Nestle Buys Jenny Craig

Nestlй recently announced its purchase of Jenny Craig. Nestlй is well known for products such as NESQUIK, OH HENRY!, NESCAFЙ, Baby Ruth, Nestlй Toll House cookies and many other indulgent snacks. What they are not known for is health food products although they sell products such as Lean Cuisine, Lean Pockets and Powerbars. The purchase of Jenny Craig provides diversification of their current product strategy into the health food market. Cynically, it also allows Nestlй to serve a number of customers twice. Offering the indulgent products that help gain weight and also offering nutritional products to help them lose weight.

Nestlй is the world's largest food and beverage maker by sales (WSJ, 2006) and is looking to increase its sales in the nutritional food market. Jenny Craig offers a well know name with over $400M in sales annually (WSJ, 2006). It is a ready made solution to allow Nestlй to diversify their product portfolio through acquisition. It also capitalizes on the current North American trend to curb the obesity epidemic. The World Health Organization (WHO) defines 300 million adults worldwide as obese. WHO identifies some of the leading contributors to obesity as the following: "Increased consumption of more energy-dense, nutrient-poor foods with high levels of sugar and saturated fats, combined with reduced physical activity, have led to obesity rates that have risen three-fold or more since 1980 in some areas of North America, ..."

As a manager of Nestle Foods, it is imperative that recognition of the future trend away from junk food is acknowledged and planned for. The purchase of a nutritional food and diet plan provider is excellent recognition of the future events that will lead to the reduction in sales of our snack food based products. In order to maintain sales and provide growth opportunities, it is necessary to diversify into other growth markets such as the organic food markets.

As proof of increased efforts to reduce junk food available to school age kids, pick up the newspaper or go online and search for 'soft drinks banned in schools'. A recent search on Google found 1.1M related articles. (Google, 2006). Many school districts have banned soft drinks and fast food from school cafeterias as a means to reduce obesity. School systems such as Los Angeles, CA have banned all carbonated drinks in 2004. (CBS News, 2002). Many other school districts have acted similarly to ban soft drinks, fast food and junk food in schools. This must worry any manufacturer in the junk food industry and the need to diversify is painfully clear.

Secondly, the realization that most dieters are cyclical or yo-yo dieters as chronicled in the article "A Behavioral Model of Cyclical Dieting" by Steven Suranovic and Robert Goldfarb could have played a factor in Nestlй buying Jenny Craig. While this would infer that Nestlй was taking advantage of consumers by offering them both high sugar, high fat products as well as a diet solution it can not be denied that is a strong market position for Nestlй. Nestlй can capture consumers multiple times as they exhibit cyclical dieting. This type of closed loop marketing is very beneficial to the parent company in generating