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Medifast CEO: 'We changed our business model to be focused on coaches'

Medifast CEO Dan Chard discusses how his company has outpaced 2021 and Q3 estimates, as it has modified its healthy living service model to focus more on direct-to-consumer.

Video transcript

[MUSIC PLAYING]

EMILY MCCORMICK: Welcome back. Medifast reported third quarter sales that jumped 52% over last year as demand for health, wellness, and weight loss products rose. Medifast CEO Dan Chard joins us now for more. And Dan, thank you so much for being with us this morning. Medifast has reached $1 billion in year to date sales already so far in 2021. And that's three months ahead of your company's previous projections. Talk to us a little bit about what's been driving that growth.

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DAN CHARD: Yeah, it's great to be with you. About five years ago, we changed our business model to be focused on coaches. And so now we look at the company as the company behind-- Medifast as a company behind one of the fastest growing health and wellness communities, which is called Optavia. So when we made that choice to focus on coaching, we grew our business from just a little bit over $250 million now to a projected $1.5 billion by the end of this year.

So, it has everything to do with what our coaches are able to do. We have basically over 90% of the country who is interested in pursuing goals. And most of them want to have some support to do that. And so, our 60,000 Optavia coaches across the country are there to help teach people a new set of healthy habits to help get them healthy.

JULIE HYMAN: Hey, Dan, it's Julie here. Forgive me. So, is the revenue-- is there a revenue arrangement with the coaches? Or is the revenue still from selling product? It's just the coaches are, you're finding, a better vehicle to get there.

DAN CHARD: Yeah, the coaches are our vehicle to both bring in new clients. Most of them were clients before they became coaches. And through the sales of our products, which are part of a system, they're compensated. But really, the compensation is for helping new clients on our program, the Optavia program, and then supporting them all the way through as they learn the healthy habit. So, this starts with the habit of healthy eating, then moves to healthy hydration, healthy sleep, and healthy exercise. So by the end, our mission is to offer the world lifelong transformation one healthy habit at a time. So that's what they're involved in, is teaching those healthy habits.

EMILY MCCORMICK: Yeah, Dan, I want to stick with the topic of the Optavia coaches, because you saw those rise 45% to reach 61,000 this past quarter. And 91% of these coaches were once clients themselves. So I'm wondering for these coaches, for many of them, is this their full-time job? And has there been this demand to become a coach as people look for alternative forms of work during the pandemic?

DAN CHARD: Well, it's a little bit of a mix. Some coaches do it full-time, and they train other coaches. Most just are passionate about it because they had a really great experience. And so, to your question about why they do this, a lot of them have been-- we specifically target people who have failed on diets. And so, coaches are passionate about it because they reflect that part of the population who have tried to get healthy, who may have not been successful, and they found a way to be successful. And so, they share that secret, which is Optavia, with those that they come in contact with. And it is part of the-- you know, a lot of them are doing it part-time, but like I said, many of them are doing it as full-time as well.

JULIE HYMAN: Hey, Dan--

EMILY MCCORMICK: What you just said--

JULIE HYMAN: Oh, sorry. Go ahead, Emily.

EMILY MCCORMICK: Oh, no, go ahead, Julie.

JULIE HYMAN: I was just going to address a little bit of an elephant in the room, Dan, which is, effectively, this is a multi-level marketing company. And sometimes these types of companies are, indeed, controversial. We all, or at least, I remember the Herbalife sort of back and forth argument over that company, although Herbalife is alive and well today, as, of course, is Medifast. So how do you think about a modern multi-level marketing company and the sort of sometimes reputation that these types of companies have?

DAN CHARD: Well, we're very specifically focused on direct-to-consumer company. So the company knows who every one of its customers are. And we focus on that relationship through the coaches. So our focus is on creating a relationship directly with the clients, using our coaches, who reflect this community. And, you know, it's an amazing way to connect client with a coach who has been part of that same journey that they've been on.

EMILY MCCORMICK: All right, we'll leave it there. Dan Chard, Medifast CEO, thank you so much for joining us.