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Report on Business Weight Watchers opening tech operation in Toronto as company tries to rebalance brand

Weight Watchers International Inc. is opening a technology operation in downtown Toronto, drawn to the city’s flourishing innovation sector as it attempts to make itself over into a digitally driven lifestyle and wellness company.

The New York-based company has hired veteran tech executive Don Kittle, former chief technology officer with eBay Inc.’s Kijiji classifieds business, to recruit 25 engineers and data scientists locally by year’s end – with the potential to hire 100 or more in the future – said Weight Watchers’ chief technology officer Michael Lysaght. It will be the company’s third tech hub; its operations in New York and San Francisco now employ roughly 225 people combined.

The job of the company’s growing tech team is to build on efforts spearheaded by Weight Watchers chief executive Mindy Grossman – long regarded as one of the world’s top female executives – to reinvigorate what she has called a “dusty” brand in large part by updating and improving the company’s digital offerings to customers.

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Weight Watchers’ new strategy, which includes adding social-media groups and audio and meditation content to its app and updating its points system, comes at a time when companies are using technology to increasingly personalize their offerings to customers. Weight Watchers already sustained a hit to revenues earlier this decade with the arrival of fitness gadgets and apps such as the Fitbit, which forced it to remain relevant to a new tech-savvy clientele.

“Look, we’re very proud of the brand,” Ms. Grossman, a branding and retail veteran who joined in July, 2017, said in an interview. “However, you need to look at how consumer preferences are changing, their perspective on what healthy means to them, consumer perspectives on what a great experience is and how they’re interfacing and interacting with technology and their expectation of personalization.”

The 56-year-old company’s business model was built around members attending regular meetings where they “weighed in” and discussed weight-loss experiences. The company did move relatively early on to offer weight-loss programs online. But it did little to update its web presence in the years after the dot-com bubble, despite the proliferation of smartphones. Its app was “incredibly dated” and had just a one-star rating on Apple’s app store when Mr. Lysaght joined in late 2014, he said in an interview.

When Ms. Grossman joined, Weight Watchers was already on the rebound after celebrity customer/pitchwoman Oprah Winfrey bought a 10-per cent stake and joined the board in 2015.

But Ms. Grossman, who previously led the revitalization of HSN’s Home Shopping Network, wanted to double down on the digital overhaul Weight Watchers had started, feeling it was vital to upgrade and expand its online interaction with its 4.6 million customers, two-thirds of whom only use the app.

Last year, she unveiled a new manifesto and brand name – WW International – positioning the company as more than a provider of weight-loss programs. WW added a loyalty program rewarding users for healthy choices and relaunched its branded food products without artificial sweeteners, flavours, colours or preservatives. WW expanded the functionality of its app by introducing online community groups and adding audio workouts; it changed its “Fitpoints” system to guide customers’ eating and activity choices, personalizing ratings based on weight, height, gender, age and type of activity.

The company’s app now commands 4.7 out of five at the Apple app store and WW is working to add its services to digital personal assistants such as Amazon’s Alexa.

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Under WW’s continuing technology transformation, it plans to further personalize WW’s digital offerings to individual users. Mr. Lysaght said WW was drawn to Toronto’s “strong tech culture,” abundance of talent particularly in areas such as data science, universities and sector support organizations.

“What has transpired in Toronto is incredibly impressive and it’s amazing how visible the passion was in every single person we met [there] and how proud everyone was of Toronto, and specifically the passion for data science and artificial intelligence,” he said. “We felt ... it was a good place for us to be.”

Ms. Grossman said: “Our message [with the Toronto opening] is we’re hiring incredible people in an incredible city in an incredible tech environment with an incredible brand that will have great impact now and in the future.” She said lower employee costs in Canada compared to New York and San Francisco “are clearly benefits” but not the main reason WW chose Toronto, whose employees will work in collaboration with the company’s New York and Bay Area technologists.

Local observers welcomed the company’s impending arrival. “The fact Weight Watchers is setting up shop here says something about the world-class talent we have and the depth and breadth of it,” said Alex Norman, co-founder of Tech Toronto, a grassroots organization that supports the local sector.

News of the Toronto expansion comes following a rough patch for WW. After initially experiencing a sharp uptick in memberships after Ms. Grossman joined, new memberships sagged in the fourth quarter of 2018 after a marketing campaign for the crucial holiday period fell flat. The company warned it would earn less than half of analyst expectations for 2019 and that revenue would decline to US$1.4-billion from US$1.5-billion in 2018, not rise as expected. The stock closed yesterday at US$19.98 on Nasdaq, more than 80-per-cent down from its peak last June.

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