Weight Watchers International Inc. plans to launch a line of snack cakes and muffins in 7-Eleven convenience stores across the United States, part of an ongoing move to increase the size of its licensed food business.
In addition, the company is rolling out portion-control lines of cheese and soft-baked cookies in grocery stores, as it increases the range of its products for weight-conscious Americans.
Weight Watchers gets more than half of its net revenues, which were $1.2 billion in fiscal 2006, from its subscription-based weight loss programs. But since the New York-based company went public in 2001, it has been stepping up the pace of introducing food items sold in major U.S. supermarket chains, said Stacy Gordon, the company’s vice president of licensing and products.
Foods with the Weight Watchers name are expected to generate $500 million in retail sales this year, up 150 percent from fiscal 2005, Gordon said. Weight Watchers takes an undisclosed license fee from manufacturers.
“It’s a big growth business for us and we expect to see that grow,” Gordon said.
The company had revenues of $87.5 million in fiscal 2006 from world-wide licensing, franchise royalties and other fees, a 17 percent increase over fiscal 2005, according to its annual report.
Weight Watchers started its branded food products in January 2005 and competes with brands such as ConAgra’s Healthy Choice, Lean Cuisine and Jenny Craig, both owned by Nestle, and NutriSystem.
The company will partner with Schreiber Foods for its cheese products and Dawn Foods for the cookies and snack items at 7-Eleven, which are expected to be in stores nationally by January or February. 7-Eleven is an indirect subsidiary of Japanese retail company Seven & I Holdings.
The deal with 7-Eleven for individually wrapped muffins and snack cakes marks the first distribution deal for Weight Watchers at a national convenience store. Gordon said she hoped a broader array of products could follow. 7-Eleven operates some 7,000 stores in the United States and is known more for hot dogs, sodas, and coffee than for fresh fruits and yogurts.
Bob Goldin, executive vice president of Technomic, a research and consulting firm, said the deal may bring Weight Watchers a large distributor, but is not necessarily a guarantee of success.
“I think it’s a credit to both companies they’re willing to try,” said Goldin, adding that 7-Eleven has been adding specialty coffees as it tries to upgrade and expand its appeal. ”I don’t think it’s a slam-dunk with respect to success.”
But the Weight Watcher’s name is well-known and probably has broader appeal than some may think, he added.
National grocery chains already sell Weight Watchers-branded food such as candies, baked goods, yogurt, frozen entrees and ice cream novelties.
“Our target is weight-conscious consumers looking for satisfying but sensible and great-tasting food products,” said Gordon. “A subset of those people are Weight Watchers members.”
Goldin said Weight Watchers must be careful not to over saturate the market, as he said occurred years ago with ConAgra’s Healthy Choice brand, which appeared on too many labels without proper support by the company.
“The danger is you dilute your equity by sticking the brand on everything,” Goldin said. “You have to be careful. It’s always a challenge.”