Nutrisystem 2010 Annual Report Download - page 11

We have an agreement with Schwan’s Home Service, a provider of fine frozen foods, for the development
and distribution of frozen foods under the Nutrisystem brand. The program, which includes frozen foods
(“Nutrisystem Select”), enhances Nutrisystem’s tradition of effective weight loss and weight management. The
full national launch of Nutrisystem Select took place in the first quarter of 2009 but was recently revamped so
that most of our weight plans include these fresh-frozen foods. The program provides customers with premium
fresh-frozen foods that complement Nutrisystem’s prepared food weight loss programs and still adhere to
Nutrisystem’s nutritional guidelines. When a customer orders Nutrisystem Select, two separate shipments are
delivered. The first shipment will be sent directly to the customer and will contain Nutrisystem’s standard shelf-
stable food. The second shipment will contain the fresh-frozen foods and will be delivered right to the customer’s
home.
The Nutrisystem D Program is a weight loss program specifically designed to produce gradual weight loss
in overweight patients diagnosed with type 2 diabetes. Results from a 2009 clinical study conducted at the
Temple University School of Medicine and published in the journal of Postgraduate Medicine show that a
pre-packaged, portion controlled meal plan in combination with weekly counseling sessions helped overweight
individuals with type 2 diabetes lose more weight and experience greater reductions in their A1C levels as
compared to those in the control group. This weight loss was also associated with reductions in blood pressure,
cholesterol and waist circumference. A follow up study at the University of Pennsylvania and Temple University
School of Medicine was launched in the third quarter of 2010 and is expected to be complete by the end of the
second quarter of 2011. Both research studies were funded by Nutrisystem.
We continue to offer our program at Costco through the use of prepaid program cards. The Nutrisystem
program has also been offered at other large retailers. Each retailer offered a unique promotional package and
pricing through the use of prepaid program cards. We have discontinued offering our program at
underperforming retailers, but we will continually explore other major retailers where we may potentially offer
our program in the future.
In 2008, we also introduced the Flex program (“Nutrisystem Flex”), which is a 28-day program consisting
of 20 days of food, our “weekends off” program, which provides a less restrictive option to meet the needs and
lifestyle of an important segment of dieting consumers. Nutrisystem Flex includes a Recipe Book (Nutrisystem,
My Way) and a Dining Out Guide to help consumers make healthy choices and stay within the program
guidelines on their “flex” days.
Typically, our customers purchase monthly food packages of shelf-stable and frozen food containing 28
breakfasts, lunches, dinners and desserts, which they supplement with dairy, fruit, salad, vegetables and
low-glycemic carbohydrate items. In certain instances, depending on the promotional offers available, customers
can receive more than the typical 28 days of food. Most customers order through our Auto-Delivery feature. Our
program is regularly priced for as little as $11 per day. By offering a variety of shelf-stable and fresh-frozen
foods, we help our customers sustain their weight loss efforts. On our website, customers can order food 24 hours
a day, seven days a week.
The features of our weight loss program address many of the most common limitations of traditional weight
loss programs, including high initiation and recurring membership fees, the inconvenience of traveling to weight
loss centers for scheduled appointments and lack of privacy. In addition, our prepared meals provide our
customers with a structured program with limited weighing and measuring of foods, and no need to count
calories, carbohydrates or points. The convenience of home delivery, reduced grocery shopping time, and rapid
food preparation also aid compliance.
Our food items have accounted for 99% of our revenues for each of the years ended December 31, 2010,
2009 and 2008, respectively. No other product or service has accounted for more than 1% of consolidated
revenue in any of the last three years. In January 2008, we expanded operations into Canada and in October
2009, we announced our Nutrisystem J Diet in Japan. Approximately 98% of our revenues for each of the years
ended December 31, 2010, 2009 and 2008 were generated in the United States.
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