Nutrisystem 2015 Annual Report Download - page 9

registered dietitians, certified diabetes educators and other nutrition and dietary staff. We do not charge
membership fees. Various promotional offers and pricing are offered throughout the year.
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. 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. The Nutrisystem name has 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 primarily 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 select retail locations.
These products and kits represent a significant departure from our traditional four-week 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
breakfast, lunch, dinner and snacks, 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, unlike some of our competitors, we do not charge a membership fee.
Our Industry
Weight management is a challenge for a significant portion of the U.S. population, as well as the global
population. More than one-third (34.9% or 78.6 million) of U.S. adults are obese.
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