Nutrisystem 2011 Annual Report Download - page 9

PART I
ITEM 1. BUSINESS
Overview
Nutrisystem, Inc. (together with its consolidated subsidiaries, “Nutrisystem,” the “Company,” “we,” “us,” or
“our”) is a leading provider of a weight management system based on a low-calorie, portion-controlled, prepared
meal program. Typically, our customers purchase monthly food packages containing a 28-day supply of
breakfasts, lunches, dinners and desserts, which they supplement with dairy, fruit, salad, vegetables and
low-glycemic carbohydrate items. Most of our customers order on an auto-delivery basis (“Auto-Delivery”), in
which we send a month’s food supply on an ongoing basis until notified by the customer to stop our shipments.
Our food for the Core program is shelf-stable at room temperature and will last for up to two years, making it
relatively inexpensive to ship and store. We have also expanded our product offerings to include a combination
of our ready-to-go food and our fresh-frozen line of menu items. This Select program is priced higher than the
Core program.
Our program is based on the following cornerstones that represent who we are to our customers:
Results. We believe our program enables our customers to lose weight successfully. The Nutrisystem
program is based on 40 years of nutrition research and the science of the low Glycemic Index, and offers over
130 portion-controlled items that include relatively higher amounts of fiber, contain “good” carbohydrates and
zero trans fats. The Glycemic Index is a measure of the quality of carbohydrates in foods. Foods on the lower end
of the Glycemic Index are generally considered “good” carbohydrates. We also offer transition and maintenance
plans, which include support tools and desired meal occasions that customers wish to continue to receive from
Nutrisystem. These plans are designed to help our customers keep the weight off.
Convenience. We sell our weight management program primarily through a direct-to-consumer sales and
distribution approach using the Internet and telephone. Our customers can order 24 hours a day, seven days a
week on our website, www.nutrisystem.com, and the food is shipped directly to the customer’s door.
Simplicity. We provide a comprehensive weight management program, consisting of a pre-packaged food
program and counseling. Our customers can either choose our pre-selected favorites food package or customize
their monthly food orders for their specific tastes. Our program does not require customers to visit centers,
measure foods or count calories. The entrees are individually packaged and food preparation time is minimal.
Value. We do not charge membership fees. Additionally, we advertise various promotional offers and
pricing throughout the year.
Anonymity. The direct-to-consumer approach using the Internet and telephone provides the privacy that our
customers value. We provide online and telephone counseling and support to our customers using our trained
weight loss coaches, diet counselors and other nutrition and dietary staff, and thus, our customers do not need to
travel for a face-to-face meeting.
Competitive Strengths
We believe our program offers consumers a sensible approach to losing weight without the use of faddish,
unhealthy or unrealistic weight loss methods. We intend to capitalize on the following competitive strengths to
grow:
Product Efficacy. We believe most of our customers are very satisfied with our products and believe they
have lost weight while using our program. Our customer surveys found that customers lost an average of 1.0 to
2.0 pounds per week and tended to stay on the program for 11 to 12 weeks. We believe these surveys indicate
overall satisfaction with our program and a potential willingness to refer our program to others.
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