Nestlé enters weight management with Jenny Craig

This latest acquisition, for US$600m, comes just weeks after Nestlé announced that it is snapping up Uncle Toby's cereals and nutritional snacks business in Australia, and is a further sign of the group's transition towards a healthier profile in line with consumer demand.

Nestlé Nutrition is an autonomous unit within the group, and it already has a global presence in infant nutrition, health care nutrition and performance nutrition. Jenny Craig adds a new string to its bow, since it brings the first weight management products into the fold.

"With this strategic acquisition, the group takes another important step in its transformation process into a nutrition, health and wellness company that sees weight managements as a key competence,"​ said chairman and CEO Peter Brabeck-Latmathe.

Traditionally weight management companies have been independent start-ups often bearing the name of their founder (Jenny Craig, Rosemary Conley, Atkins). Many have now grown to be very substantial businesses with high consumer awareness in several market.

Jenny Craig, which Nestle is buying from private equity group including ACI Capital and MidOcean Partners, reported sales of more than $400m USD in the last 12 months, and double-digit organic growth.

However it remains that Jenny Craig business is a combination of weight management programmes tailored to clients individual needs and food production, which might make it an unusual target for a food company.

But a spokesperson for the company told NutraIngredients.com that it is precisely this combination that made it an interesting acquisition. He drew attention to the two-part structure of Nestle's medical food service in France, which combines preparation of foods to meet the specific nutritional needs of outpatients with delivery to their homes.

Nestle has been involved in this activity for three years and the spokesperson said that it enables hospital stays to be cut short, resulting in psychological and financial benefits for patients.

Beyond stating that the Jenny Craig management team will continue to run the business and report to Nestlé Nutrition, Nestlé has not yet revealed any other plans, such as whether it plans to increase the food offering side of the business in line with its own core competencies, and whether it will roll out Jenny Craig in Europe and other world markets.

For now, however, it is significant for Nestlé Nutrition as it strengthens its position in the United States, which the company has identified as "the world's largest nutrition and weight management market"​.

According to Euromonitor International, the world market for slimming products was worth US$7.64bn at retail in 2005, of which the US made up $3.93bn and Western Europe $0.93.

Nestlé Nutrition is also looking at expanding into functional foods for metabolic syndrome, having obtained the option to licence Phospha E for use in nutritional products from Australian biotech company Phosphagenics, in exchange for a contribution towards the costs of a preclinical study, prior to full-scale evaluation in humans.

Over 300m adults are obese worldwide, according to latest statistics from the WHO and the International Obesity Task Force. About one-quarter of the US adult population is said to be obese, with rates in Western Europe on the rise although not yet at similar levels.

As awareness of the implications of overweight and obesity have filtered through to public consciousness, losing weight has become not just a matter of looking good - it has become seen as a means to a longer life.

Coupled with this awareness, the food industry has taken a rap for the unhealthy products it advertises and sells. By taking steps towards offering a healthier range - albeit in parallel with chocolate bars, ice cream and prepared foods - some companies are seeking to mitigate an unhealthy image.

Last year Masterfoods-owned Mars announced the establishment of a nutrition division, the premier product in which is its Cocovia chocolate bar with a health positioning due to its high content of cocoa flavonols and added plant sterols.

A recent report from JP Morgan identified a business conundrum that the stampede towards healthier eating presents to food companies: continue going against the grain with high margin, not-so-healthy products or deliver healthier foods at smaller margins.

The report, which was requested by United Nations asset managers who wanted an analysis of how obesity may affect company performance and valuations, identified Nestlé as one of the companies that are better prepared or positioned to benefit from the demand for healthy products - along with Danone, Campbell and Dean Foods.