As the adult obesity rate in the U.S. continues to rise, revenue for some companies that provide weight-management products and services is getting skinnier.
Gallup-Healthways reported this month that the obesity rate for 2013, based on data gathered between Jan. 1 and Oct. 28, is up to 27.2%, 1 percentage point higher than it was in 2012. According to Gallup-Healthways, it is likely to surpass all annual average obesity levels since 2008, when the two companies began tracking the statistic.
And the most recent data from the Centers for Disease Control and Prevention show that 35.7% of U.S. adults were obese in 2009-2010.
Yet revenue in the weight-management industry isn't keeping pace.
“The market forces are very contradictory,” said Dr. Philip Herschman, chief clinical officer of CRC Health Corp.
When CRC, a Cupertino, Calif.-based company that primarily focuses on substance-abuse treatment and addiction recovery, announced its most recent quarterly results earlier this month, it showed that its weight-management segment had slipped. Client service revenue in the division was down nearly 7% for the most recent quarter, ended Sept. 30.
CRC operates 10 weight-loss camps for children and one adult residential facility, but despite the obesity epidemic, Herschman said, the weight-management portion isn't booming because “there's no third-party reimbursement to treat obesity.”
“Folks are much less apt to pay for a behavioral health program when they might be able to get reimbursement for bariatric surgery or do one of the more popular or less immersive and less expensive programs,” Herschman said.
But even those businesses have been struggling recently. Earlier this month, Nestle sold the bulk of its weight-loss company Jenny Craig to private equity firm North Castle Partners because it had “been a laggard in the firm's portfolio for quite some time,” according to a note written by Morningstar analyst Erin Lash.
And Weight Watchers, one of Jenny Craig's main competitors, has also seen a decline in the sales and fees portion of its revenue. For its most recent quarter, ended Sept. 28, the company reported revenue of $393.9 million, representing an 8.5% drop from $430.6 million for the same period in 2012.
Follow Rachel Landen on Twitter: @MHrlanden
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