Nestle Adds Jenny Craig Weight-Loss Business to Its Plate

In a move that lets Nestle play both sides of the weight game, the company said Monday that it would buy the Carlsbad, Calif.-based Jenny Craig Inc. weight-management chain for $600 million.

Nestle is buying the company from New York private investment firms ACI Capital Co. and MidOcean Partners, and founders Sid and Jenny Craig. The deal comes at a time when an innovative advertising campaign documenting the weight loss of "Fat Actress" and "Cheers" star Kirstie Alley has boosted the company's performance.

The campaign, which company officials say will continue after the deal closes this fall, follows a series of marketing missteps that included the hiring of President Clinton's former intern Monica Lewinsky as a spokeswoman and a focus on developing diet shakes and nutritional bars to mimic the products of rival weight-loss company Slim-Fast.

Sales have risen to $430 million from $300 million four years ago, when the private equity firms bought a controlling stake in Jenny Craig for $115 million.

Jenny Craig's cash flow, an important indicator of profit, has soared more than sixfold to $66 million during the same period, said Ezra Field, managing director ACI capital and a member of Jenny Craig's board. He declined to release profit figures.

Nestle is buying into a plump market amid growing national concern about obesity.

About 25% of the American public says it is on a diet, said Harry Balzer, vice president of NPD Group, a market research company based in Port Washington, N.Y. Three-quarters of American adults say they have been on a diet at some point.

"You can always count on having a market for diets and diet products," Balzer said.

With an estimated $2.2 billion in sales last year, the commercial weight-loss business has averaged a husky 14% annual growth rate for the last five years, according to Mintel International, a Chicago market research firm.

And more growth is expected. Federal studies have found that nearly 65% of the adult population is overweight or obese and childhood obesity has risen dramatically over several decades.

Nestle acknowledged the trend when it announced the deal.