Nestle Swallows Jenny Craig
Nestle swallows Jenny Craig
Andrew Ross Sorkin in New York
June 20, 2006
IS NESTLE'S Kit Kat on Jenny Craig's diet plan?
Nestle, the Swiss food giant, yesterday announced that it has agreed to pay about $US600 million ($810 million) for Jenny Craig, the weight loss company that has had a surprising turnaround in recent years as a result of an irreverent advertising campaign chronicling the slimming waistline of the actor Kirstie Alley, who appeared in a comedy series called Fat Actress.
The deal is a bold gamble for Nestle, which is known for Kit Kat bars and Nesquik but less for its role in the $US30 billion weight loss management industry. The deal is also a bet that consumers, for reasons of health and vanity, will continue trying to lose weight through prepackaged meals and motivational workshops.
The acquisition is also part of Nestle's effort to expand in what is described as the "functional food" category through its Nestle Nutrition unit in the US, which makes PowerBars, baby foods and a series of nutritionally enriched products for the elderly.
Jenny Craig makes packaged meals that are sold only through its weight loss centres.
Analysts say they expect Nestle to take advantage of the brand recognition of Jenny Craig to begin selling an expanded line of meals through supermarkets and other channels, where Nestle can use its scale and influence to command premium shelf space. The market for diet-related products is growing by almost 10 per cent a year.
For Nestle, which already owns Lean Cuisine, the deal will bolster its position against rivals such as Unilever, which sells Slim-Fast packaged meals and shakes - a business that is growing at double digits - as well as Weight Watchers International and ConAgra Foods, which owns Healthy Choice.
The deal also marks the first time a giant food manufacturer has made such a big bet on a business that is not strictly about selling food.
Much of Jenny Craig's appeal lies in the personal evaluations and tailored diets it offers clients, as well as the weekly workshops at its 600 centres in the US, Canada, Australia and New Zealand, where dieters come to get motivated.
Indeed, if Nestle pursues a supermarket strategy with Jenny Craig, it may face a challenge: Jenny Craig stumbled in the late 1990s, in part because it too began selling food and diet products outside its centres, a move that was blamed for confusing the brand among consumers and driving down sales.
Nestle won a lengthy auction for Jenny Craig, which was put up for sale in January by its owners, ACI Capital and MidOcean Partners, a spin-off of Deutsche Bank's private equity arm.
The private equity firms had acquired a majority interest in Jenny Craig from the company's founders, Sid and Jenny Craig, in 2002 for $US115 million.
The sale is a major for the firms, which reaped more than five times their investment in less than five years.
The New York Times
Originally Posted by Kristy
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