Nutrisystem 2014 Annual Report Download - page 9

Competitive Strengths
We believe our program, kits and digital tools offer consumers a sensible approach to losing weight without the
use of faddish, unhealthy or unrealistic weight loss methods by educating them about proper portion size, as well
as the appropriate combinations of fiber, protein, good carbohydrates and fat.
We intend to capitalize on the following competitive strengths:
•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 research has 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. Our
research indicates overall satisfaction with our program and a potential willingness on the part of our
customers to refer the Nutrisystem program to others. We have also sponsored clinical trials at leading
academic centers in patients with Type 2 diabetes. Statistically significant and clinically meaningful
weight loss and improvements in HbA1c (a key measure of blood glucose control) were observed, in
addition to improvements in secondary endpoints such as waist circumference, total plasma cholesterol
and blood pressure.
•Strong Brand Recognition. We believe that our brand is well recognized in the weight management
industry. Our company and our predecessors have been in the weight management industry for more
than 40 years, and we estimate that our company and our predecessors have spent hundreds of millions
of dollars in advertising over that time period.
•Low Cost, Highly Scalable Model. Unlike traditional commercial weight loss programs, which
primarily sell through franchisee and company-owned centers, we generate revenue in our direct
channel through the Internet and telephone (including the redemption of prepaid program cards). Our
method of distribution removes the fixed costs and capital investment associated with diet centers. We
also minimize fixed costs and capital investments in food procurement and fulfillment: we outsource
the production of our food products to a number of vendors and we outsource 100% of our fulfillment
operations to a third-party provider.
•Retail.We also generate revenue through the sale of our products and kits at retail locations. These
products and kits represent a significant departure from our traditional 28-day program and have
expanded our products and consumer reach. The retail channel provides us with great brand exposure,
offering consumers who may not be aware of our program an opportunity to sample Nutrisystem at an
attractive price point.
•Superior Consumer Value Proposition. Our goal is to offer our customers a complete weight
management program that is convenient, private and cost-effective. Our customers primarily place their
orders through the Internet or over the telephone and have their food delivered directly to their homes.
This affords our customers the convenience and anonymity that other diets, which rely on weight-loss
centers, cannot ensure. Additionally, we provide our customers with a package of food, including daily
breakfast, lunch, dinner and dessert, which removes the confusion of reading nutrition labels,
measuring portions or counting calories, carbohydrates or points. We believe our weight management
program offers our customers significant value and is priced below those of our competitors. In
addition, we do not charge a membership fee, as opposed to many of our competitors.
Our Industry
Weight management is a challenge for a significant portion of the U.S., as well as the global population. The
World Health Organization has stated that worldwide obesity has more than doubled since 1980 and estimated
that in 2014, more than 1.9 billion adults, 18 years and older, were overweight and over 600 million of these
were obese.
According to the U.S. Department of Health and Human Services, overweight and obese individuals are
increasingly at risk for diseases such as Type 2 diabetes, heart disease, certain types of cancer, stroke, arthritis,
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