The Weight Loss Industry: An Opportunity for Profit

The Weight Loss Industry: An Opportunity for Profit

I was recently reading Garry Vaynerchuk’s best seller book “Crush It!: Why NOW Is the Time to Cash In on Your Passion“. Gary talks about the opportunity that we all have to take our passion and make a living leveraging the power of the Internet. So, and idea struck me. Those of you who have an interest in writing about fitness, dieting, and health can capitalize on this New Wellness Revolution, as described by economist Paul Zane Pilzer.

Quick quiz: do you know what the no. 1 preventable cause of death in the U.S. is?

Many people would guess smoking, but that would be wrong. The answer is: obesity. Being overweight and obese is now a huge public health problem along with related diseases such as diabetes, heart disease and high cholesterol.

Obesity in the US

Currently, one-third of Americans are obese and another third are overweight. One effect of this is that there’s not only big business around fatty, convenient foods, but there’s also big business around losing weight. And the demand just keeps growing and growing. So now the question is, why wouldn’t you invest in this industry yourself?

4 out of 5 dieters try to do it on their own

Researchers estimate there are 108 million dieters in the U.S. and approximately 80% — or 86 million – of them diet on their own, meaning they jump from fad to fad. The weight loss market is expected to reach $65 billion this year. That includes money spent on meal replacements, low-cal foods, diet pills, bariatric surgeries, and more.

Market research firm Marketdata, which tracks the weight loss industry, shows exactly how large the weight loss market is. According to their research:

  • 90% of online dieters are female.
  • Most dieters now start when they weigh between 175 and 199 pounds. They previously started between 150 and 174 pounds, which demonstrates that Americans are getting heavier and heavier.

Health care costs for obesity are also expected to skyrocket from $147 billion today to $344 billion by 2018, which is bad news for those hoping to rein in health care costs. By 2018, obesity will account for 21% of all health care spending.

The problems dieters face

There are many reasons that people fail to lose weight, even after years and years of trying. One major reason is that people have become distorted on what is an appropriate portion size. Take for example, a hamburger and French fries. Today’s hamburger is about three times as large as it was in the 1950s. A portion of French fries has also tripled in size. And the fountain soda you slurp on the side? It used to be 7 ounces. Today, it can be as large as 64 ounces – more than 9 times as big!

For those growing up in this “super size” world, these portion sizes seem normal. And what’s shocking is that by consuming a meal such as this, you can eat what should be your day’s worth of calories all in one meal.

So where’s the opportunity?

The best investing opportunities center around weight-loss programs, weight-loss drugs, organic groceries and fitness centers. Let’s take a look at each of these in some more detail.

  • Weight-loss programs: When it comes to weight-loss programs, Weight Watchers is the king of the hill. Since 1999, Weight Watchers’ revenue has grown from $360 million to $1.8 billion, a 400% increase in just 13 years. Its stock has grown from $2.13 a share back then to $48.10 as of July 2012. In addition to its center-based locations, Weight Watchers also has a large online presence, with 1.72 million online subscribers. That represents 24% of its yearly revenue.
  • Weight-loss drugs: With so many diets failing, many people are turning to weight-loss drugs to try and shed unwanted pounds. A few drugs that are currently in development are: Contrave, developed by Orexigen, and Qnexa, developed by Vivus. Lorcaserin by Arena was approved June 2012 boosting the company’s stock price which has seen a 600% increase the past 5 months. Just make sure you do your research on weight-loss drugs and make sure their clinical trials are going well, with no major side effects to users.
  • Organic groceries: There’s been an increased movement recently on fresh, wholesome foods as evidenced by a growing number of farmers’ markets across the country. Organic groceries such as Whole Foods are doing well too, and are expected to lead a trend of more organic foods and groceries across the country.
  • Fitness centers: The fitness center industry is worth $18 billion per year and has grown about 4% every year. Look to invest in some of the larger fitness centers across the country.

Investing in your body could be the best money maker

If you’re averse to investing, the best way to make money might actually be to lose weight yourself if you are overweight or obese. By losing weight, you can save not only on the obvious, which is extra food that you should be consuming, but also on the less obvious, such as health care costs and transportation.

Estimates say that women spend an extra $8,365 per year if they are obese, and obese men spend an extra $6,518 more per year than men of a healthy weight. For women, that breaks down to $697 per month and for men, it’s about $543.

About 10% of that cost relates to medical expenses. You can also save on gasoline. Americans collectively spend an extra $1 billion in gas every year because of excess weight. On a personal level, if you are 100 pounds overweight, losing that weight could increase the gas efficiency of your car by 1% to 2%, translating to $0.03 to $0.07 per gallon.

In addition, studies have shown that heavier women tend to make less money than thinner women. For example, one study concluded that a 104-pound woman makes $22,000 more per year than an average-sized woman (164 pounds at the time of the study). For men, there was virtually no difference in salary.

The weight-loss industry will only expand from here

As Paul Pilzer emphasizes in his book, with the baby boomer generation facing the health consequences of obesity, many of them are more than willing to spend a lot of money on weight-loss to try and have a healthier life. This makes weight-loss a great investment choice for the foreseeable