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David Kirchhoff by Anthony Jenkins (Anthony Jenkins/The Globe and Mail)
David Kirchhoff by Anthony Jenkins (Anthony Jenkins/The Globe and Mail)

THE LUNCH

David Kirchhoff: The real skinny on Weight Watchers Add to ...

Not in person, however, at least not today, as the conversation moves from yo-yoing weight to Weight Watchers’s yo-yoing share price. In late March, fuelled by a heavily criticized share buyback that led Standard & Poor’s to drop its outlook on the company’s rating from stable to negative, the stock reached a giddy $82.91 (U.S.) and then promptly fell on its ass. Last week, you could snap up shares for $40.60 after the company cut its earnings outlook and Mr. Kirchhoff admitted on a conference call that they expected enrolment at meetings to drop by the high single digits rather than merely holding steady as originally forecast.

Still, the company is cushioned from the full effects of the public market because it has been controlled since 1999 by the European-based investment group Invus, which bought it from food-processing giant H.J. Heinz Co. and still holds 52 per cent of the shares. “They’re not pushovers,” he says. “As far as shareholders go, they’re demanding. But they’re also really smart, and they have encouraged and pushed us to make decisions that are going to build meaningful long-term value in the business.”

And though the company is suffering right now from what it believes are macroeconomic conditions beyond its control, it also sees an extraordinary opportunity on the horizon, as weight moves from being a personal, cosmetic concern to a public health issue. As health-care costs continue to spiral upwards, Mr. Kirchhoff is convinced that curbing obesity will become a primary focus for companies, local governments, and other large organizations faced with ballooning insurance costs.

Which is why he is spending much of his time these days “running around with my new friends in health care.” (In fact, he dropped into Washington just before this Toronto visit.) Obesity is now consistently one of the top three issues “impacting health-care systems around the world, particularly in the U.S.,” he says. “It’s the leading cause of diabetes, increasingly the leading cause of cardiovascular disease, and it now rivals smoking as the leading preventable cause of cancer.”

And with nearly 100 million expected to develop diabetes by 2050, “it could literally cripple the health-care system in the United States.”

So Weight Watchers is pressing hard, arguing that it provides one of the few dependable methods to tackle the challenge. Last fall, the Lancet published a study that suggested people enrolled in the company’s program were more likely to lose weight than those being treated by a physician. The study was funded, and trumpeted, by Weight Watchers. Two months later, the British Medical Journal published a study with similar conclusions.

With research like that in its back pocket, the company is now lobbying insurance companies, large companies that self-insure their employees, and governments to be recognized as a medically legitimate treatment that helps prevent the onset of disease. Last December, Weight Watchers hired away the head of innovation at U.S. drugstore chain Walgreens to create a business unit dedicated to that effort. And last month it learned the U.S. Preventive Services Task Force, a federal agency that decides which treatments should be covered by insurance plans, issued a new set of guidelines that will make Weight Watchers-style programs mandatory under some conditions.

“That’s a big win,” Mr. Kirchhoff says.

Still, for Weight Watchers to fulfill its potential, the mindset among health-care providers has to undergo what he describes as “a tectonic shift,” from management of illness to prevention.

With local governments and large companies alike facing skyrocketing costs for benefits, weight-loss programs begin to seem like a good bet. “We actually see this with cities and states. They’ll say, ‘Why is this school budget increasing another 6 per cent?’ At least half of that is increasing benefit cost, and therefore they have to cut back on other programs to pay for the fact that we’re becoming more sick.”

“Then they’ll say, given all the benefits I provide, having a more-well work force and dealing with obesity feels like a pretty smart bet – as far as a benefit versus other things I might provide my employees, like free chocolate sundaes on Fridays, or whatever it might be.”

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