Weight Loss Firm Jenny Craig Is Considering a Sale

Struggling amid intense competition in the weight loss sector, La Jolla, Calif.-based Jenny Craig Inc. is exploring its options, including a possible sale. With the help of investment banking firm Koffler & Co. of Los Angeles the company is testing the acquisition interest of companies in a variety of industries, such as health and wellness, fitness, food, and even pharmaceuticals – businesses that might be a good fit with the company’s weight management operations. Jenny Craig, the country’s No. 2 weight loss company, has seen its sales decline in the last couple of years as an onslaught of weight loss programs, diet pills and supplements, and weight loss books has led to increased competition for dieters’ dollars. Jenny Craig has posted a string of losses in recent years, including an operating loss of $6.8 million on revenue of $203.9 million for the nine months ended March 31. In the weight loss counseling area, Jenny Craig runs a distant second to Weight Watchers International Inc., which had nearly $400 million in sales in 2000. Last year Jenny Craig had sales of $291 million. More than 90% of the company’s revenue comes from the sale of its prepared meals, but until recently, Jenny’s Cuisine meals were available only through the company’s weight loss centers. Now consumers can buy the meals in supermarkets and through the company’s web site. In the grocery stores, Jenny’s Cuisine faces stiff competition from low-calorie entrees such as Healthy Choice, Weight Watchers, and Lean Cuisine, and garners only a 14% share of the $2.5 billion low-calorie meals category. Steve Koffler, President of Koffler & Co., says his firm expects a lot of interest in Jenny Craig since the company enjoys strong brand recognition. “Among people who diet, there is a 99% awareness level of the Jenny Craig brand,” he says. The weight loss and health and wellness areas are very attractive, he adds. According to recent reports, he says, obesity affects about 100 million Americans. Each year Americans spend about $35 billion on weight management products and services, including medically monitored weight loss programs, low-calorie foods, diet supplements, health clubs, and diet books. Koffler notes that while Jenny Craig serves only a small portion of the broad weight management market, there are good opportunities for expanding the brand into new areas.