Does The Oprah Winfrey Brand Still Sell?
One month ago today, beloved former talk show host and new Weight Watchers spokesperson Oprah Winfrey made roughly $20 million from a single tweet when she announced that she’d lost 26 pounds on the program.
The bombshell: she’d done it while eating bread—that doughy, delicious, profane dietary indulgence—every day since last summer.
Weight Watchers shares soared nearly 20 percent and subscriptions 35 percent after Winfrey tweeted a commercial of herself endorsing bread (“This is the joy for me!”) and extolling the “genius” of the program.
The Twitterverse responded with unmitigated ecstasy: Winfrey, our favorite self-help guru, had granted us permission to eat bread and assured us we could lose weight doing so.
It seemed like the beginning of a great year for bread lovers, Weight Watchers, and Winfrey, who was pocketing an estimated $2.4 million per lost pound. But Weight Watchers’ shares plummeted 21 percent during their fourth quarter, and the company saw a 4.8 percent decrease in active subscribers.
This was very grave news indeed. In fairness, Oprah only joined Weight Watchers in October, investing $43.2 million for a 10 percent stake in the company (and a seat on the board).
But with the billionaire media mogul promoting them at every turn, one would think they’d end the quarter on a positive note. Could Winfrey be losing her selling power?
“I don’t think so,” said John La Rosa, an analyst at Marketdata Enterprises, an independent market research firm that has been tracking the weight loss industry for 27 years.
But Weight Watchers’ deep-rooted problems have managed to transcend the Oprah effect. After all, convincing people to buy books on her book list is much easier than convincing Wall Street to invest in a 53-year-old company with an outdated business model.
Weight Watchers is still a one-size-fits-all diet program that continues to target the same demographic they targeted in the ‘80s and ‘90s: women in their 40s and 50s who want to lose a cumbersome 20-25 pounds.
That segment of the market has long since shrunk, and Weight Watchers is failing to compete with newer, more innovative weight loss programs and niche markets.
Instead, the company has been funneling money into their website and mobile apps to keep up with other diet and fitness apps—roughly $75 million, according to La Rosa, who claims they’re doing it all wrong.
“Those apps are basically for DIY dieters who lose interest in them after a couple of months, just like they lose interest in health clubs that they join in the beginning of the year,” he said. “Most people need more counseling and hand-holding to reach their weight-loss goals.”
La Rosa says the company over-values and underpays its 10,000 group leaders, who have expressed dissatisfaction with Weight Watchers. It doesn’t help that the average age of these leaders is 48, more proof that they aren’t reaching out to younger dieters.
“They’re not connecting with their biggest asset: the people,” said La Rosa, referring both to internal strife among Weight Watchers employees (“We think there’s a morale problem”) and to their lack of appeal to younger and older dieters.
During meetings with analysts in 2013, Weight Watchers also allegedly discussed working with the health care system market, which they said would generate as much as $300 million a year in revenue by 2017.
But according to La Rosa, they’re currently working with only one major insurance company and bringing in $60-$70 million in that area.
“They have the money to develop new content and more programs for different classes of dieters,” said La Rosa, noting that other diet service companies like Nutrisystem have benefited from doing so.
It’s not that they need to scrap their points program, but they need more programs for different types of dieters. La Rosa says they also need more retail partners to compete in a crowded market.
He predicts that Oprah will help the company, as long as she keeps the weight off. She’s managed so far, but the Queen of Talk is also the Queen of Yo-Yo Dieting. She’s not the most reliable guide to nutrition and wellness, having been seduced by fads and novelty diets again and again.
She put controversial Dr. Oz on the map, and also lent her influential platform to Jenny McCarthy’s anti-vaccination campaign.
In her first Weight Watchers commercial, Winfrey indicated that she’s done with those fads—that “every time I tried and failed, every time I tried again, and every time I tried again, has brought me to this powerful moment to say, ‘If not now, when?’”
The real test is whether the Oprah effect through her ongoing endorsement will translate to a significant rise in Weight Watchers subscriptions, a multi-month commitment at $40 a month. Yes, she’s eating bread every day and still keeping the weight off. But investing in the company has proven to be a risky gambit.
As La Rosa stressed, “Weight Watchers cannot rely on Oprah to solve all of its ills.”