Back in 2021, Medifast was among the Baltimore area’s prime examples of a booming, homegrown startup-turned-wellness-giant riding a COVID-era economic wave.
With households spending more than ever on discretionary items like dieting and wellness products, the company’s sales spiked to an all-time high and it announced plans to ramp up hiring in Maryland to support distribution.
It was a very different story by mid-2022: The economy had cooled, as had the market for Medifast’s supplements and dietary products, thanks to rising inflation and a consumer spending slowdown that caused initially high growth expectations to drift out of reach. Medifast’s year-over-year profits for Medifast dropped 17% in the second quarter of 2022, and in August, the company lowered growth expectations for the rest of 2022. Several weeks later, in August, it filed a notice with the Maryland Department of Labor announcing the layoffs of 134 workers at its distribution center in Ridgely — a sturdy employer in Eastern Shore’s Caroline County since 2003. The cuts affected 50 workers from Caroline County and dozens more from surrounding Eastern Shore communities in Maryland and Delaware.
“My immediate thought when I heard about it was, taking it from an empathetic standpoint, ‘Oh, those families, now they’ve got this to worry about, but at least there are tons of jobs available,’” recalled Debbie Bowden, economic development director for Caroline County, during an interview in November. “I think I was grateful that they didn’t have to close down the facility. I am watching now to make sure that that isn’t the next step, given that other similar types of facilities have shut down on the Eastern Shore.”
While layoffs at the tech and ecommerce giants were the big story in 2022 — high-profile examples include Meta, Microsoft, Walmart, Amazon and Shopify — the tale has been similar for smaller-market employers and startups hurting from reduced valuations and expectations, as well as slowing consumer spending. Technical.ly has reported on a number of these cuts, including multiple layoff rounds at Philadelphia-based instant consumer needs delivery specialist GoPuff and other announced job cuts at Pittsburgh robotics firm SeeGrid and ID.me in Northern Virginia. From tech hubs and urban centers out to rural areas like Maryland’s Eastern Shore, in which both Medifast and USA Fulfillment slashed positions en masse, more companies have been consolidating operations and hedging their initial 2022 growth expectations.
For startups dependent on investment capital, there’s a certain “reality check” afoot after the early COVID-era moment when interest rates were lower and cash was more freely available, said Daraius Irani, chief economist at Towson University’s Regional Economic Studies Institute.
“Now, the cost of borrowing has gone up, so people are a little bit reluctant to borrow money” and invest, he noted.
Meanwhile, inflation continues to hamper consumer spending — yes, even during the usually retail-crazed holidays — and with looming forecasts of an economic recession in 2023, retail-oriented firms large and small are in a humbling economic moment.
“The real challenge,” Irani said, “will be obviously that, as we’re going into this recession with big interest rates, that’s always going to make it a challenging environment for any discretionary or large-ticket items and purchases.”
