The Great Consolidation? Strategists Warn of Make-or-Break Era for Fitness Brands
At the ATN Innovation Summit, McKinsey and L Catterton insiders laid out what it’ll take to survive and thrive as consolidation reshapes the fitness industry
The fitness and wellness industry is entering a pivotal era of consolidation, one that will define which companies emerge as long-term winners and which are left behind.
That was the consensus among industry leaders during a panel discussion moderated by Edward Hertzman, founder and CEO of Athletech News, at the ATN Innovation Summit 2025. Key insights came from Eric Falardeau, partner at McKinsey & Co., Jeff Rudnicki, senior partner at McKinsey, and Marc Magliacano, managing partner at L Catterton.
The conversation was anchored by a newly released letter from McKinsey urging operators to rethink their strategy and positioning before it’s too late.
“The sector is consolidating quicker,” said Falardeau. “This is not a new thing, but it’s consolidating quicker and that has implications for strategy… What will it mean to win in five years versus in the last five years?”
Differentiation Remains Key
As companies face tough questions about what’s next, one segment is charging ahead: high-value, low-price (HVLP) gyms. Magliacano pointed to a surge, fueled in part by demand from women integrating strength training into their everyday routines.
“You’re going to have ongoing massive growth in boxes and clubs in the U.S.,” he said.
To stay competitive, clubs need to create a clear point of differentiation around their model, something that draws members in despite rising options.
“So people will drive past brand A, B, and come to your brand C,” Magliacano said.
“Today, I will tell you, the data says the members are very satisfied with their current HVLP operator,” he added. “Everyone’s happy, but at some point, when you’re trying to get that incremental member to your club, you’re going to have to showcase differentiation.”
Rethinking Aggregators
As the fitness and wellness industry evolves amid consolidation, panelists highlighted employers as a powerful gateway.
“I really like the idea of well-operated fitness clubs… and aggregators, especially the ones that are going through employers to help make real partnerships with HR, in big businesses, to truly expand the number of people that adopt habits,” Falardeau said.
Magliacano echoed that sentiment, citing L Catterton’s investment in EGYM’s Wellpass and ClassPass. He also challenged long-standing assumptions about aggregators.
“Some of those old paradigms of aggregators are bad, and it’s all about operational excellence within the fitness club segment – that’s all we need. That’s true today,” he said. “I just don’t know in the next five to 10 years.”
M&A Moves to Center Stage
Rudnicki didn’t mince words when addressing misconceptions about M&A.
“Seventy to ninety percent of deals do not fail. If you’ve heard that, that’s wrong,” he said. “It’s almost the opposite. The companies that remain the best for a long time are also the best at M&A. The company you’re thinking of when I say, ‘What’s a company that you admire that’s been great for 10-plus years?’ I promise you their M&A function and capability is the secret.”
But M&A success, Rudnicki cautioned, requires careful planning and an honest assessment of organizational abilities.
“M&A is not a strategy. M&A is a tool,” he said. “What capabilities do you need that M&A can provide? What can you do quicker or better through acquisition than you can build in-house?”
Rudnicki urged executives to build a “proactive sourcing engine” to identify targets aligned with long-term goals. That includes moving beyond financial due diligence to evaluate strategic fit and cultural compatibility.
“Acquiring and integrating your closest competitor is going to be a lot different than acquiring and integrating a digital offering, something in a different space,” he said.
Together, the panel called for a shift in mindset. Rather than simply asking, “What’s our M&A plan?” operators should be asking: “What’s our strategy, and how can M&A accelerate it?”
Small Operators, Big Opportunities
While much of the conversation focused on large-scale consolidation, the panel was clear that smaller operators are far from doomed, as long as they remain proactive and adaptive.
“If you’re an independent health club operator, it doesn’t mean you can’t win,” Magliacano said. “Fitness club service, as I’ll call it, is a local business. Local business is high touch, high emotion, high brand love, high member love. So you absolutely have the right to win. It’s just going to be different tomorrow, and so really, being prepared, the ‘how to win’ will be different than the way you may have won yesterday.”
The key, panelists said, is building a moat through differentiation and community connection – advantages big brands often overlook.
“If you really think about your business and what you can do in your local market… you have the grand advantage to go out there and create your own moat that will allow you to continue to thrive and prosper against some of the bigger names,” Magliacano added.
Falardeau reinforced that view.
“There’s room for more than one winner, and there’s room for winners of different sizes,” he said.
This article is based on a live discussion held during the ATN Innovation Summit 2025, a two-day event dedicated to the future of fitness and wellness. See here for more Innovation Summit coverage.