Issue No. 169: Fitness Comes Full Circle

After two years of on-again, off-again gym closures and a workout-from-home boom, the fitness industry is trying to find its footing.

Level Set

Against all odds, gyms aren’t dead. And, despite their in-person competitors being hamstrung, digital and connected equipment companies aren’t the definitive victors.

Two analogs, Peloton is getting pummeled while Planet Fitness ramps up.

A self-proclaimed tech company, Peloton recently completed its round trip from a pre-COVID market cap of $8B to $50B and back again.

Meanwhile, Planet Fitness, a boring brick-and-mortar operator, has outperformed the connected equipment brand over the last year.

As Peloton founder John Foley relinquishes the CEO role amid rumors of a potential sale, Planet Fitness chief executive Chris Rondeau touts strong membership growth.

Hardly an apples-to-apples comparison, the broader implications are worth exploring.

Variant attendance. Last summer and again in December, gym visits rebounded to pre-pandemic levels, according to analytics firm Placer.ai. While Omicron curbed the New Year’s rush, the data provider expects an increase in foot traffic as the virus surge subsides.

Faulty forecasts. From Peloton and MIRROR to iFIT and Beachbody, home fitness brands are battling reopening headwinds. Since its acquisition of smart bike maker MYXfitness, Beachbody CEO Carl Daikeler said a decline in demand and rising marketing costs led to poor sales.

More to the point, Peloton CFO Jill Woodworth said: “It is clear that we underestimated the reopening impact on our company and the overall industry.”

Canary in a coal mine. A cautionary tale, Peloton’s Foley reportedly said the company was “undisciplined” in chasing pandemic-induced demand. Now, he added, they’ll attempt to retool in pursuit of sustainable growth.

Applying this logic across digital and connected fitness, companies that pursued Peloton-like growth and tech multiples will also need to correct course.

Beachbody’s Daikeler acknowledged as much, telling Bloomberg they need to operate “responsibly and appropriately” based on realistic demand, not peak-COVID sales figures.

Similarly, citing Peloton in their pitch decks, recently funded fitness startups probably sold investors (and themselves) on unrealistic growth metrics. Taking stock of the shifting landscape and tempering expectations, it’s a good time to level set.

Anytime, Anywhere

There’s no denying that the pandemic has transformed the fitness industry, permanently closing 25% of all gyms/studios while fueling tech innovation.

But, it’s becoming increasingly clear that it’s not a singular choice between in-person or at-home workouts. In fact, the exact opposite is true.

Speaking to this development, in Issue No. 122, we wrote:

“Gyms and studios will no longer be the hub of a fitness seeker’s universe. Instead, they’ll be a spoke in the exercise ecosystem, giving way to a new kind of fitness bundle.”

Expanding on this sentiment in Issue No. 135, we added:

“Ultimately, the consumer will decide if, when, and how they work out. To them, more options are better. But as they sample different digital and physical options, the companies that deliver a personalized, engaging, and effective experience will win.”

To that end, according to data from McKinsey, fitness consumers prefer a combination of digital and IRL exercise.

Even after the pandemic, 70% of online exercisers plan to maintain or increase their digital fitness use.
During the pandemic, 50% of respondents were less happy with their workout routine compared to what they had pre-COVID.
70% of fitness consumers reported missing their gym as much as they miss family and friends.

Moving toward a hybrid future, fitness operators will face a number of new challenges.

First, if workouts are split between the home and the gym (or anywhere else, for that matter), greater attention will be paid to where that ratio nets out.

According to Les Mills, the majority of exercisers prefer a 60:40 split between gym and home workouts. But, over the next year, a survey from The New Consumer found a 25:75 gym-to-home ratio would be the most popular hybrid option.

For now, while some brands take a wait-and-see approach, others are leaning into new business models.

Hybrid workouts. With $15M in new funding, FitLab is combining “connected studios,” home workouts, and events to create an integrated offering.

Similarly, CITYROW’s omnichannel, connected-equipment-plus-studio model, garnered a $12M investment last summer. And, expanding beyond group fitness, Les Mills is entering the metaverse with VR boxing.

Equipment agnostic. Instead of focusing on equipment or location, brands like Future, Strava, and Apple are encouraging and benefiting from physical activity in any form. Users pay $150/month for a Future coach who provides workouts and feedback based on where, how, and when they want to exercise.

By tracking 30 activities while integrating with 44K+ API partners and 400+ hardware devices, Strava’s subscription platform is built around community and competition. Meanwhile, Apple’s wellness ecosystem now includes health data, hardware, and its Fitness+ subscription — from inactivity reminders to guided walks and HIIT workouts.

Rethinking third spaces. Digital communities are great, but, for many, virtual high-fives and leaderboards can’t replace real human interaction.

While brick-and-mortar operators experiment with new formats, like opening Xponential Fitness boutiques inside an LA Fitness or 24 Hour Fitness partnering with iCRYO to offer wellness services on site, new formats are taking hold.

As Silofit expands its network of private micro-gyms, Maverick Community, Hydra Studios, and Safe Sweat offer on-demand fitness and wellness options. After raising $140M in December, Restore Hyper Wellness plans to double its footprint, opening 100 health and recovery centers this year. And Othership is using guided sauna and ice bath classes to redefine healthy, IRL social experience.

Looking ahead: The last two years have been a whirlwind. But in some ways, the fitness industry is back to where it started from.

On one side, gyms and studios will have to chart a new path forward. On the other, digital and connected fitness options are confronting rising churn and acquisition costs. Meanwhile, rates of inactivity and obesity have reached record highs.

If we’ve said it once, we’ve said it one thousand times, the future of fitness isn’t IRL vs. at-home; it’s about providing more options for more people.

🎒Rucking Over Running

Driven by the pandemic, outdoor activities like running, walking, and hiking boomed — and participation is still rising. Now, starved for community, exercisers are seeking out races and meetups for the best of both worlds.

On the Fitt Insider Podcast: GORUCK founder and CEO Jason McCarthy joined us to discuss translating experiences in the US Special Forces to bootstrapping a $30M-per-year business around rucking, aka walking with a weighted rucksack.

We also cover: his wariness of the fitness metaverse, the power of social interaction, and his latest venture, Sandlot Technology, that aims to decentralize fitness.

Listen to today’s episode here.

🍏 Withings Weighs Integrated Health

French wearable company Withings acquired German digital health and fitness platform 8fit.

In recent months, the company has accelerated its transformation from selling fitness trackers to building an integrated health ecosystem.

October 2021: After receiving FDA approval for EKG and pulse oximeter features, the wearable maker introduced its new health-monitoring ScanWatch.
November 2021: Popular in Europe, Withings debuted its wearables in the US.
January 2022: The company unveiled its Body Scan smart scale, app, and health subscription at CES 2022. The device measures body composition, heart rate, and vascular age.

Utilizing 8fit’s digital fitness programming, healthy recipe database, and sleep meditation content, Withings plans to offer personalized health and fitness recommendations.

Competition ahead. Withings isn’t alone in its ambition to build an integrtated health offering. From tech incumbents to fast-growing wearable makers, everyone wants a piece of the trillion-dollar healthcare market.

Leveraging its smartwatch and health data, Apple aims to revolutionize healthcare.
After acquiring Fitbit for $2.1B, Google is readying an Apple Watch competitor and doubling down on healthcare.
Amazon’s “Prime Health” flywheel has expanded to include medical records, online prescriptions, fitness wearables, and more.

Beyond Big Tech, WHOOP is expanding its high-performance platform as Oura upgrades its smart ring. Elsewhere, even CrossFit is moving in, launching Precision Care – a telehealth service “for CrossFitters, by CrossFitters.”

Punchline: With US healthcare spending set to top $6.2T by 2028 as health outcomes worsen, more companies are eyeing outsized profits and meaningful impact by pivoting from fitness and wellness to healthcare.

💪 Accountability-as-a-Service

Bringing human connection to digital fitness, personal training app Future secured $75M in new funding.

How it works: Future pairs users with a highly credentialed, full-time coach. After signing up and meeting their trainer, members are sent an Apple Watch. The trainers create personalized plans and track performance through the Apple Fitness dashboard as well as daily text conversation.

Scaling up. Founded in 2017, Future has raised more than $110M to date. Accelerating marketing and product development, the company plans to reach $100M in annual recurring revenue by 2023.

Staying consistent. In addition to custom programming, Future users have unlimited access to their coach for feedback or to modify a workout. Keeping users accountable and aiding retention, members and coaches exchange an average of four text messages each day.

Adding experts. According to a press release, the company plans to enter other categories of health coaching. Echoing this sentiment on the Fitt Insider Podcast, Future CEO Rishi Mandal said:

“The vision for the company is to build a constellation of experts around you. And fitness is a really great starting point.”

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Editor’s note: Fitt Insider is an investor in Future. We invest in early-stage health, fitness, and wellness companies. Learn more, and get in touch, here.

👀 Peloton’s Wild Ride Continues

A developing story, change is afoot at Peloton.

The latest: Founder John Foley is stepping down from the CEO role, becoming executive chairman. Former Netflix and Spotify CFO Barry McCarthy is replacing Foley.

Following word that slow demand led the company to halt production of its connected equipment, Peloton is abandoning plans to build a manufacturing facility in Ohio.

Of note, former Precor CEO Rob Barker is departing the company just over a year after Peloton paid $420M for the commercial fitness brand.

Across the company, Peloton is eliminating 2,800 positions globally.

Deal or no deal. As calls to sell the company mount, potential suitors are circling. According to the Wall Street Journal, Amazon and Nike are weighing a bid, while rumors fly about interest from Apple, Disney, Netflix, and others.

But… Despite a change in title, Foley still wields voting control. Without his sign-off, there’s no deal to be done.

By the numbers. Reporting earnings for Q2 2022, Peloton cut fiscal year revenue projections by about one billion dollars, from a high of $4.8B to a top end of $3.8B. Yet, as net losses mounted—totaling $439.4M for the quarter ending December 31, 2021—the company’s subscription revenue grew 73% to $337.5M.

TBD. For now, Peloton’s stock is rallying on news of the ongoing restructuring. Getting back on the bike, and shifting gears, the company’s wild ride continues.

📰 News & Notes

Nike sues over digital sneaks.
Calm acquires Ripple Health Group in healthcare play.
Fitt Jobs: Land your dream job in the health & fitness industry.
Startup Q&A: FLOWBIO’s Stefan van der Fluit says “sweat is data.”
F45 hires former Tom Brady, Mike Tyson trainer as Chief of Athletics.
Amazon Care expands nationwide, locks in Whole Foods and Silicon Labs.
At-home health diagnostic market expected to balloon to $2B in three years.
iFIT seeks to block Peloton bike imports with trade suit. [Reread: Patent Wars]

💰 Money Moves

Future, a digital personal training app, secured $75M in a funding round co-led by SC.Holdings and Trustbridge Partners.
Connected cycling training app The Breakaway raised $2.9M in a seed round from General Catalyst, Norwest Venture Partners, and Zone 5 Ventures.
More from Fitt Insider: The Breakaway CEO Jordan Kobert on data-driven cycling
Bouldering Project, a Seattle-based chain of climbing gyms, acquired three facilities from Brooklyn Boulders in Brooklyn, Boston, and DC.
French wearable company Withings acquired German digital health & fitness platform 8fit.
Benestar Brands, owner of a portfolio of snack brands, acquired 4505 Meats, makers of keto- and paleo-friendly pork rinds.
More from Fitt Insider: Protein-packed Snacks Hit Overdrive
FDA-approved sex therapy app Lover landed $2M in a bridge funding round from Lerer Hippeau, Manta Ray, Global Founders Capital, and FJ Labs.
TRIPP, makers of an immersive VR-based therapeutic, acquired VR meditation community EvolVR.
Austrian hydration startup waterdrop raised €60M ($68.6M) in a Series B round led by Temasek.
Zero Acre Farms, creators of a healthier, more sustainable alternative to vegetable oil, closed a $37M Series A round co-led by Lowercarbon Capital and Fifty Years.
AI-enabled mental health platform HealthRhythms closed $11M in an oversubscribed seed round led by GSR Ventures and Brook Byers.
More from Fitt Insider: Mental Healthcare Goes Digital
Nestlé Health Science acquired European keto dieting app PronoKal and a majority stake in plant-based protein powder brand Orgain in separate deals.
UK-based sustainable activewear brand TALA secured £4.2m ($5.68M) in an oversubscribed funding round co-led by Active Partners and Venrex.
More from Fitt Insider: Suiting Up to Cool Down the Planet
Getlabs, an at-home blood testing startup, grabbed $20M in a Series A round.
UK-based men’s health platform Numan added $20M in growth debt to its Series B and will launch blood testing services.
Dawn Health, a digital therapeutic for insomnia, raised $1.8M in a pre-seed round led by Kindred Ventures.
Digital health startup Marigold Health, provider of peer-to-peer substance use counseling, secured $6M in seed funding.
League, creators of digital infrastructure for healthcare companies, raised $95M in a Series C round led by TDM Growth Partners.
Rosita Longevity, a healthy lifestyle app for seniors, closed a €2.4M ($2.74M) seed round and will launch in the US.