Here’s Why Jenny Craig Really Shut Down

On May 5, 2023, news broke that weight loss juggernaut Jenny Craig was filing for Chapter 7 bankruptcy in the US.

Of course, in light of the recent news of so many legacy brands crumbling (the 50-year old-home decor shop Bed Bath and Beyond filed for Chapter 11 bankruptcy in April, and the 30-year-old news outlet Vice Media filed for Chapter 11 in May), it wasn’t exactly shocking to hear that another big-box store was going out of business.

According to an insider I spoke with, who was involved in the M&A conversations, the company “had been declining year over year – they were bleeding cash and trying to figure out how to turn the business around.”

But, why was this particular moment the final death knell? After all, Jenny Craig (“JC”, or “Jenny”) had been through its fair share of private equity and corporate M&A over the years:

• JC was delisted from the New York Stock Exchange in 2001, and a majority stake in the company was sold in 2002 to ACI Capital and MidOcean Partners for $112 million;
• In 2006, Nestlé, the Swiss food giant, purchased the company at a premium, for $600 million;
• Nestlé divested the underperforming brand – selling it to North Castle Partners in 2013; and
• HIG Capital acquired the business in 2019 for an undisclosed sum.

In spite of recent financial challenges, certainly there was some sharky investor eager to scoop up the distressed assets along with 40 years of brand equity, at a deep discount, right?

Wrong.

Here are five reasons why the hate-it-or-love-it diet company met its demise. And if you’re running (or working for) a similar legacy brand – you should be paying close attention to avoid these pitfalls.

1. Jenny Craig, ironically, couldn’t trim the fat

JC’s business model historically focused on high-touch support for individuals looking to lose weight, leveraging a network of weight loss centers and personalized consultants around the country (as well as in Canada, Puerto Rico, Australia and New Zealand). These centers meant that JC maintained a hefty brick-and-mortar footprint, and remained loaded with debt because of this footprint – to the tune of $250 million. This “bloat” became unsustainable over the years – particularly with the accelerated shift to online coaching brought on by the Covid-19 pandemic.

According to the insider I spoke with, JC had a big fixed cost infrastructure. In comparison, newer and more popular weight-loss companies like Noom, which was founded in 2008 as a digitally-native subscription-based app for tracking food intake and exercise habits, offer a much more scalable model.

Part of the challenge was that for many Jenny clients, the centers were an important part of why they stuck with the program. One customer I interviewed named Ariel Faison, who maintains a YouTube channel providing tips on how to recreate JC menu items at home, shared that she had built a strong rapport with her coach, and looked forward to sitting down and sharing the ups and downs of her life and weight loss journey every week. Faison further explained, “it wasn’t just an automated chatbot – where an agent will get back to you. This was a real person, who would learn your habits and really be there as a friend.”

In late April 2023, the company woke up to the reality of its unsustainable model and announced it was overhauling its business with plans to close its 600 centers across the U.S. and revamp itself as an e-commerce player. But it was too late.

2. Jenny Craig, who?

Jenny Craig had its heyday in the 1990s and 2000s – recall their iconic commercial, 1-800 94-Jenny! The company initially IPO’d in 1991 and has been a household name for decades. However, like so many legacy businesses, the Jenny Craig brand hasn’t kept up with the changing times.

In response to the shut-down, Reddit users joked that they were surprised Jenny Craig was still around.

And this brand perception is not surprising, considering Jenny’s lagging social media presence. JC has 31K followers on Instagram, 236K likes on Facebook and 3K subscribers on YouTube. By contrast and for context, its close rival, Weight Watchers (which rebranded to “WW” in 2018) has 1.7M followers on Instagram, 2.9M likes on Facebook and 172K subscribers on YouTube.

Even though WW was founded in 1963 – making it two decades older than JC, they were able to pivot from “IRL” to digital- and appeal to a much younger demographic. How? I believe it was their clear shift in brand messaging from weight loss, to wellness; a focus on inclusivity and curves, and shift away from counting calories. When WeightWatchers rebranded in 2018 to WW – accompanied by the tagline “wellness that works”, they were specifically tapping into a cultural zeitgeist that prioritizes body positivity and getting fit, rather than just getting skinny. And, regrettably, that brand facelift, was something that Jenny Craig was unable to accomplish.

3. “Jenny Craig is for older, White folk”

In describing her experiences, Faison, who is a thirty-year old African American woman, explained to me that she didn’t see diversity at Jenny Craig. “I had heard about Jenny for years and years – in my mind – it’s an old people’s weight loss program. And I have never seen anyone who looks like me in a Jenny Craig center. But I’m used to it. I live in Arizona. You won’t see anyone who’s Black. They are all older and caucasian. [Jenny targets] older, white females. And a lot of them are lifetime members who have been with the company since 1993!”

Competitor WW was more proactive about attracting a more diverse clientele by leveraging celebrity brand ambassadors, like singer-actress Jennifer Hudson (joined in 2010), media mogul Oprah Winfrey (2015), DJ Khaled (2017), singer Ciara (2021) and actress Tia Mowry (2022), through the years.

Now this is not to say that JC never brought on a racially or ethnically diverse brand influencer. In fact, in 2008 rapper-actress Queen Latifah replaced the now late actress Kirstie Alley in Jenny ads. But unfortunately, for JC, the private equity community just didn’t believe that the brand could sufficiently capture a younger and more diverse demographic.

4. O–o-o-ozempic! And other prescription weight loss drugs

The market for prescription weight loss drugs is booming. According to Axios, it is estimated to reach $30 billion by 2030.

The Ozempic jingle accompanying nightly commercials for the “miracle drug” produced by Novo Nordisk and endorsed by celebrities such as Elon Musk and Chelsea Handler, is a steady reminder for Americans – you don’t have to suffer through calorie counting and food rationing, when you can take a daily or weekly injection and have it done-for-you.

Charles Barkley recently shared publicly that he was able to lose 60 pounds in 6 months on the drug Mounjaro, a similar weight-loss medication produced by Eli Lilly.

Both Ozempic and Mounjaro, along with others like Wegovy, Victoza and Saxenda, are part of a class of drugs initially designed for diabetics, known as glucagon-like peptide-1, or GLP-1, receptor agonists. The injectable hormones are designed to do three things:

• increase insulin production, in order to increase sugar absorption and decrease blood sugar;
• slow down gastric emptying so you feel full longer; and
• decrease your appetite by reducing the feeling of hunger in your brain

I asked Faison, who is a diabetic whether she had been prescribed one of these drugs, and she shared, when she first started on her weight loss journey she would have tried anything, but has since developed more discipline. “My mentality was, give me a pill, give me a shot, give it to me, put it in my body! But these drugs weren’t out at that time. Where I’m at now, I’ve learned to develop good habits, self monitor and be more accountable on my own – I am checking how different foods raise or lower my blood sugar.”

Now, it’s not the first time prescription weight loss drugs have popped on the scene. In 1996 the Food and Drug Administration (FDA) approved dexfenfluramine and fenfluramine (brand names, “Redux” and “fen–phen”), causing revenue at Jenny Craig and similar diet programs to plummet. So, JC hired part–time doctors to prescribe the drugs. Unfortunately, the drugs were quickly withdrawn from the market, when a study linked one of them to pulmonary hypertension and valvular heart disease. A cascade of lawsuits then followed, from injured patients who had developed abnormal heart conditions.

WW, which had previously sat on the sidelines during the Redux/Fen-Phen era, took a much different approach. In March of 2023, adopting a “if you can’t beat ‘em, join ‘em” approach, WW acquired Sequence, a subscription telehealth platform offering access to healthcare providers specializing in chronic weight management, for $132 million, enabling the company to offer these drugs to its customers as a premium subscription. This go-round, Jenny stayed out of the fray, likely because it was burned before.

There certainly are plenty of downsides to relying on medications for weight loss, which would cause many to question WW’s business strategy, including:

• hefty price tag — approximately $1,200 / month, without insurance;
• chronic supply shortages, preventing customers from obtaining;
• side effects including nausea, diarrhea, abdominal pain, bloating and in severe cases, pancreatitis and thyroid cancer; and
• the yo-yo effect — these are long-term / life-long medications, so many people who stop taking the drugs gain the weight back.

Despite the drawbacks, the frenetic market demand for these medications is not stopping, and is certainly slowing demand for traditional weight loss programs. And Jenny Craig was undoubtedly a casualty.

5. Meal delivery services are too expensive

At the end of the day, Jenny Craig’s core business was a meal delivery service, which although supremely convenient, was also very expensive.

The cost ranged from approximately $97 to $200 per week ($14 – $30 per meal) depending on the plan you chose, and customers were encouraged to add fruits and vegetables to supplement the pre-packaged deliveries. All-in, customers might be spending $600 – $1,000 per month on food, and that’s just for one-person, let alone a whole family. According to the Department of Agriculture’s most recent figures, in 2021, the average family of four spends approximately $1,000 per month on groceries on the low-end, and approximately $2,000 per month on the high-end.

Some former customers took to Facebook to complain about the expensive diet plan. “Food is great! Jenny Craig is expensive particularly if you have to purchase food from markets for other family members.” Another remarked, “​​I’m surprised they are shutting down. The food was very expensive. Shame that with their high prices she still couldn’t make it work. Seems she racked in tons of money.”

Jenny Craig certainly isn’t the only meal delivery service which has been struggling financially, especially given the drop in demand for meal kits post-pandemic. Freshly shut-down in January 2023. New York-based Blue Apron, which is still not profitable (sustained a $79M loss in 2022), said in early December 2022 that it was downsizing its corporate workforce by 10%. No matter how you slice it, whether it’s restaurant or at-home delivery, the margins are tough and food is a hard business.

Admittedly, there is still strong demand for convenience in the kitchen, albeit at a reasonable price point. And this is why the market for meal kits is quite crowded, with companies like Blue Apron, HelloFresh, Green Chef, Daily Harvest, Factor, BistroMD, offering everything from keto-friendly recipes and ingredients to dietician-designed meals that are delivered fresh and ready to eat in under 5 minutes. However, in a tightening economy, as Americans are looking for ways to trim their food spend, meal delivery services are considered luxuries. And again, companies like WW and Noom have adopted a more sustainable model, where the customer is responsible for their own meal preparation.

Conclusion

A recent study by McKinsey found that the average life-span of companies listed on the S&P 500 was 61 years in 1958. Today, it is less than 18 years. So by any measure, Jenny Craig had a solid run at 40 years. But that doesn’t mean we can’t unpack the ways that they could have breathed new life into the business, to get back to growth. The next question is – which, if any, of the many lessons from JC’s decline, can help you adapt to changing consumer preferences and stay competitive?