The Supply Side: Wal-Mart helps Nutrisystem push diabetic food box

Diabetes is a $160 billion annual cost to the nation’s health care system and diet food supplier Nutrisystem’s diabetic food box has risen to the top selling item on the diet and diabetes aisles at Wal-Mart, according to Dawn Zier, CEO and President of Nutrisystem.

Predominantly a direct marketer, Zier said the move to Wal-Mart was needed to widen the company’s core audience and provide an entry-level opportunity for lower income demographics.

“By bringing our world-class weight loss solution to select Wal-Mart stores, is allow us to make a difference in the lives of consumers we were not currently reaching,” she said.
“Once a dieter has the affordable kit, they’re only responsible for procuring a small supply of fresh fruits and vegetables, healthy carbs, and healthy proteins to complement the meal plan.”

During Nutrisystem’s earnings call Nov. 3, Zier said the relationship with Wal-Mart for the JumpStart 5-day box has been a success since it was launched in mid-2013. She said more work was done to formulate a diabetic version of the Jumpstart box which is also sold at Wal-Mart and it has sold well because there are limited products for the growing number of diabetics.

Retail sales for recent quarter grew to $4.7 million, from $3.5 million a year ago and the company expects sales will expand more in the fourth quarter and throughout the diet season. 

“We will be featured on end caps in Walmart Stores and we have added several new products and meal occasion items for the diet aisles and elsewhere in the store,” Zier said.

She said the retail sales of Nutrisystem products mostly mimic the direct online sales in terms of demographics, which are about half female and half male users. However, she said the diabetic formulas are more popular with men at the retail level.

Sam’s Club is also part of the company’s plans for 2015 as Nutrisystem formulated a different diet product than the Jumpstart boxes sold in Wal-Mart. Zier said the Sam’s Club premier offering is a higher level “in and out” product that will be featured beginning in January and throughout the diet season. 

The company also announced they extended their partnership to include Walmart.com where they will be a direct ship vendor immediately after the holidays.

The test sales with Target this fall have not resulted a deal with that retailer, but Zier said Target doesn’t reset its diet and diabetic aisles until April. She said they will not be in Target Stores during the diet season, but they are testing 12 new products on Amazon.com.

“We are excited about this test because we think it will open up a new potential customer base for us. These are brand new products exclusive to Amazon so that they will not cannibalize other sales elsewhere,” Zier said.

The company expects its revenue will increase by double digits in the fourth quarter ahead of the time when many begin making resolutions to lose weight, thanks in part to the retail partnership with Wal-Mart.

The Jumpstart 5-day plan sold at Wal-Mart retails for $44.98, and includes 15 entrees, five desserts and a meal planner. Nutrisystem is working to keep products costs in check despite higher food inflation and price increases in other sales channels. Zier said affordable access for the diabetic product is even more crucial as this market is grossly underserved.

The Arkansas Department of Health reported that diabetes prevalence in Arkansas is higher among those with lower income levels. Prevalence among those with income 
less than $15,000 annually was almost three times that of those with income above $50,000 annually.

“Arkansans are increasingly feeling the effects of diabetes as nearly 235,000 people suffer from the disease in the state, and over 35,000 have the disease in Northwest Arkansas. By the year 2050, it is estimated that one in three adults will be directly affected by diabetes,” according to the local affiliate of the American Diabetes Association.