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Jenny Craig, Inc.

Jenny Craig, Inc.

11355 North Torrey Pines Road
La Jolla, California 92037
U.S.A.
(619) 812-7000
(800) 388-6213
Fax: (619) 812-2700
Web site: http://www.jennycraig.com

Public Company
Incorporated:
1983
Employees: 4,100
Sales: $352.24 million (1998)
Stock Exchanges: New York
Ticker Symbol: JC
NAIC: 812191 Diet & Weight Reducing Centers; 311999 All Other Miscellaneous Food Manufacturing

Through its chain of weight management centers, Jenny Craig, Inc. markets a meal plan, based on the purchase of its own prepared foods, and provides advisory and motivational services to its customers. The chain experienced rapid growth during the 1980s, and in 1998 it was operating 643 company owned and 138 franchised centers in 45 states, as well as in Australia, New Zealand, Canada, and Puerto Rico. However, by the late 1990s, the company was also showing signs of slower sales, reporting a 22 percent decrease in service revenues from U.S. company-owned operations between 1997 and 1998. Moreover, revenues had fallen from $401 million in 1996 to $352 million in 1998. The company was responding to the declines by leveraging the Jenny Craig name: expanding its conventional marketing venues to include e-commerce, and by extending its product line to include cookbooks and exercise equipment.

Company Origins

Co-founder Jenny Craig developed an interest in the fitness industry in the 1960s, through her efforts to lose weight following a pregnancy. She operated a gym in her hometown of New Orleans, before joining the staff at the Body Contour fitness center in 1970. Body Contour was headed by Sid Craig, who maintained a 50 percent interest in the company. Jenny and Sid married in 1979, and together they helped turn the struggling company into a thriving business that was reporting $35 million in sales by 1982.

That year, the Craigs sold Body Contour to a subsidiary of Nutri/System Inc. With the $3.5 million they made from the sale, the Craigs formed Jenny Craig, Inc. in 1983. Initially barred from entering the U.S. diet industry by a noncompetition clause, the company opened its first weight loss center in Australia. By 1985, 69 Jenny Craig Weight Loss Centers were in operation in Australia, and the company became one of the biggest players in that countrys diet industry. That year, the Craigs returned to the United States, opening 13 centers in the Los Angeles area, which were soon followed by six additional facilities in Chicago.

U.S. Expansion in the 1980s

By 1987, the company had established 46 centers in the United States and 114 in foreign countries; of these 160 units, 45 were franchised operations. Seeking capital from outside investors, the Craigs considered taking their company public but were discouraged by a weak market for initial public offerings. Instead, Michael Tennenbaum, vice-chairman of investment banking at Bear Stearns Companies, Inc., stepped in. Tennenbaum brought together a group of investors that included his partners at Bear Stearns, the New York Life Insurance Co., and TA Associates, an investment and venture capital firm, among others. Together they invested $50 million in Jenny Craig, and two bank loans contributed another $50 million to the companys recapitalization. The successful expansion left the Craig family with a $108 million dividend.

Marketing was integral to Jenny Craigs success. In the early 1990s, ten percent of sales went into commercial advertising each year, and franchises were required to spend the higher of ten percent of sales or $1,000 a week on advertising for their centers. The companys television campaigns featured celebrities, such as actors Elliot Gould and Susan Ruttan, who had achieved success with the Jenny Craig program. Moreover, ads provided a toll free number which automatically connected callers to the center nearest to them. In 1991, the company also began a direct mail campaign based on its extensive database of two million current and former clients.

The Jenny Craig program was designed by its staff of registered dieticians and psychologists and approved by an advisory board consisting of health and nutrition research experts. The three principal tenets of the program were behavior education, proper nutrition, and exercise. Central to the program was Jennys Cuisine, portion and calorie controlled foods that participants were required to purchase. Jennys Cuisine was created by suppliers in compliance with standards set by a board of dieticians; suppliers included Overhill Farms, Magic Pantry Foods, Truitt Bros., Campbell Soup Company, Carnation, and Vitex Foods. The program made available 60 different breakfast, lunch, dinner, dessert, and snack food items, including apple cinnamon oatmeal, teriyaki beef, and chocolate mousse. Menus were updated to include microwaveable entrees and canned foods in 1986. The companys gross revenues from food sales increased from 60 percent in 1986 to 91 percent in 1993.

Another important part of the Jenny Craig program was its twice-weekly meetings. New clients met with a counselor, who would monitor their progress and sell them installments of Jennys Cuisine. At subsequent group meetings, participants attended classes covering such subjects as dining out, asserting yourself, and dieting as a team. In 1989, video cassette programs were introduced into counseling classes to ensure consistency at all centers. After viewing video cassettes, participants engaged in discussion facilitated by their counselor.

A Public Offering and a Challenging Marketplace

In 1991, under improved market conditions, Jenny Craig was taken public, issuing 3.5 million shares at $21 per share. The offering generated $73.5 million in capital, which was used to satisfy the companys bank loans and its debt to the investment group. During this time, the Craigs sold another 1.65 million of their own shares for $36 million, and the banks and investors garnered $11.5 million for the 550,000 shares they sold. As a result, the Craigs retained 59 percent of the company, while banks and investors controlled 20 percent and the public claimed 29 percent.

Sid Craigs expectations for company revenues to grow by 15 to 20 percent a year through expansion proved unrealistic. After a period of remarkable growth in the weight loss industry as a whole during the 1980s, public attention focused on the potential health risks involved in dieting during the early 1990s, and enrollment at diet centers dropped. In 1990, Jenny Craig and its rival Nutri/System Inc. were named as defendants in a class action lawsuit alleging that weight loss programs, like those promoted by the companies, had resulted in cases of gallbladder disease. Moreover, Jenny Craig was named in 11 other personal injury cases during this time. The disputes were settled, and the alleged link between gallbladder problems and the Jenny Craig program was never proven. However, the cases prompted a Federal Trade Commission investigation into the validity of the claims for successful weight loss made by Jenny Craig and other companies in the diet industry.

The company soon terminated its operations in the United Kingdom, due to their lack of profitability, and, in 1992, a secondary offering of public stock was postponed indefinitely, due to weak market conditions and a decline in profits linked to a failed promotional campaign. Nevertheless, Jenny Craig continued the expansion of its diet center chain, opening 89 new centers and repurchasing 41 franchises.

During 1993, the ongoing FTC investigations into the advertising and promotional practices of the diet industry generated more negative publicity. Specifically, the FTC questioned whether advertising was leading consumers to mistakenly believe that maintaining weight loss after finishing the diet program would be easy. Moreover, medical journals and newspapers reported that yo-yo dietingthe repeated gain and loss of weightcaused more health problems than simply remaining slightly overweight.

Jenny Craig and four other major commercial weight loss companiesWeight Watchers, Nutri/System, Diet Center, and Physicians Weight Loss Centerpetitioned for standard advertising rules for the industry, but the petition was rejected.

When Nutri/System reported severe financial setbacks in April 1993 and was forced to close its headquarters and 283 of its centers, Jenny Craig immediately began an advertising campaign offering Nutri/System clients the opportunity to continue their weight loss programs at Jenny Craig at no additional service fee. In its open letter to Nutri/System clients, Jenny Craig emphasized its financial strength as a debt-free, $500 million New York Stock Exchange Company with ten years of proven success. However, neither Jenny Craig nor Weight Watchers International, which had launched a similar campaign, saw a significant increase in enrollments.

Increased competition in the industry, largely by do-it-yourself diet companies, also began to cut into Jenny Craigs market by emphasizing the high costs of membership in diet center programs. Typical Jenny Craig clientswomen wanting to lose 30 or more poundscould spend over $1,000 as clients of Jenny Craig, paying an initial start-up fee and about $70 a week for meals. Other companies, such as Just Help Yourself, began offering self-administered diet plans, marketing themselves as cheaper, more convenient alternatives to diet centers.

Company Perspectives:

In response to the needs of todays hectic, fast-paced world, Jenny Craig, Inc. offers a comprehensive weight management program that takes a practical, non-dieting approach to losing weight to help clients develop a healthy relationship with food, build an active lifestyle, and create a more balanced approach to living.

Despite the shrinking market, the Craigs continued to expand. In 1993, Jenny Craig added 100 new centers and bought back 48 franchises, bringing its total outlets to 794. The company also introduced a program for those living in areas beyond the reach of its centers, allowing customers to order products by telephone and receive direct shipments.

Some shareholders disagreed with the companys expansion policy. Stock purchased at $21 per share in 1991 had sunk below $15 the following year. In October 1993, three share-holders filed a suit against the company, alleging that the expansion was designed to bolster sales figures, overshadowing the companys financial difficulties. While Jenny Craigs total revenues for the year ended June 30, 1993 were $490.5 million, up six percent from 1992, average revenues for each company-owned center had declined ten percent from the previous year. Moreover, although the companys Southern California centers remained profitable, these outlets had experienced a 26 percent decline in revenues.

A Change at the Top in the Mid-1990s

When Ronald E. Gerevas, chief operating officer and president, departed unexpectedly in November 1993, Jenny Craig stock dropped to $11.75 a share. Gerevas replacement, Albert J. DiMarco, left after just four months; William R. Lewis, a former business associate of DiMarco who had just been appointed chief financial officer the month before, left with DiMarco. By this time, confidence in the company was declining, and its stock was trading at about $6.25 per share, less then one-third of its original price. In April 1994, hoping that new management would help restore investor confidence, the company appointed C. Joseph LaBonté as president and CEO, and Ellen Destray was made chief operating officer. Sid Craig remained as the companys chairperson.

Jenny Craig introduced modifications to its original program in 1994. A wider variety of meetings were offered, and clients were allowed to choose the classes most pertinent to their lifestyle. The companys video programs were also updated and made available for home use. Perhaps most importantly, the program was modified to reflect current trends in popular psychology that suggested that overeating was a result of emotional distress. Accordingly, Jenny Craig encouraged clients to discover, address, and overcome individual emotional issues that might impede the success of their dieting. Nonetheless, the company continued to struggle with declining membership into the late 1990s.

The late 1990s brought new challenges for Jenny Craig, some in the form of litigation against the company both by consumer groups and the U.S. government. In May 1997, as a result of an earlier charge of deceptive advertising against the company, the FTC imposed restrictions requiring Jenny Craig to stipulate in its advertising: For many dieters weight loss is temporary. Furthermore, testimonials of those who had been very successful under the plan had to be accompanied by a disclaimer: This result is not typical. You may be less successful. In addition to these provisions, Jenny Craig was also forced to publish the average weight loss its customers experienced and to provide scientific data supporting future claims.

Next, in September 1997 the Federal Food and Drug Administration recalled a popular diet drug composed of either dexfenfluramine (sold as Redux) or fenfluramine and phentermine (fen-phen). Data indicated that fen-phen damaged the heart valves of some people who used the drug. This decision affected Jenny Craig, as the company had begun using physicians outside its organization to write prescriptions for fen-phen and had incorporated the drug into the weight-loss program. Also during this time, the company faced litigation on the part of some former employees in Boston, men who alleged sex discrimination in the workplace.

In February 1999 Jenny Craig joined a coalition of weight-loss organizations in issuing guidelines to give consumers regarding program effectiveness, safety, and costs. This effort, it was hoped, would forestall further efforts at regulating the weight-loss industry. These full disclosure guidelines required weight-loss organizations to give consumers information about the qualifications of their staffs, health risks associated with obesity, health risks of rapid weight loss, and the full costs of their program, including the price of the food.

The weight-loss industry in general and Jenny Craig in particular experienced financial setbacks during this time. Net income between 1994 and 1998 was a roller coaster ride for Jenny Craig, with postings of $36.7 million in 1994, to $11.7 million in 1995, a rebound of $22.9 million in 1996, and a decline to $2.12 million in 1998. The company reported that its membership rate had stalled, and its number of outlets had fallen to 675.

1999 and Beyond

Jenny Craig reacted to uneven profits on several fronts. On December 9, 1998 the company announced the appointment of a new president, Philip Voluck, who would continue to serve as chief operating officer, a position he had gained six months earlier, coming to the company with considerable experience at ex-rival Nutri/System. Founder Jenny Craig continued to serve as vice-chairman of the company, while her husband Sid Craig remained chairman and CEO. In March 1999 the company announced its plans to refocus its mission into one of self-improvement rather than weight-loss. The new program included two new product lines: a new Advanced Nutrients line of food supplements, sold exclusively via the Internet, and a new Jenny Craig line of exercise equipment. At the same time, the company refocused its food program, and the resultant ABC program was simpler to use and gave clients more choices. Subsequent program variations included a less costly plan for clients, under which they were able to purchase supplements rather than meals.

Personal struggles also ensued for Jenny Craig herself as company spokesperson. According to her own account in People magazine, in April 1995 Craig awakened one evening, startled by the television, and her sudden movement snapped her lower jaw tight over her upper jaw. The resultant injury to the muscles of her jaws deteriorated her ability to speak. Craigs daughter took over as company spokesperson as Craig sought medical treatment from one expert after another. Finally, three years later, a California surgeon reconstructed her jaw and placed her on a rigorous therapy program. No stranger to rigorous exercise routines, Jenny Craig reported success and hoped she could start the new century with fully restored ability to speak. Similarly, Jenny Craig management hoped that its efforts to refocus the companys mission would help it withstand the uncertainty facing the weight-loss industry.

Principal Subsidiaries

Jenny Craig Weight Loss Centres, Inc.; Jenny Craig International, Inc.; Jenny Craig Australia Holdings, Inc.; Jenny Craig Weight Loss Centres Pty. Ltd. (Australia); Jenny Craig Distributing Pty. Ltd. (Australia); Jenny Craig Management, Inc.; Jenny Craig Operations, Inc.; Jenny Craig Products, Inc. JCCH1, Inc.; JCCH2, Inc.; JCH, Inc.; Jenny Craig Weight Loss Centres (Canada) Company; Jenny Craig (Canada) Holdings, LLC.

Further Reading

Barret, Amy, How Can Jenny Craig Keep on Gaining?, Business Week, April 12, 1993, p. 52.

Herman, Phyllis, Fat City, Forbes, February 17, 1992, pp. 72-73.

Bird, Laura, Jenny Craig Kicks Off a Database Program, Adweeks Marketing Week, January 7, 1991, p. 8.

Craigs Again Take Control of Jenny Craig, San Diego Business Journal, October 13, 1997, p. 47.

Goldman, Kevin, Ads Dished up for Nutri/System Dieters, Wall Street Journal, May 7, 1993, p. B8.

Holden, Benjamin A., Financial Officer Quits Jenny Craig After Brief Tenure, Wall Street Journal, March 10, 1994, p. BIO.

Hyten, Todd, Ex-Jenny Craig Male Workers Allege Discrimination, Boston Business Journal, October 14, 1994, p. 5.

Leon, Hortense, Doctors, Pharmacies Say Fen-Phen Recall No Problem, South Florida Business Journal, September 19, 1997, p. 5.

Lippert, Barbara, Weighty Matters, Adweek, January 10,1994, p. 28.

Melton, Marissa, Guaranteed: Lose 1 Pound in 90 Days, U.S. News & World Report, February, 22, 1999, p. 67.

Pollack, Judann, Fed Up with Promoting Diets, Weight-Loss Rivals Branch Out, Advertising Age, March 29, 1999, pp. 3-4.

Rizzo, Monica, Painful Silence, People, May 3, 1999, pp. 79-81.

Rundle, Rhonda L., Jenny Craig Inc. Delays Planned Stock Offering, Wall Street Journal, May 28, 1992, p. A8.

Saddler, Jeanne, Three Diet Firms Settle False-Ad Case; Two Others Vow to Fight FTC Charges, Wall Street Journal, October 1993, p. B5.

Valeriano, Lourdes Lee, Diet Programs Hope Broader Services Fatten Profits, Wall Street Journal, August 5, 1993, p. B4.

Elaine Belsito

updated by Shannon and Terry Hughes

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Jenny Craig, Inc.

Jenny Craig, Inc.

445 Marine View Drive
Del Mar, California 92014
U.S.A.
(619) 259-7000
Fax: (619) 259-2812

Public Company
Incorporated:
1983
Employees: 4,570
Sales: $444 million
Stock Exchanges: New York
SICs: 6794 Patent Owners & Lessors; 7991 Physical Fitness Facilities; 8742 Management Consulting Services.

Among the four largest diet companies in the United States, Jenny Craig, Inc. is also the only publicly held company in the industry. Through its chain of weight management centers, Jenny Craig sells a meal plan, based on the purchase of its own prepared foods, and provides advisory and motivational services to its customers. The chain experienced rapid growth during the 1980s, and, by 1993, it was operating 588 company owned and 220 franchised centers in 45 states, as well as in Australia, New Zealand, Canada, and Mexico. During this time, the company reported a client base of approximately 155,000 in the United States and 25,000 in foreign markets. However, the company also showed signs of slower sales and growth, reflecting the national economic recession and several unfavorable reports on the safety and health benefits of many diet programs.

Co-founder Jenny Craig developed an interest in the fitness industry in the 1960s, through her efforts to lose weight following a pregnancy. She operated a gym in her hometown of New Orleans, before joining the staff at the Body Contour fitness center in 1970. Body Contour was headed by Sid Craig, who maintained a 50 percent interest in the company. Jenny and Sid married in 1979, and together they helped turn the struggling company into a thriving business that reported $35 million in sales by 1982.

In 1982, the Craigs sold Body Contour to a subsidiary of Nutri/ System Inc. With the $3.5 million they made from the sale, the Craigs formed Jenny Craig, Inc. in 1983. Initially barred from entering the U.S. diet industry by a noncompetition clause, the company opened its first weight loss center in Australia. By 1985, 69 Jenny Craig Weight Loss Centers were in operation in Australia, and the company became one of the biggest players in that countrys diet industry. That year, the Craigs returned to the United States, opening 13 centers in the Los Angeles area, which were soon followed by six additional facilities in Chicago.

By 1987, the company had established 46 centers in the United States and 114 in foreign countries; of these 160 units, 45 were franchised operations. Seeking capital from outside investors, the Craigs considered taking their company public but were discouraged by a weak market for initial public offerings. Instead, Michael Tennenbaum, vice-chairman of investment banking at Bear Stearns, stepped in. Tennenbaum brought together a group of investors that included his partners at Bear Stearns, the New York Life Insurance Co., and TA Associates, an investment and venture capital firm, among others. Together they invested $50 million in Jenny Craig, and two bank loans contributed another $50 million to the companys recapitalization. The successful expansion left the Craig family with a $108 million dividend.

Marketing was integral to Jenny Craigs success. In the early 1990s, ten percent of sales went into commercial advertising each year, and franchises were required to spend the higher of ten percent of sales or $1,000 a week on advertising for their centers. The companys television campaigns featured celebrities, such as actors Elliot Gould and Susan Ruttan, who had achieved success with the Jenny Craig program. Moreover, ads provided a toll free number which automatically connected callers to the center nearest to them. In 1991, the company also began a direct mail campaign based on its extensive database of two million current and former clients.

The Jenny Craig program was designed by its staff of registered dieticians and psychologists and approved by an advisory board consisting of health and nutrition research experts. The three principal tenets of the program were behavior education, proper nutrition, and exercise. Central to the program was Jennys Cuisine, portion and calorie controlled foods that participants were required to purchase. Jennys Cuisine was created by suppliers in compliance with standards set by a board of dieticians; suppliers included Overhill Farms, Magic Pantry Foods, Truitt Bros., Campbell Soup Company, Carnation, and Vitex Foods. The program made available 60 different breakfast, lunch, dinner, dessert, and snack food items, including apple cinnamon oatmeal, teriyaki beef, and chocolate mousse. Menus were updated to include microwaveable entrees and canned foods in 1986. The companys gross revenues from food sales increased from 60 percent in 1986 to 91 percent in 1993.

Another important part of the Jenny Craig program was its twice-weekly meetings. New clients met with a counselor, who would monitor their progress and sell them installments of Jennys Cuisine. At subsequent group meetings, participants attended classes covering such subjects as dining out, asserting yourself, and dieting as a team. In 1989, video cassette programs were introduced into counseling classes to ensure consistency at all centers. After viewing video cassettes, participants engaged in discussion facilitated by their counselor.

In 1991, under improved market conditions, Jenny Craig was taken public, issuing 3.5 million shares at $21 share. The offering generated $73.5 million in capital, which was used to satisfy the companys bank loans and its debt to the investment group. During this time, the Craigs sold another 1.65 million of their own shares for $36 million, and the banks and investors garnered $11.5 million for the 550,000 shares they sold. As a result, the Craigs retained 59 percent of the company, while banks and investors controlled 20 percent and the public claimed 29 percent.

Sid Craigs expectations for company revenues to grow by 15 to 20 percent a year through expansion proved unrealistic. After a period of remarkable growth in the weight loss industry as a whole during the 1980s, public attention focused on the potential health risks involved in dieting during the early 1990s, and enrollment at diet centers dropped. In 1990, Jenny Craig and its rival Nutri/System Inc. were named as defendants in a class action lawsuit alleging that weight loss programs, like those promoted by the companies, had resulted in cases of gallbladder disease. Moreover, Jenny Craig was named in 11 other personal injury cases during this time. The disputes were settled, and the alleged link between gallbladder problems and the Jenny Craig program was never proven. However, the cases prompted a Federal Trade Commission investigation into the validity of the claims for successful weight loss made by Jenny Craig and other companies in the diet industry.

The company terminated its operations in the United Kingdom, due to their lack of profitability, and, in 1992, a secondary offering of public stock was postponed indefinitely, due to weak market conditions and a decline in profits linked to a failed promotional campaign. Nevertheless, Jenny Craig continued the expansion of its diet center chain, opening 89 new centers and repurchasing 41 franchises.

During 1993, the ongoing FTC investigations into the advertising and promotional practices of the diet industry generated more negative publicity. Specifically, the FTC questioned whether advertising was leading consumers to mistakenly believe that maintaining weight loss after finishing the diet program would be easy. Moreover, medical journals and newspapers reported that yo-yo dietingthe repeated gain and loss of weightcaused more health problems than simply remaining slightly overweight.

Jenny Craig and four other major commercial weight loss companiesWeight Watchers, Nutri/System, Diet Center, and Physicians Weight Loss Centerpetitioned for standard advertising rules for the industry, but the petition was rejected.

When Nutri/System reported severe financial setbacks in April 1993 and was forced to close its headquarters and 283 of its centers, Jenny Craig immediately began an advertising campaign offering Nutri/System clients the opportunity to continue their weight loss programs at Jenny Craig at no additional service fee. In its open letter to Nutri/System clients, Jenny Craig emphasized its financial strength as a debt-free, $500 million New York Stock Exchange Company with ten years of proven success. However, neither Jenny Craig nor Weight Watchers, which had launched a similar campaign, saw a significant increase in enrollments.

Increased competition in the industry, largely by do-it-yourself diet companies, also began to cut into Jenny Craigs market by emphasizing the high costs of membership in diet center programs. Typical Jenny Craig clientswomen wanting to lose thirty or more poundscould spend over $1,000 as clients of Jenny Craig, paying an initial start-up fee and about $70 a week for meals. Companies like Just Help Yourself began offering self-administered diet plans, marketing themselves as cheaper, more convenient alternatives to diet centers.

Despite the shrinking market, the Craigs continued to expand. In 1993, Jenny Craig added 100 new centers and bought back 48 franchises, bringing its total outlets to 794. The company also introduced a program for those living in areas beyond the reach of its centers, allowing customers to order products by telephone and receive direct shipments.

Some shareholders disagreed with the companys expansion policy. Stock purchased at $21 in 1991 sunk below $15 the following year. In October 1993, three shareholders filed a suit against the company, alleging that the expansion was designed to bolster sales figures, overshadowing the companys financial difficulties. While Jenny Craigs total revenues for the year ended June 30, 1993 were $490.5 million, up six percent from 1992, average revenues for each company-owned center declined ten percent from the previous year. Moreover, although the companys southern California centers remained profitable, these outlets experienced a 26 percent decline in revenues.

When Ronald E. Gerevas, chief operating officer and president, departed unexpectedly in November 1993, Jenny Craig stock dropped to $11.75 a share. Gerevas replacement, Albert J. DiMarco, left after just four months; William R. Lewis, a former business associate of DiMarcos who had just been appointed chief financial officer the month before, left with DiMarco. By this time, confidence in the company was declining, and its stock was trading at about $6.25 per share, less then a third of its original price. In April 1994, hoping that new management would help restore investor confidence, the company appointed C. Joseph LaBonte as president and CEO, and Ellen Destray was made chief operating officer. Sid Craig remained as the companys chairperson.

Jenny Craig introduced modifications to its original program in 1994. A wider variety of meetings were offered, and clients were allowed to choose the classes most pertinent to their lifestyle. The companys video programs were also updated and made available for home use. Perhaps most importantly, the program was modified to reflect current trends in popular psychology that suggested that overeating was a result of emotional distress. Accordingly, Jenny Craig encouraged clients to discover, address, and overcome individual emotional issues that might impede the success of their dieting. Given the rapidly changing nature in health and fitness beliefs and practices in the United States, Jenny Craigs future will likely depend on its ability to adapt its programs accordingly.

Further Reading:

Bird, Laura, Jenny Craig Kicks Off a Database Program, Adweeks Marketing Week, January 7, 1991, p. 8.

Barret, Amy, How Can Jenny Craig Keep on Gaining? Business Week, April 12, 1993, p. 52.

Berman, Phyllis, Fat City, Forbes, Feburary 17. 1992, pp. 72-73.

Craig, Jenny, Jenny Craigs What Have You Got to Lose? Villard Books, 1992.

Goldman, Kevin, Ads Dished up for Nutri/System Dieters, Wall Street Journal, May 7, 1993, p. B8.

Holden, Benjamin A., Financial Officer Quits Jenny Craig After Brief Tenure, Wall Street Journal, March 10, 1994, p. B1O.

Jenny Craig Inc., Wall Street Journal, November 30, 1993.

Lippert, Barbara, Weighty Matters, Adweek, January 10, 1994, p. 28.

Rundle, Rhonda L., Jenny Craig Inc. Delays Planned Stock Offering, Wall Street Journal, May 28, 1992, p. A8.

Saddler, Jeanne, Three Diet Firms Settle False-Ad Case; Two Others Vow to Fight FTC Charges, Wall Street Journal, October 1993, p. B5.

Valeriano, Lourdes Lee, Diet Programs Hope Broader Services Fatten Profits, Wall Street Journal, August 5, 1993, p. B4.

Elaine Belsito

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Jenny Craig, Inc.

Jenny Craig, Inc.

5770 Fleet Street
Carlsbad, California 92008
USA
Telephone: (760) 696-4000
Fax: (760) 696-4009
Web site: www.jennycraig.com

KIRSTIE ALLEY CAMPAIGN

OVERVIEW

With 64 percent of American adults considered overweight or obese in 2004, weight loss was big business in the United States. An estimated 44 percent of women and 29 percent of men were trying to lose weight in 2004, and they were spending about $44 billion on diet programs. That amount was expected to increase steadily to nearly $48 billion by 2006. As the number of overweight people looking for a magic bullet for weight loss grew, so did fad programs promising to make the task of dieting easier. Diet crazes such as the Atkins low-carbohydrate diet plan began winning consumers away from traditional programs, such as Jenny Craig, that took a conservative approach to dieting. By 2004 the number of people signing on with Jenny Craig weight-management centers was stagnating.

To win back customers, in 2004 Jenny Craig made two changes: it added to its roster a new diet program that offered clients more flexibility than its original plans, and it signed on J. Walter Thompson New York as its advertising agency, replacing its former agency, Johnson/Ukropina of Irvine, California. The first task for J. Walter Thompson was to create an advertising campaign supporting Jenny Craig's new diet program, Jenny YourStyle. Although the campaign began in September 2004, it was replaced just months later, in January 2005, with a new set of advertisements that featured actress/comedian Kirstie Alley as its celebrity spokeswoman. No budget for the new campaign was available, but according to a report in the New York Times, the preceding campaign, "Jenny YourStyle," cost $30 million.

The "Kirstie Alley" campaign was an immediate hit with consumers. American dieters drawn to Alley's humorous approach to her own weight problem and dieting efforts rushed in droves to Jenny Craig Centres to sign up. Following an appearance by Alley on The Oprah Winfrey Show, calls to Jenny Craig centers increased 81 percent. Based on its success a series of new television spots were added to the "Kirstie Alley" campaign and began airing in December 2005.

HISTORICAL CONTEXT

Before Jenny Craig became an international weight-management company, she was a 50-year-old woman with a supportive husband, Sid Craig, and a dream. She wanted to help people improve their lives through balanced nutrition, physical activity, and lifestyle. In 1982 Jenny Craig opened her first eponymous weight-loss center in Melbourne, Australia. The Craigs established additional centers in New Zealand, and in 1985 the company expanded into the United States with 12 centers in Los Angeles. By 2004 there were more than 650 company-owned and franchised Jenny Craig Weight Loss Centres in Australia, New Zealand, Canada, Guam, Puerto Rico, and the United States. The company steadily increased memberships at Jenny Craig Weight Loss Centres by using marketing methods that relied on customer testimonials similar to those promoting other weight-loss programs. Included were commercials featuring ordinary consumers sharing their personal weight-loss success stories.

As the number of overweight and obese people increased, so too did the number of weight-loss companies and programs vying for their share of the diet industry, which had climbed to an estimated $44.6 billion in 2004. Low-carbohydrate fad diets such as Atkins and South Beach, which promised weight loss by only eating foods low in carbs, began winning away dieters from traditional programs like Jenny Craig. In 2004 Jenny Craig responded to the new diet plans with the introduction of Jenny YourStyle, a more flexible plan that allowed participants to continue many of their dietary habits while still losing weight. Wanting a fresh approach to its advertising to support its new weight-loss program, Jenny Craig also began looking for an advertising agency to replace Johnson/Ukropina of Irvine, California.

Agencies competing for the business included Interpublic Group of Companies, based in New York; Newport Beach, California—based independent agency Heil-Brice; and Bartle Bogle Hegarty, which withdrew from the competition prior to the final round. J. Walter Thompson New York (JWT) eventually won the account. To prepare for the competition and become familiar with the client, executives at JWT went on a Jenny Craig diet, and in addition to winning the account, they lost a total of 50 pounds. JWT's first creative effort for Jenny Craig was a $30 million campaign that was released in September 2004 and helped introduce the new Jenny YourStyle program. It also was designed to reintroduce Jenny Craig as the diet center of choice for consumers looking for sustainable weight loss. In December 2004 JWT prepared to begin a campaign featuring celebrity spokeswoman Kirstie Alley, who signed on to promote Jenny Craig after going on the Jenny YourStyle weight-loss program. The first television spot starring Alley aired in January 2005.

TARGET MARKET

According to U.S. News & World Report, 64 percent of Americans were overweight or obese in 2004. Further, at that time 44 percent of women and 29 percent of men said that they were trying to lose weight. In 2005 nearly an equal number of men and women said that they were actively trying to lose weight: 30 percent and 31 percent, respectively. Reaching the men and women already on a diet program as well as those considering starting a program was the goal of J. Walter Thompson's 2005 "Kirstie Alley" campaign. Jenny Craig's chief operating officer, Jim Evans, noted in PR Newswire that the new campaign featuring Alley "was designed to resonate with anyone looking to lose unwanted weight with a safe, scientifically proven, lifestyle-focused method."

COMPETITION

Weight Watchers International, based in Woodbury, New York, was established in 1963. In 1997 Weight Watchers signed on as spokeswoman British royal and ex-wife of Prince Andrew, Sarah Ferguson, the Duchess of York. The stunning, red-haired "Fergie" was the ideal spokeswoman for Weight Watchers: she was a celebrity, an emotional eater struggling with weight loss, divorced, and a busy, working single mom. The Tampa Tribune described her as "both glamorous and ordinary." She also connected with American women, who followed her lead and embraced the Weight Watchers diet program, flocking to its weekly weigh-ins and meetings held in communities nationwide. In 2001 the privately held Weight Watchers went public, and by the following year it reported that sales had increased 127 percent to $620 million. Sales jumped to $944 million two years later. But by 2004, despite having some 1.5 million members, Weight Watchers was slipping. Many dieters, frustrated with the hassles of the program's system for counting calories, were abandoning Weight Watchers. Others were wooed away by the newest fad diets, such as Atkins and South Beach, which espoused losing weight while eating what you wanted as long as it was low in carbohydrates. To reverse the trend, during the summer of 2004 Weight Watchers ran a series of television spots created by its agency, the Seiden Group of New York. The commercials featured women who told not only of their weight-loss successes with the program but also of the side benefits, such as developing more self-esteem and achieving more quality time with their families. Weight Watchers also responded to the low-carb diet craze and introduced a selection of low-carbohydrate, ready-to-eat meals and a new program, the TurnAround plan, that focused less on counting calories and more on food choices. In November 2004 Weight Watchers replaced the Seiden Group with ad agency Young & Rubicam of New York, but then it partnered with Foote Cone & Belding, Chicago, to launch a new advertising campaign with the tagline "Watch yourself change" in January 2005.

In 1996 the Internet took dieting to a new level with the introduction of the website eDiets.com. It was described by its founders as the "premier one-stop online diet and healthy-living destination." Included on the site were personalized information, products, professional advice, and other services for consumers who wanted not only wanted to lose weight but also to improve their lives through fitness and nutrition. Relying solely on online advertising, eDiets.com had attracted more than 1.5 million members worldwide by 2003. Its target market was women aged 25 to 54 years old with an average weight-loss goal of at least 50 pounds. The site offered more than 20 different diet plans, including Atkins and the Mayo Clinic Diet, and won the praises of Forbes, which named it "Best of the Web" in the diet and nutrition category. Hoping to reach a broader range of consumers, in early 2004 eDiets.com released a series of four television spots created by the Ad Store, an agency based in New York. The $1.5 million effort paid off, nearly doubling the number of visitors to the site. Later that year eDiets.com announced plans to double its budget for television advertising to $3 million.

MARKETING STRATEGY

J. Walter Thompson's creative effort for Jenny Craig featuring actress/comedian Kirstie Alley was twofold: it expanded on an earlier, albeit brief, campaign developed to promote Jenny Craig's new weight-management program titled YourStyle, and it built on Alley's self-deprecating sense of humor. The new campaign followed Alley's efforts to lose more than 50 pounds by adhering to the Jenny YourStyle weight-loss program, which was also the basis of her new Showtime television show, Fat Actress. Campaign spots were loosely based on the theme "Have you called Jenny yet?"

Television spots for the new campaign were released during the first week of January 2005, a critical time for companies in the diet business, because it was when many people were enthusiastic about their New Year's resolutions to lose weight. In the initial spot Alley was shown on a set with little decor beyond a chair and an oversized pink telephone. Alley picked up the phone handset and called Jenny Craig's founder. She then told an unseen person at the other end of the line that the call was "in regards to me being fat." Alley then looked directly at the camera, as if speaking to every overweight person watching the commercial, and said, "Hey, you're chubby too! Let's lose weight together! They have really yummy food…. They have chicken fettuccini!" At the end of the spot Alley's call was finally put through, presumably to Jenny Craig herself, and Alley said, "Jenny! Hey, listen girl, I'm fat!" Unlike the first-person testimonials usually used in diet-program ads, Alley's spot appeared believable.

WHAT'S FOR DINNER? OR BREAKFAST? OR LUNCH? GOURMET DIET FOOD

More and more people, regardless of their weight, were discovering the convenience of having gourmet diet meals delivered right to their doors, ready to heat and eat. Jenny Direct, the home-delivery division of weight-loss management company Jenny Craig, Inc., reported that in 2004 its service had grown to more than 8,000 clients in the United States. The nutritious meals were growing in popularity with dieters and nondieters alike who had neither the time nor the inclination to prepare three home-cooked meals plus snacks each day. Participation in the Jenny Direct program cost on average $15 per day, and it included delivery by Federal Express or United Parcel Service. Meals arrived frozen with instructions about what should be eaten at each meal, removing all the guesswork and ensuring that hungry gourmands or dieters had perfectly balanced meals three times a day with little effort on their part beyond turning on a microwave oven.

Subsequent spots followed Alley on her weight-loss adventure and featured her sharing her personal experiences with dieting and the Jenny Craig program. Spots also maintained the sense of humor used in the initial spot while focusing on Alley's increased energy and emphasizing the variety of foods available through the plan. People who missed the spots when they aired could log onto the company's website, www.jennycraig.com, and read Alley's blog entries, which were updated each week. Television spots could also be watched on the website.

OUTCOME

When Jenny Craig launched a new advertising campaign featuring Kirstie Alley as its spokeswoman, consumers quickly embraced the star as she pursued weight loss through Jenny Craig. More importantly, record numbers of overweight Americans enrolled in the program. According to a PR Newswire report, the company claimed that the campaign resonated with consumers because the commercials were humorous, honest, and lacked the "outlandish 'magic bullet' claims" typically seen in ads for other weight loss plans. Adweek critic Barbara Lippert also praised the campaign for its honesty, commending it for avoiding political correctness and for not being afraid to use the "f" word—fat—in weight-loss television spots. Five months after the campaign began, Alley appeared on The Oprah Winfrey Show to announce that she had lost more than 33 pounds, reaching the halfway mark of her weight-loss goal. Alley's statements during the show resulted in an 81 percent increase in callers to Jenny Craig inquiring about the weight-loss program. In a press release commenting on the campaign, Jenny Craig's chief operating officer, Jim Evans, said, "Our business has been very strong since Kirstie Alley joined our program." The campaign was so successful that it was extended. J. Walter Thompson created a new series of television spots featuring Alley that began airing at the end of 2005, and it continued the tagline "Have you called Jenny yet?"

FURTHER READING

"EDiets.com Ranks as No. 1 Health, Fitness & Nutrition Site, According to Nielsen/NetRatings." PR Newswire, January 14, 2004.

"'Fat Actress' Kirstie Alley Chooses Jenny Craig to Lose Weight; Actress to Star in New Advertising Campaign." PR Newswire, December 20, 2004.

Ives, Nat. "Eat Carbs, Lose Weight. Jenny Craig's New Campaign Touts Flexibility." New York Times, September 10, 2004, p. 5.

"Jenny Craig Phones Jump after Kirstie Alley's Appearance on 'The Oprah Winfrey Show.'" PR Newswire, May 24, 2005.

"Jenny Craig Unveils New Twists in Its Next Round of Kirstie Alley Commercials." PR Newswire, December 16, 2005.

Lawlor, Vera. "Not for Dieters Only: Gourmet Breakfast, Lunch, and Dinner—Delivered." Bergen County (NJ) Record, August 4, 2004.

Lippert, Barbara. "Barbara Lippert's Critique: The Weighting Game." Adweek, January 10, 2005.

Oser, Kris. "EDiets Launches Digital Magazine for 13 Million." Advertising Age, January 24, 2005.

"Rethinking Weight." U.S. News & World Report, February 9, 2004.

Sanders, Lisa. "J. Walter Thompson Diets Its Way to Review Victory." Advertising Age, June 10, 2004.

Thompson, Stephanie. "After the Carb Craze: Diet Marketers Bet on Balanced Options." Advertising Age, January 3, 2005.

Thompson, Susan H. "Britain's Fergie Brings Her Message of Inspiration and Weight Loss." Tampa (FL) Tribune, February 1, 2004.

"Weight Watchers Woodbury, N.Y." Adweek, November 1, 2004.

"Y&R Wins $45 Mil. Weight Watchers' Account." Adweek, November 16, 2004.

Zammit, Deanna. "Ediets.com Beefs Up TV Budget." Adweek, June 16, 2004.

                                            Rayna Bailey

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