Jenny Craig Inc.

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Jenny Craig Inc.

founded: 1983

Contact Information:

headquarters: 11355 n. torrey pines rd.
la jolla, ca 92037 phone: (858)812-7000 fax: (858)812-2713 toll free: (800)597-5366 email: [email protected] url:


Jenny Craig Inc. (JCI) provides a comprehensive weight loss and weight management program through its Jenny Craig Weight Loss Centres. As of the end of January 2002, JCI operated 428 company-owned and 115 franchised centers in the United States and 115 company-owned and 38 franchised centers in Canada, Australia, and New Zealand. The center served approximately 74,000 U.S. customers and 23,000 international customers. The program combines weight loss counseling and motivation with a nutritionally balanced, low-calorie diet. The foundation of the company's business is Jenny's Cuisine, the food product line sold to clients as part of the overall weight loss program. Both men and women are customers of JCI; however the majority of participants are women who want to lose 30 pounds or more.

After experiencing robust growth through the 1980s and into the early 1990s, during which time the number of company-owned centers and franchises reached 643 and 138, respectively, the business began to decline during the late 1990s. In August 2001, JCI was removed from the New York Stock Exchange, after which the company began trading on the Over-The-Counter Bulletin Board (OCTBB). In February 2002 JCI announced its intentions to accept a buyout bid from ACI Capital, with the backing of DB Capital Partners, the private equity arm of Deutsche Bank. On January 28, 2002, cofounder Sid Craig stepped down as the company's chief executive officer. However, both Sid and Jenny Craig are part of the investment group that made the acquisition and remain as members of the board of directors.


For fiscal year 2001, ending June 30, Jenny Craig Inc. generated total revenues of $283.6 million, resulting in a net loss of $19.3 million. These figures compare negatively to those reported in fiscal 1997, at which time the company posted a net income of $8.3 million on revenues of $365.1 million. Net income fell to $2.1 million in fiscal 1998, and in 1999 the company posted its first net loss, totaling $2.8 million. In fiscal 2000 and 2001 the losses increased to $7.1 million and $19.3 million, respectively. After peaking at $33.88 a share in January of 1992, during the third quarter of 2001 stock prices hit a low of $1.01 per share before rebounding to $3.15 at the end of January of 2002. Upon the announcement of the proposed buyout by ACI Capital, trading increased and stock prices jumped to a 52-week high of $5.12. As part of the purchase agreement, stockholders received $5.30 per share, making the deal worth approximately $115 million. During the first two quarters of fiscal 2002, JCI regained some financial footing. For the six months ending December 31, 2001, JCI reported a net income of $23.6 million on total revenues of $142.9 million, compared to a net loss of $23.3 million on revenues of $127.1 million during the same time period of 2000.


Analysts consider the acquisition of Jenny Craig Inc. by ACI Capital as a positive move for the company and viewed the appointment of Kent Kreh, former chief executive officer of Weight Watchers, as a good sign for hopes for the company's financial turn-around. Other positive signs include the company's low debt level and cash assets of $52 million. Nonetheless, analysts remain concerned that the diet market has changed so significantly in recent years that JCI will not be able to reclaim its original place in the industry.


Jenny Craig met her future husband, Sid Craig, when she joined Body Contours, a fitness center in New Orleans, Louisiana. Sid Craig was half-owner of Body Contours. When the couple married in 1979, Jenny became active in the business' development. By 1982 revenues reached $35 million. The Craigs sold Body Contours in 1983 and used the $3.5 million they received in the transaction to start Jenny Craig Inc. Temporarily barred by a noncompetition clause from doing business in the diet and fitness industry in the United States, the Craigs moved to Australia to open their fitness centers. Having established 69 weight loss centers in Australia generating some $50 million in gross income, in 1985 the Craigs returned to the United States and opened 13 centers in Los Angeles followed by six center openings in Chicago. By 1987 JCI was operating 46 U.S.-based centers and 114 international centers.

Having entered into business in the infancy of the diet industry, JCI grew at a tremendous pace during the late 1980s and early 1990s. The Craigs considered taking their company public in 1987, but weak market conditions caused them to reconsider. By 1991 the market had sufficiently rebounded for them to decide to go public. With the financial backing of a Wall Street investment bank that raised $100 million to support the initial public offering, JCI became a publicly owned company in October 1991. Issuing 3.5 million shares at $21 per share, the offering generated $73.5 million. After selling an additional 1.65 million shares, the Craigs retained a 59 percent share in their company.

By 1993 JCI was at its peak, operating 794 weight loss centers in the United States, Canada, Australia, and New Zealand. Revenues reached more than $490 million. However, the market was drying up quickly, and the tide seemed to be turning against JCI. In 1990 JCI was named in a class action lawsuit that claimed a link between the diet program and gallbladder problems. In addition, JCI was named in 11 personal injury cases. The suits were eventually settled even though the link between the diet and health problems was never proved. Nonetheless, the publicity prompted the Federal Trade Commission to investigate JCI's advertising practices. During the same period, dieting was receiving bad press from the medical community as it disclosed the dangers of "yo-yo" dieting, producing studies that suggested repeated cycles of losing and regaining weight can cause health problems.

Despite the market indicators, JCI continued to expand, opening 89 new centers and repurchasing 41 franchises in 1992, and adding 100 new centers and repurchasing 48 franchises in 1993. Some investors claimed the rapid expansion inflated sales figures, camouflaging the company's financial problems. Although total revenues increased by 6 percent in fiscal 1993 over fiscal 1992, individual company-owned weight loss centers revenues averaged 10 percent less than the previous year.

JCI reacted to the downturn in the market by revamping the program to include a wider variety of choices and more flexibility. Despite these efforts, membership continued to decline. The company was further affected by bad publicity in 1997 when the Federal Trade Commission charged JCI with false advertising and required the company to accompany its stories of success with a disclaimer that informed the public that the results reported were not typical.

The company's financial troubles continued to multiply, with net income turning into net loss in 1999. During the summer of 2000, the Craigs offered to purchase all outstanding stock for $3.75 per share, but then decided to withdraw the offer after deciding the weak market did not support the buyout. When the offer was removed, investors responded and stock prices fell. In early 2001 the New York Stock Exchange filed to remove JCI's listing unless the company could increase its market value from $32 million to $50 million. Unable to do so, JCI was delisted in August of 2002. Stocks were then traded on the OCTBB, and the Craigs considered selling the company. After financial consultants were hired to advise the company on the matter of a sale, JCI proceeded in shopping for a buyer. On January 28, 2002, the company announced its intentions to sell out to ACI Capital. Although not all shareholders agreed with the decision, the Craigs controlled 59 percent of the company and therefore could control the outcome. The deal was expected to be finalized in the second quarter of fiscal 2002.


Unlike many products, few celebrities want to endorse a product or service that requires them to admit a weight problem. During the 1990s, Weight Watchers scored a major coup by enlisting Sarah Ferguson, the Duchess of York, to become the company's spokeswoman. In an ill-fated move, JCI attempted to cash in on the notoriety of Monica Lewinsky, the White House intern at the center of the sex scandal surrounding President Clinton. When word got out in December 1999 that JCI had hired Lewinsky, investors reacted quickly and stock prices rose. However, as soon as the advertisements began appearing in January 2000, controversy was sparked immediately. The media picked up the story, giving JCI some much needed media exposure; unfortunately, the feedback from both the press and the public was less than positive. In fact, some JCI centers refused to run the ads in their areas, claiming that Lewinsky should not be held up as anyone's role model, and late night talk shows hosts such as Jay Leno and David Letterman had a heyday with the story. As quickly as stock prices had risen, they then dropped. By February the ads were removed from the air and the campaign abandoned. JCI subsequently dropped the advertising agency that developed the campaign.

FAST FACTS: About Jenny Craig Inc.

Ownership: Jenny Craig Inc. is a private, wholly owned subsidiary of ACI Capital Company.

Officers: Kent Kreh, Chmn.; Patricia Larchet, 39, Pres. and COO, 2001 salary $422,000; Duayne Weinger, 52, VChmn., 2001 salary $398,000; James Kelly, 40, CFO and VP

Employees: 3,510

Principal Subsidiary Companies: Jenny Craig Inc.'s subsidiaries include Jenny Craig Weight Loss Centres Inc., Jenny Craig Australia Holdings Inc., Jenny Craig International Inc., Jenny Craig Weight Loss Centres (Canada) Company, Jenny Craig Management Inc., Jenny Craig Operations Inc., Jenny Craig Products Inc., and Jenny Craig (Canada) Holdings, LLC.

Chief Competitors: Jenny Craig's primary direct competition comes from Weight Watchers International, as well as regional and local weight loss enterprises. The company also competes against a wide range of weight loss alternatives, including self-administered weight loss plans; Internet-based programs; programs administered by doctors, nutritionists, and dietitians; and government and nonprofit organizations that may administer weight-loss drugs or other medications.

Another strategic misstep took place during the 1990s when the weight-loss drug known as fen-phen was introduced on the market. At first JCI refused to advocate the drug, but under pressure from increased sales of competitors, added it to the program's regimen. Consequently, when the drug was withdrawn in 1997 after being deemed unsafe, JCI lost approximately $15 million. The results of JCI's introduction of snack bars and beverages during the late 1990s was also unplanned. Intended as supplements to Jenny's Cuisines, clients began replacing menu items with the bars and beverages.


During JCI's peak years, cofounder Jenny Craig was the long-serving and well-received spokeswoman for her company, appearing in numerous television and print ads. But in 1995 a bizarre accident injured Craig's jaw and left her unable to speak for some time, prompting her to retire as spokeswoman. About the same time, the market was being inundated with new diet products and foods and nutritional supplements. Further, JCI's core group of customers, women of the baby boomer generation, were transitioning into latter life stages and were no longer as motivated to manage a strict diet regimen. Consequently during the late 1990s, JCI lost its identity in the public eye. The world of health, nutrition, and diet was changing and expanding rapidly. Prepackaged diet food products that listed nutritional values were not readily available in the 1980s when JCI launched its operations. Yet by the turn of the century, large sections of grocery store shelves and freezer space were dedicated to portion-controlled single serving menu items at a lesser cost than Jenny's Cuisine. Additionally, pharmacies stocked a variety of weight-loss pills, shakes, and bars, all of which posed competition to Jenny Craig Weight Loss Centres. Unlike the new line of products and Internet-based services, JCI must continue to maintain costly overhead expense such as property rentals and trained staff.


JCI has reacted to the downturn in business by retaining its basic program structure, and providing additional services and broader choices to its clients. New programs include a vegetarian plan and a plan aimed at business travelers. During 2001 the company launched the Ultimate Choice program, which allows clients more flexibility in food choices. In the same year JCI began marketing a cookbook of healthy, easy-to-prepare recipes titled 30 Meals in 30 Minutes, aimed at busy people with no time or desire to cook.

JCI has also upgraded its Web site to provide online menu planning. Clients can design and print customized menus. By making selections in advance, the customer can take advantage of more time available during the one-on-one sessions to discuss progress, results, and strategy for the upcoming week. The Web site also provides community support for its clients through email, message boards, and a 24-hour chat room. Jenny Craig Direct provides a new program for clients who do not have access to a JCI weight loss center or who prefer to participate from the privacy of home or office. The Direct program offers one-on-one consultation via telephone, and Jenny's Cuisine is delivered to the customer's door. Despite the changing market JCI plans to retain it holistic approach to weight loss and weight management and has no intentions of joining the trends toward quick fixes or pill-based dieting.

CHRONOLOGY: Key Dates for Jenny Craig Inc.


Sid and Jenny Craig form Jenny Craig, Inc.


Operates 69 weight loss centers in Australia, 13 centers in Los Angeles, and 6 centers in Chicago


Operations grow to 46 U.S. centers and an additional 114 locations in other countries


Completes initial public offering, issuing 3.5 million shares at $21 per share


Despite negative publicity generated by an ongoing investigation by the Federal Trade Commission into Jenny Craig's advertising practices, outlet total reaches 794 but stock drops to $6.25 per share


Launches e-commerce on Web site and features former White House intern Monica Lewinsky in a controversial advertising campaign


New York Stock Exchange suspends trading of Jenny Craig shares


Jenny Craig agrees to sell out to ACI Capital in a public-to-private leveraged buyout; stockholders receive $5.30 per share


Jenny Craig Weight Loss Centres provide individual counseling to help customers identify and modify their eating habits. Jenny's Cuisine, the foundation of the diet and nutrition plan provided to participants, is manufactured under specific guidance of JCI dieticians. The food products are designed to provide portion- and calorie-controlled foods that are both nutritionally balanced and good flavored. All participants in a weight loss center are required to purchase meals. To participate in the program, customers pay a fixed service fee in addition to the cost of the food. The Gold Program cost is $199. The Platinum Program, which includes such benefits as a Jenny Craig cookbook, program return privileges, and refund options if certain criteria are met, is priced at $295.

Upon enrollment of a customer, the center gathers information regarding the individual's height, weight, activity level, and overall health. Based on the information, a weight loss consultant then helps the participant establish a weight loss goal. With a goal in place, the customer begins the program by purchasing Jenny's Cuisine food products for the first week's meals. During the first half of the program, customers are advised to eat Jenny's Cuisine for every meal as well as fresh fruits, vegetables, and dairy products. One-on-one counseling is conducted weekly with a weight loss consultant; a participant's progress is monitored, meal plans are selected, and the customer leaves the center with another week's supply of Jenny's Cuisine. Eventually the participant's diet includes five days of Jenny's Cuisine and the customer is advised on meal plans and food selection for the remaining two days. Customers who remain active in the program continue weekly counseling and food purchases until the goal weight is achieved. On average, participants lose one to one and a half pounds per week and stay with the program for three to four months.

Jenny's Cuisine product line includes approximately 70 different items covering breakfast, lunch, dinner, and snack foods. The items are packaged as frozen meals, shelf-stable, and canned as well as snacks and dried foods. Meal items include blueberry waffles, French toast with berries, stuffed shells, baked turkey, pizza, chicken fajitas, teriyaki beefsteak, and chili con carne. Suppliers include Overhill Farms, Campbell's Soup Company, and International Home Foods.


As of January 31, 2002, approximately 23,000 of JCI clients were located outside the United States, in Canada, Australia, and New Zealand. JCI, which originated in Australia in 1983, has more than 100 JCI weight loss centers, and New Zealand is home to 18 more centers.


JCI offers a wide variety of health and wellness information on the Jenny Craig Web site. A "Healthy Living" section provides advice and information on such topics as activity secrets, dining out dilemmas, grocery guide, eating right, portion control, relaxation, and finding your healthy weight. Personally, the Craigs have made numerous significant contributions to the community. They helped fund a health clinic in Mexico and once funded the entire Australian Olympic team. A large donation to California State University at Fresno, Sid Craig's alma mater, resulted in the business school being named in his honor. In 1999, the Craigs donated nearly half of the funds needed to build the Jenny Craig Pavilion at the University of San Diego.


Jenny Craig Inc. made headlines of a different kind in 1995 when a group of men who became known as the "Boston Eight" brought a gender-discrimination suit against the company. The male employees of a Massachusetts Jenny Craig Centre filed suit in Massachusetts Superior Court for what they felt were condoned work-place practices that denigrated them because of their gender. In what came to be called a "reverse sexual harassment," the men claimed, among other complaints, that they were requested to shovel snow and were not invited for off-premise socializing with their mostly female co-workers.


JCI typically employs individuals with training and experience in the fields of sales, customer service, and personal health. Jobs available include consultants, program directors, and center directors. Consultants work with clients, offering guidance and support during the weight loss program during weekly one-on-one counseling sessions as well as telephone contacts. Consultants are also responsible for meal selection and Jenny's Cuisine product sales. A program director works with customers to establish the most appropriate programs based on their individual needs. A center director manages the business aspects of the center, including sales, operations, customer service, and personnel. Career opportunities are also available at the company's headquarters in La Jolla, California, in a variety of fields including marketing, information technology, training, accounting, purchasing, distribution, and warehousing. JCI offers a basic employee benefit package that includes life, accidental death, and disability insurance, paid time off, and an employee assistance program. Optional benefits include comprehensive health insurance, supplemental life insurance, and a 401(k) savings plan with matching company contributions.



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"jenny craig redefines 'fast food' with newest collection of recipes designed for busy people." pr newswire, 14 august 2001.

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For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. jenny craig inc.'s primary sics are:

6794 patent owners and lessors

7299 miscellaneous personal services, not elsewhere classified;

also investigate companies by their north american industry classification system codes, also known as naics codes. jenny craig inc.'s primary naics codes are:

533110 owners and lessors of other non-financial assets

812990 all other personal services