Medifast seeks to help people slim down and shape up... fast. The company develops and markets health and diet products under the Medifast brand name. The products, which are manufactured by subsidiary Jason Pharmaceuticals, include food and beverages (meal replacement shakes, bars), as well as disease management products for diabetics. Medifast operates through three channels: The Medifast Direct segment is the direct-to-consumer part of the business through which consumers order Medifast products online; Take Shape for Life is Medifast's personal coaching division composed of independent contractor health coaches; and, its Weight Control Centers are Medifast's bricks-and-mortar walk-in clinics.
Medifast's largest sales channel is its personal coaching division Take Shape for Life, which accounts for more than 60% of sales. For customers who want more supervision, Medifast operates a chain of bricks-and mortar weight control centers (MWCC). The fast-growing MWCC division accounted for about 13% of Medifast's 2011 sales (up from 10% in 2009). Currently, the company has about 80 company-owned weight loss centers in about half a dozen states, including Florida, New Jersey, and Texas. Franchisees operate another 30 weight loss centers in six other states, including Arizona and California. New MWCC markets include Miami and southern Virginia.
Sales and Marketing
Medifast uses multiple marketing strategies to reach its target audiences. It runs ads in national and regional magazines, on television, radio, and the Web. It also uses direct mail and social media channels. Advertising costs (excluding direct-response advertising) totaled $27 million in 2011, compared with $23 million and $17.4 million in 2010 and 2009, respectively. Direct response advertising in 2011 totaled $26 million.
Medifast's sales and profits are growing in tandem with the rise in obesity rates and the diabetic population. Indeed, its sales have increased 255% since 2007, while profits and cash flow also climbed steeply. Most recently, sales rose nearly 16% in 2011 vs. 2010, while net income fell by more the 5% over the same period. The drop in net income -- the company's first decline in four year -- was attributed to costs associated with hiring and the opening of new Medifast Weight Control Centers over the course of the year. Both the Medifast and Weight Control Center & Wholesale businesses posted sales gains. The Take Shape for Life personal coaching business saw its sales rise by 12%, while increased advertising for Medifast Direct Response drove sales up 14%. The addition of about 30 new company-owned weight control centers in 2011 also contributed to the annual increase in sales.
While the ranks of the overweight are growing, the company is also working to tailor its products to the rapidly growing population of diabetics. It maintains an in-house call center and support staff, with registered dieticians on hand to assist customers.
Medifast's promotion and distribution model has changed over time. When it was founded in 1993, the company primarily sold its products through doctor's offices. Customers received supervision from their family physician, who, in turn, received commissions on any products sold. However, as physicians had increasingly less time to spend with patients, the method grew less effective. While some doctors still stock an inventory and resell the company's products, most of Medifast's sales are made through the its website, thus reducing the complexity of its product distribution. Even its Take Shape For Life coaches simply direct customers to the website or call centers and receive commissions for orders placed there. New doctors who wish to promote the products are signed on as coaches.
In 2012 the company moved into international territory by partnering with Productos Medix S.A. de C.V., a leader in pharmaceutical obesity products in Mexico, to exclusively distribute its Medifast meal replacement products and programs through physicians and Weight Control Centers in Mexico under its Medifast brand. – less