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Oprah WeightWatchers

Oprah takes her famous effect to Weight Watchers

Her show might be gone but the “Oprah Effect” clearly endures. After Oprah Winfrey last week announced she would buy a 10 percent stake in Weight Watchers and take a seat on the board, the company’s slumping stock doubled to $13.92 per share, adding about $400-million to its market value.

For years, Winfrey has helped make countless little-known brands wildly successful by endorsing them through one of the media ventures that made her a billionaire. But this is the first time she has made such an investment in a public company. Winfrey also plans to give Weight Watchers unfettered access to her name and face for marketing purposes.

“Weight Watchers has given me the tools to begin to make the lasting shift that I and so many of us who are struggling with weight have longed for,” Winfrey said in a statement. “I believe in the program so much I decided to invest in the company and partner in its evolution.”

Though one of the best-known names in weight loss, the 52-year-old Weight Watchers has had declining membership rolls in recent years as it has lost out to newer and more technologically-oriented paths to shedding pounds, including weight-loss apps and fitness-tracking devices.

This year, Weight Watchers announced plans to cut roughly $100-million in additional costs and laid off the president of its North American business.

After 10 straight quarters of declining sales, the stock had slumped 73 percent, to $6.79.

Only one analyst out of eight had encouraged investors to buy shares of Weight Watchers. But that did not stop Winfrey.

“It’s like a win on steroids,” said Erich Joachimsthaler of the Vivaldi Partners Group, a brand-strategy consulting firm. “Weight Watchers cannot stay where they are, and by having that endorsement, it’s not just about visibility but it helps them to build those brand values and associations that Oprah stands for.”

Throughout the years, Winfrey has been open about her struggle to maintain her own ideal weight.

Her successful endorsement of products through her annual list of favourite things so often produced skyrocketing sales and popularity that the result was called the “Oprah Effect.” Spanx, an undergarment used to make women look slimmer, was on the list in 2000, giving the then-unknown product national fame and helping turn its founder, Sara Blakely, into a billionaire.

Winfrey is expected to bring some major gravitas to Weight Watchers’ marketing department. She agreed to offer her name and face to Weight Watchers and no other weight-loss products for five years with the option to renew afterward, according to a filing with the SEC. The company already has a picture of Winfrey on its website home page.

But it is unclear whether her backing can help Weight Watchers expand outside of its core demographic and attract younger users, according to R J Hottovy, an analyst at Morningstar.

“There have been a lot of questions about the company’s marketing and its ability to stay relevant in this day in age,” said Hottovy. “The company still faces challenges. It’s a very competitive field, but certainly having Oprah’s backing is by all means positive.”

This is not Weight Watchers’ first marketing foray with a celebrity. The singers Jennifer Hudson and Jessica Simpson have been spokeswomen for the company, appearing in commercials and talking about their experiences using the program.

The company agreed to issue Winfrey 6.4 million shares of common stock for $43.2 million, with the option to purchase an additional 3.5 million shares, the regulatory filing shows.

Source: NYTimes

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