Sanford Health getting bigger in weight loss with Twin Cities stores opening

A growing chain of weight-loss stores from Sioux Falls, S.D.-based Sanford Health has landed in the Twin Cities.

A local franchisee opened the first Profile by Sanford store in the metro late last month, and has plans for another five outlets at retail centers across the Twin Cities by the end of next year.

Currently, Sanford and its franchisees operate 35 stores in 11 states, and have plans for more than 70 new stores over the next two years.

The moves come as researchers say the percentage of overweight and obese adults is growing, while the share of those trying to lose weight has been declining.

Sanford officials believe they are offering an effective approach to weight loss, and are betting the health system's brand can expand to new products — much like Sanford and Minneapolis-based Allina Health System are trying their hand these days at selling health insurance.

"Just as Allina [and Sanford] think that operating their own insurance companies leverages the positive feelings that people have about their health providers, I would say that Sanford is finding that they can extend those positive feelings to other ventures, like nutrition and lifestyle coaching," Allan Baumgarten, a health care analyst in St. Louis Park, said via e-mail.

Sanford Health is already a big name as a hospital and clinic operator in western Minnesota, with the Minnesota Department of Health tracking 429 available beds at 15 hospitals. It's one of the larger health care systems in the Upper Midwest, with a total of 44 hospitals and nearly 300 clinics in nine states.

For the fiscal year ending June 30, Sanford posted operating income of $151 million on $4.4 billion in revenue. In November, the system announced its first international hospital investment by acquiring a minority stake in a medical center in Germany.

In October 2012, Sanford launched the weight-loss business, which aspires to compete with big national names like Weight Watchers and Jenny Craig.

People who access the service at a Profile by Sanford storefront pay a $300 annual fee that provides personal coaching and development of a weight-loss plan. At the outset, customers replace all grocery store food with food sold by Profile, said Tom Grady, the franchisee working with other investors to bring the stores to the Twin Cities.

The 25 stores open for the entirety of the 12-month period ending in June had collective gross sales of about $30 million and were serving about 28,000 members, according to documents filed with the Minnesota Department of Commerce. They describe the stores as "weight management centers."

Sanford Health clinicians researched the science behind the weight-loss program, although published studies showing its impact aren't yet available, said Nate Malloy, a vice president for the business. Most Profile by Sanford stores right now are owned by the health system, but franchisees will play a bigger role going forward.

"People that are truly having and experiencing life-changing results [are] driving 100 percent of our growth," Malloy said. Program participants receive a scale that provides wireless, real-time progress monitoring through web and mobile apps.

Technology is a big part of the evolving weight-management market, according to research from Morningstar analyst R.J. Hottovy, who covers Weight Watchers.

"We believe mobile apps and other technologies have commoditized aspects of the weight-management category," Hottovy wrote last month. "Although we don't view Weight Watchers' clinically proven platform as a commodity product in an industry rife with false claims, we believe the previous lack of program and technology innovations made it difficult for consumers to distinguish Weight Watchers' in-person and online businesses from new rivals."

Through the first nine months of 2017, Weight Watchers posted net income of $100.5 million on revenue of $994.4 million. A company spokeswoman pointed to a recent report from Marketdata LLC, a market-research firm that projects the commercial weight-loss programs market is growing about 9 percent this year to $3 billion.

Commercial programs are just one of 10 major segments that Marketdata says are collectively worth about $66 billion. But Marketdata recently noted headwinds: "The number of active dieters is estimated to have fallen 10 percent since 2015, to 97 million, due to a growing size acceptance movement and dieter fatigue."

In March, researchers in the Journal of the American Medical Association noted similar trends. In a study that included 27,350 participants, researchers observed that overweight and obesity prevalence increased from 52.7 percent in 1988-94 to 65.6 percent in 2009-14. The share of those trying to lose weight declined from 55.7 percent in the earlier period to 49.2 percent in 2009-14.

"Socially acceptable body weight is increasing," researchers wrote. "If more individuals who are overweight or obese are satisfied with their weight, fewer might be motivated to lose unhealthy weight."

Sanford said the Profile program already has helped nearly 800 people in the Twin Cities through a phone-based coaching model.

Grady, the local franchisee, said his company hopes to convince those clients to become customers at the new brick-and-mortar operations. Sanford Health will continue to own and operate Profile stores in Mankato and St. Cloud.

"We will continue to expand nationally, in North America, with additional locations owned by … Sanford Health, but at the same time leverage the franchise model to have a broader reach and a broader impact," Malloy said. "We believe that our franchise partners are able to help us expand into markets that perhaps we wouldn't be able to get to from a corporate standpoint as fast."

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck