industry. We,
however, have no control over how successful competitors will be in addressing these factors. By providing a
well-recognized food-based program using the direct channel, we believe that we have a competitive advantage
in our market.
Our Products and Services
For over 30 years, the NutriSystem name has been recognized as a leader in the weight loss industry. We
provide a comprehensive weight management program, consisting primarily of a pre-packaged food program and
counseling. Trained counselors are available an average of 24 hours per day, seven days per week, to answer
questions and make recommendations to help each customer achieve his or her weight loss goals. Customers
support, encourage and share information with each other through hosted chat rooms and bulletin boards. These
services are complemented with relevant information on diet, nutrition and exercise, which is provided on our
community website and emailed to our customers weekly.
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