Houseparty

Aug 10, 2023

Share The women at the rogue WeightWatchers meeting in Norwalk, Connecticut, were livid. For years they’d faithfully gathered, like about a million other members, at WeightWatchers locations across the United States to conduct the weekly rites: step on the scales, share the latest wins and woes, and swap tips on how to hack points or resist that happy-hour margarita. Some had been coming for 15 years; two had been on and off WeightWatchers since the 1970s. They’d lost 21, 25, 28 and 36 kilograms; they’d supported one another through retirements, children leaving for college and deaths in the family. Then in March, WW International shut down thousands of in-person locations, leaving the group to either make an hour-plus drive to a meeting across Long Island Sound or, worse, assemble online. WeightWatchers taught dieters there was only one way to shed the kilograms: hard-won behavioural change. AP So one evening in April, about a dozen of them gathered in a windowless room at a local ShopRite for their second self-organised meeting. As they munched on Slim & Trim brand popcorn (three WeightWatchers points per serving), they fumed about another fresh wound – one that seemed like an even bigger betrayal. The company was getting in on the hottest new thing in weight loss: obesity medications. In March, the same month WeightWatchers clamped down on its rent costs, it agreed to pay $US132 million ($195 million) to acquire Sequence, a two-year-old telemedicine start-up that prescribes a new, much-hyped set of medications called GLP-1s that can basically melt the kilos away. The drugs, which go by Wegovy, Ozempic and other brand names, have come to be regarded in the past year as a magic weight-loss solution . Shrinking celebs such as billionaire Elon Musk and comedian Chelsea Handler were injecting themselves with the stuff; some doctors and scientists were predicting the drugs could upend America’s obesity crisis; and now WeightWatchers – the arbiter of self-restraint – was diving in, too. “They’re not practising what they preached … and now all of a sudden there’s a drug involved,” Christine Sisterhenm, who’s been on the program for four years, said at the April meeting. “WeightWatchers has kicked us to the kerb,” said Bob Kline, the lone male member of the group that day, who joined WeightWatchers about 15 years ago. For decades, WeightWatchers taught dieters there was only one way to shed the kilos: hard-won behavioural change. It was a long game, one fought with pre-portioned baby carrots and an accountant’s worth of spreadsheets for meal-logging. But battling food for your whole life is exhausting, and the weight almost always creeps back up for most dieters. Now, after 60 years, the company was reversing course, proclaiming that jabbing a drug into your thigh once a week could do the trick. GLP-1s, which mimic a naturally occurring appetite suppressant, activate pathways in the brain that make you want to put down the fork even if there’s still food on your plate. The cravings just disappear, along with the kilos. WeightWatchers’ sharp turn to pharmaceuticals is the work of its new chief executive, Sima Sistani, a Silicon Valley veteran who took the top job last year. The company has been fighting for relevance for about a decade, mostly by going all-in on wellness trends rather than by transforming itself for the digital age. Advertisement That allowed upstarts such as subscription-based slimming app Noom to siphon off customers, leaving WeightWatchers flat-footed when the coronavirus pandemic shoved everything online. Late last year, nine months after Sistani became CEO, WeightWatchers’ stock price dipped to $US3.38 a share, its lowest level in about 20 years. Sistani had made a name for herself after selling the video-chat app Houseparty, which she co-founded, to a big gaming company for an undisclosed sum. WeightWatchers’ board hired her to save the company, and within weeks of taking the job in March last year, she started looking at GLP-1s, which were just going mainstream. Sistani says that when she heard these drugs could eradicate obesity in her lifetime, “I was just like, ‘Wow, that is a big statement. … We need to catalyse this.’ ” WeightWatchers CEO Sima Sistani. Bloomberg Businessweek The strategy seems as audacious as it does desperate, but WeightWatchers has little to lose. The company long succeeded by surfing each wave of diet culture, from low-carb to fat-free. Now it has about $US1.5 billion ($2.2 billion) in debt, more than 10 times its expected 2023 earnings. Its bonds are trading at distressed levels, which suggests investors think the company may have trouble paying back its creditors. (WeightWatchers said earlier this year that it has more than sufficient liquidity.) Meanwhile, pharmaceutical companies and entrepreneurs have been rushing to embrace GLP-1s since 2021, when Wegovy became the first highly effective obesity medication to win US Food and Drug Administration approval. Dozens of slickly branded telemedicine start-ups such as Sequence have surfaced, acting as digital matchmakers between patients eager to take weight-loss meds and clinicians who can prescribe them. The start-ups are trying to capitalise on a drug category that analysts at Jefferies Financial Group predict will be worth more than $US100 billion by 2032. Since the WeightWatchers-Sequence announcement , the traditional weight-loss category has only continued to free fall: longtime competitor Jenny Craig, also saddled with debt, filed for bankruptcy , and WeightWatchers’ biggest shareholder, Artal Group SA, sold its remaining stake, ending a relationship that began in 1999. “Obviously, it’s not a vote of confidence,” says Mike Holland, a senior credit analyst at Bloomberg Intelligence. All of this raises the question: what even is WeightWatchers if it becomes just another hawker of diet drugs? It may not matter. Sistani says: “It’s not like Blockbuster didn’t see Netflix coming.” WeightWatchers founder Jean Nidetch in 1988. Bloomberg Businessweek Before WeightWatchers-branded postal scales and recipe cards became staples of the American kitchen, a housewife in Queens, New York, was mistaken for being pregnant. The woman, Jean Nidetch, joined a local weight-loss program and began meeting with her mahjong crew of fellow dieters, eventually losing more than 30 kilograms and turning the weekly support group into a format that could be replicated. Businessman Al Lippert and his wife, Felice, became fans and helped Nidetch and her husband, Marty, found WeightWatchers in 1963. It soon expanded internationally, and in less than a decade, it went public. The original WeightWatchers plan was strict, banning many processed carbs and emphasising protein and fruit. Dieters measured out their food and were required to eat liver – the closest thing to a superfood at the time – at least once a week. By the ’70s, as convenience foods were starting to boom, WeightWatchers began to loosen up, licensing its name for use on frozen meals and other products. Advertisement Ketchup maker H.J. Heinz was in the process of acquiring a line of WeightWatchers-branded packaged foods in 1978 when it decided to buy the company, too, for about $US71 million. Under its new owner, WeightWatchers dived deeper into selling in supermarkets – where it faced off against rivals such as Stouffer’s Lean Cuisine and Jenny Craig – and became Heinz’s fastest-growing line by 1989. Then, in the ’90s, researchers discovered a drug combination that could help people lose weight. Millions of people flocked to clinics and doctors willing to churn out prescriptions of fen-phen, an amphetamine-like combination of fenfluramine and phentermine that worked to suppress appetite. Jenny Craig and Nutrisystem soon joined the frenzy, getting into the prescription business by enlisting doctors to prescribe fen-phen to their customers. WeightWatchers stayed away, though, causing its membership and sales numbers to drop. But taking a hard line paid off when fen-phen was later linked to heart damage, a discovery that led to recalls and lawsuits. “We’re not a medical organisation, and we never pretended to be,” a WeightWatchers spokeswoman told the Los Angeles Times in 1997. “Medical decisions about prescription drugs should be left to people and their personal physicians.” The points system WeightWatchers’ offerings fluctuated over the years, from weight-loss camps to working-woman-friendly recipes, even as the weekly in‑person meetings remained constant. In the late ’90s the company introduced the points system, which gave foods different numeric values based on calories, fibre and fat, that could serve as a simple shorthand for tracking what people put in their bodies. Dieters received a budget of points, allowing for some indulgences – just not too many. (In 2017, WeightWatchers even created a menu with more than 200 zero-points foods – including eggs, fish and beans – with the implication that one could, but probably wouldn’t, gorge on them endlessly.) The company itself shape-shifted, too: Heinz sold it to the investment firm Artal Group in 1999, and Artal took the company public again in 2001. By 2015, WeightWatchers was in trouble. Loaded with debt , largely from purchasing its own stock over the previous decade, and struggling to compete with free online weight-loss and fitness tools, the company needed to get people excited about joining again. And nobody, WeightWatchers concluded, was better at getting people excited than Oprah Winfrey. The influential talk show host had long struggled publicly with her weight, trying just about every diet out there. In 2015, Oprah Winfrey bought 10 per cent of the company. After WeightWatchers approached her, Winfrey bought a 10 per cent stake – which would have been worth about $US43 million before she joined the company – and became a board member. In commercials, she flaunted the 18 kilograms she’d lost on the program and praised its flexibility. “I have bread every day,” she declared. Her endorsement provided a much-needed facelift to an ageing brand, but the core, slightly boring tenets of pursuing a healthy lifestyle remained. “I truly wish there was a magic pill,” former CEO David Kirchhoff told analysts a few years earlier. “But there isn’t.” Advertisement How people were approaching weight loss, meanwhile, was changing. The body positivity movement was shifting emphasis from the scale to overall health, which might now mean eating like a caveman, meditating, sporting a Fitbit, swapping alcohol for green juice or turning to Goop for your medical ailments. Wellness culture ran on good vibes, and dieting had bad vibes, as Deb Benovitz, who heads WeightWatchers’ insights and innovation, learnt when she surveyed consumers. People no longer wanted to talk just about “diet” – which inevitably implied failure – and instead said things like, “I want you to look at the whole me.” Wellness not diet In 2017, Mindy Grossman, the retail executive who had reinvented television shopping at HSN, took the helm and continued the wellness makeover. (She also marked the third CEO in 10 years.) WeightWatchers scrubbed the “d”-word from its materials, replacing it with “healthy eating”; got rid of artificial sweeteners, colours and preservatives in its products; and, for the first time, let people join without specifying a goal weight. Members could also attend wellness workshops and go on a WeightWatchers cruise. In 2018, the company even temporarily scrapped the WeightWatchers name, truncating it to WW with a new slogan: “Wellness that works.” WeightWatchers had an app, which it updated with Headspace meditations and new online groups where members with similar interests could connect, but those changes went largely unnoticed. Ultimately, says Benovitz, wellness “didn’t translate into sales”. (Grossman did not respond to a request for comment.) Noom, meanwhile, using psychology to help dieters develop and keep healthy habits, was suddenly becoming cool. Then, during the pandemic, people were packing on kilos snacking anxiously at home, while hundreds of leased WeightWatchers locations across the US sat empty. By the time Grossman stepped down early last year, the company’s membership was declining, and even Winfrey, still a board member, had offloaded most of her stock. A social network Early in the pandemic, Sistani was taking a walk around her neighbourhood in Menlo Park, California, to mark another day of working from home. After a meandering career with stops at Creative Artists Agency and Tumblr, she had recently achieved a milestone many in Silicon Valley dream of: selling a company. In this case it was Houseparty, a group video-chat app popular with gamers and college students, which Epic Games, the maker of Fortnite, had purchased. As she walked, Sistani listened to an episode of Winfrey’s Super Soul podcast and heard comedian Tina Fey confess her affection for WeightWatchers. Fey told Winfrey that her favourite low-points treat was a banana and strawberries with Cool Whip and chocolate drizzle on top. She said she’d posted about it under a pseudonym on the WeightWatchers app, where she also cheered on other members. It dawned on Sistani, who’d used WeightWatchers after giving birth, that the company was more than a fading brand for middle-aged dieters – it was a social network. “I hadn’t really connected those dots,” she recalls thinking. “And I got really excited about that.” Advertisement She contacted WeightWatchers’ board, hoping she might persuade them to bring her on. That didn’t happen, but two years later, when the company was in desperate need of a reinvention, the board invited her to interview for the CEO role. Sistani’s pitch: not only did she understand digital communities, but she could also turn WeightWatchers into a tech company. Its customers were already getting used to doing things online: once more evenly split between in-person and not, members had shifted dramatically during the pandemic, such that more than 80 per cent of subscribers opted to pay only for digital access. But often, customers weren’t connecting with one another on WeightWatchers’ app, instead using places such as Facebook and Reddit. To start, she told the board, the app would have to improve. “You can’t even DM people,” she said. It was a diagnosis more commonly heard in 2010 than in 2022, but it got her the job. To be eligible for a GLP-1 prescription (Ozempic and Wegovy) through WeightWatchers, subscribers need to have a body mass index of 30 or higher. Jason Bergman By the time Sistani joined, Ozempic and Wegovy were becoming household names, and hashtags such as #ozempicjourney were being circulated on TikTok by users who shared miracle stories of losing weight. Sistani hatched an internal incubator at WeightWatchers to explore whether the company should offer GLP-1s. Benovitz, the head of customer insight, was interviewing GLP-1 patients, who were calling the drugs “magic”. Hearing their stories of losing weight after many futile years of trying was so moving that she cried. “It felt like, I’m living through an inflection point where we may be able to cure a problem in this world that has been getting worse and worse,” says Benovitz, who has been with WeightWatchers for almost a decade. It wasn’t just GLP-1 patients. Despite all the talk about body positivity, people seemed to have moved on, and they wanted to slim down again. They felt like they finally had permission to speak about it more bluntly. The company quietly began calling itself WeightWatchers again; suddenly wellness was out and science was in, especially science that explained the biological factors of obesity. Board tentative In October, Sistani met WeightWatchers’ scientific advisory board, which is made up of outside academics and physicians. (Some of them have taken tens of thousands of dollars from either Novo Nordisk or Eli Lilly, both makers of GLP-1s. WeightWatchers says it looks for the best scientific experts and hires them based on their expertise, regardless of affiliations.) Sistani came away determined to move swiftly, but the company’s board was tentative, mindful of the fen-phen fiasco WeightWatchers had dodged decades earlier. Sistani convinced some longer-tenured members that GLP-1s were different. And Gary Foster, the company’s chief scientific officer, was reassured that GLP-1s’ primary side effects – nausea, diarrhoea and vomiting – were generally mild and that the drugs had been used for almost two decades by people with diabetes without any safety scandals. “Other medications had things that were more nervous-system-related, or agitation or increased heart rate,” he says. With GLP-1s “you’re not seeing any of that”. Advertisement Of course, it remains to be seen what happens long term when GLP-1s are used by many more patients, including already-thin people wanting to lose weight, a cohort on whom these drugs have yet to be tested. (This month, a European regulator began investigating some GLP-1s after the drugs were linked to a small number of reports of suicidal thoughts .) The fastest way to move into GLP-1s was an acquisition, and by that time, Sistani had plenty of options. Telemedicine had boomed during COVID-19; to spin up a digital prescription provider, all you needed was a sleek website, some science-y language branding, contract clinicians and a marketing budget. After considering more than 30 different GLP-1 start-ups, Sistani was sold on Sequence, which she thought had the best approach to automating insurance appeals, arguably the most labour-intensive part of the process. “They had a team of engineers who’d come from working on AI-driven cars and have figured out a complete automation platform,” she says. Sistani decided to buy the company, she says, because of its “tech stack” and a feeling of kinship with its co-founders, two ex-Google software engineers who’d come along with the deal. Remi Cossart, the CEO and co-founder of Sequence’s parent company, Weekend Health, says: “I truly believe that five to 10 years from now, we’ll look back on weight management in a very different way than we did, say, a few years ago.” Loyalist backlash Wall Street cheered the deal, but for many WeightWatchers lifers the news stung. The acquisition “is an antithesis to what I thought they believed in”, says Nadine Lee, who’s been a member for the past 13 years. “Switching to medications feels like a quick-fix shift in their philosophy.” With the program, every food – from an ice-cream sundae to a piece of broccoli – had a points value. In this new WeightWatchers era, how many points was a shot of Ozempic? With the deal moving so quickly to purchase Sequence, it remains uncertain just how WeightWatchers will handle the integration. Sistani says her experience at acquired companies – not just at Houseparty, but also at Tumblr after Yahoo! bought it in 2013 – will help smooth the transition. “Two-thirds of acquisitions don’t go well,” she says. “I’m really lucky to have been part of one that did and one that didn’t.” (Tumblr was acquired for $US1 billion in 2013 and sold for $US3 million in 2019; Epic shut down Houseparty in 2021.) Since the purchase announcement in March, WeightWatchers hasn’t communicated much about its move into pharmaceuticals. Sistani, who posts videos on TikTok sharing her go-to two-point smoothie recipe and sporting a sweatshirt that reads “saving my points for wine”, says she’s been surprised by the backlash among WeightWatchers loyalists. But some die-hards who reach and maintain their goal weight don’t pay the company a cent, and even if they did, she’s fine rubbing them the wrong way to win over a new crowd. “Some of the pushback we heard, our members for instance, was like, ‘I did it the hard way.’ And that’s not a reason to not help people,” Sistani says, comparing their complaints to people griping about student loan forgiveness. Advertisement Based on conversations with Sistani and her team, it’s likely the new WeightWatchers will look like some version of this: a traditional membership now costs about $US25 to $US50 a month; for access to the GLP-1s, you upgrade to a Sequence membership, bringing your monthly fee to $US99. (Existing Sequence members, already paying this amount, automatically become WeightWatchers members.) A Sequence membership comes with medical consultations and help from a dietitian but doesn’t actually include GLP-1s. To be eligible for a GLP-1 prescription through the company, you need to have a body mass index of 30 or higher (or 27 or so with a weight-related condition). Once on the drugs, Sequence members have access to WeightWatchers’ new lifestyle services to help with things such as managing side effects and rebuilding strength as weight drops (along with fat, muscle inevitably disappears, too). The company envisions also marketing these behavioural services to GLP-1 patients who have obtained the drugs elsewhere. “There are plenty of people who are getting these medications from their doctors and not having the right support,” Sistani says. Members who aren’t on GLP-1s will continue using its traditional program – the points system and virtual or in-person meetings. WeightWatchers had about 3.5 million online and in-person members last year, more than half of whom would qualify for a GLP-1 prescription based on their BMI. That group, along with a segment of the company’s 20 million or so lapsed customers, could be interested in upgrading to a Sequence membership. But that doesn’t guarantee health insurance will cover the GLP-1s, which can add $US900 to $US1400 in out-of-pocket costs a month, an unrealistic expense for most. (WeightWatchers says in cases where people can’t get coverage, Sequence can provide access to less expensive medications typically covered by insurance.) Sistani also concedes that while WeightWatchers has dramatically cut its real estate expenses – reducing from about 3000 locations before the pandemic to about 800 – the new business’ margins are similar, with costs such as employing clinicians, as well as staff to fight insurance companies that deny coverage to members. But a bigger threat to WeightWatchers is how rapidly the drugs are being commoditised. Noom recently launched a $US120 monthly subscription for GLP-1 users, while the telemedicine start-up Ro – better known for selling erectile dysfunction medications – plastered New York City subway stations with ads featuring weight-loss drug injections. Med spas and plastic surgery clinics are pitching Ozempic, Wegovy and Mounjaro alongside facials, tummy tucks and nose jobs and blanketing Instagram and Facebook with ads. (One nail salon in New Orleans advertises nurse-administered injections for “Semaglutide Saturdays”, a reference to the active pharmaceutical ingredient in Ozempic and Wegovy.) The drugs seem to be following the Botox trajectory, leaping from medical intervention to cosmetic elective, and Ozempic injection parties are not far behind. Drug companies can barely keep up with demand as they deal with product shortages and knockoffs put out by so-called compounding pharmacies, which sell cheaper and questionable versions. (Novo Nordisk recently sued several providers and pharmacies over trademark infringement and other complaints.) Soon enough there should also be GLP-1 pills for obesity and probably next-generation versions that help people lose even more weight. Middlemen such as WeightWatchers could find themselves in a race to the bottom, competing on price, access and marketing. “The uniqueness of this WeightWatchers offer is still a question from my end,” says Brian Nagel, a managing director and senior analyst at Oppenheimer & Co. In the best-case scenario, WeightWatchers members who try Ozempic will encourage friends to sign up for the new program, where they can get drugs and support and discover the wonders of points. Those who are – and aren’t – on GLP-1s thrive together without resentment. In the worst-case scenario, long-time members, whose only elixir all these years has been willpower, quit en masse. Advertisement But it doesn’t end there: the new people who swarm to the brand for access to the drugs can’t get their insurer to cover them, then abandon it just as quickly. Eventually, some members fear, leaders at weekly meetings sling GLP-1 pens as newly skinny Ozempic users complain about losing too much weight too quickly. Everyone else grinds bitterly through another daily points log on their phone, including one-time Ozempic takers whose kilos have piled back on. What’s left is the illusion of a venerable brand that’s turned into a prescription factory with perks. Already, versions of the latter scenario are playing out. Cindy Borges, a 54-year-old in Visalia, California, joined Sequence after she heard it had been acquired by WeightWatchers. Sequence couldn’t help her secure insurance coverage, though, and she quit soon after. She says she told two co-workers who were interested in her experience that it was a scam. “At the end of the day, until the insurances will start paying for it, what’s the point?” she asks. Even if WeightWatchers can satisfy Sequence customers, it could still fade into irrelevance. Kelly Steffee, a 46-year-old mum who lives in an Orlando suburb, was a WeightWatchers member on and off for years before she joined Sequence last year. A clinician there prescribed Mounjaro, and she lost more than 23 kilograms in six months. But the most dramatic results were the ones she felt inside. “That food noise, the lady in your head telling you to eat all the time – ‘Get a cheeseburger from McDonald’s, it’s really, really good’ – she’s not there any more,” Steffee says. Although Sequence helped WeightWatchers recapture her as a customer, it wasn’t a stable situation. For one, Steffee’s insurance wasn’t covering Mounjaro, and a coupon she’d been using, issued by the drug company, expired in June. She also wanted to keep losing weight, but her Sequence-appointed doctor didn’t want her to drop any more. So she quit and found another telemedicine provider that prescribed her Ozempic, at a dose she wanted. This time, her insurance covered it. As for WeightWatchers, Steffee isn’t interested in going back to paying for the warm and fuzzy sense of community it monetised for so long. She already gets that on TikTok, where she’s constantly swapping tips and life updates with fellow weight-loss-drug takers. “That,” she says, “is my WeightWatchers meeting.” With Kevin Simauchi and Anders Melin Bloomberg Businessweek