For Diabetics : Clients Rely on Sugar-free Sweet Deals
When Julia Southworth, an infant with diabetes, was discharged from Children’s Hospital, her parents did not take her straight home. On the recommendation of the hospital nurse who had cared for her, they headed instead for the Sugarfree Center in Del Mar, a retail store that specializes in products and equipment for diabetics.
As Julia’s parents soon found out, diabetes is an expensive and time-consuming disease. Many diabetics must monitor the sugar level in their blood several times a day. A device to do that costs $150 to $250. The paper strips required for each test cost about 50 cents each. The newest equipment to inject insulin can cost $700 or more.
“For somebody to spend several thousand dollars a year on insulin, blood-testing supplies and other equipment like syringes is not unusual,” said Jim Hazlett, editor of Diabetes Self Management magazine.
Treatment Is Big Industry
With about 6 million diagnosed diabetics in the country and perhaps another 6 million who have the disease but do not know it, treatment is a big industry. Nationally, $250 million to $350 million a year is spent on supplies and equipment alone.
San Diego County is home to about 130,000 diabetics, according to the American Diabetes Assn. The Sugarfree Center, which opened for business here three years ago, is the only speciality store of its kind in the area. According to manager Pat Ockel, the store generates about $300,000 a year in revenue.
A hundred or more customers a week visit the store, which is in a small office suite across from Flower Hill Mall. Inside, they find shelves lined with self-help books for diabetics; a wide range of blood-monitoring devices and supplies; equipment to inject insulin and, perhaps most important for many diabetics, appropriate substitutes for the foods they are no longer allowed to eat. The store’s offerings include special wines, frozen dinners such as ratatouille and chicken fajitas, and sugar-free candy.
“I can stock up on the one thing that I really missed,” said Rose DeBord, whose illness was diagnosed three years ago.
“Chocolate--that is the universal cry,” confirmed Orchid Fickle, a clerk in the store, who, like all employees at the Sugarfree Center, is diabetic.
Although customers may be attracted by the food, the store’s main product line is blood-monitoring equipment and injectors. To distinguish itself from its competition--many pharmacies and even the Price Club carry a limited range of equipment--the Sugarfree Center offers extensive training on each device.
Service Breeds Loyalty
The service breeds customer loyalty. Rose Scholl has been diabetic 15 years and a Sugarfree Center customer for a year. She recently bought a new piece of equipment to inject insulin, and Ockel, the manager, spent more than an hour demonstrating the equipment and helping her practice, she said.
“No other store provides attention like that,” said Scholl, who calls herself a loyal patron.
The service has also impressed the physicians and diabetes educators in the county who refer their patients to the store.
“Although some pharmacies do have special sections for diabetics, nobody is as knowledgeable as the people at the Sugarfree Center,” said Dr. Stephen Nozetz, an endocrinologist at the Scripps Memorial Hospitals. “It is like a supermarket for diabetics.”
“The Sugarfree Center educates people and allows them to make their own choices,” said Suzanne Dealy, a nurse who specializes in diabetes education in the outpatient clinic at Children’s Hospital. “Then they don’t have to have blind faith in the machine I recommend.”
Origins in Mail Order
The first Sugarfree Center was established in 1978 in the San Fernando Valley by authors June Biermann and Barbara Touhy. Biermann, a diabetic, had won some fame in the diabetic community by writing four books about the disease, including “The Peripatetic Diabetic,” which chronicled her efforts to lead a full and normal life.
Biermann and Touhy first launched a mail-order house for equipment and some of the more exotic items they had seen in Europe. It soon became apparent that diabetics needed a place where they could meet each other and be trained on machines that were just becoming available. The two opened a small store in Touhy’s living room.
In 1985, Ockel, a diabetic and a former corpsman in the Navy, opened the Del Mar store. The combined operations were successful enough to attract the attention of Health West, a Woodland Hills-based company that, with annual revenues of $500 million a year, owns and operates 10 hospitals, including Long Beach Community and Northridge hospitals, as well as a health maintenance organization, an insurance company, a home health provider and other outpatient services.
On June 1, Health West completed a merger with LHS Corp. of Los Angeles to become a $1-billion provider of health services. The new company is called UniHealth Corp.
In the fall of 1986, Health West bought the two Sugarfree Centers for an undisclosed sum.
“The Sugarfree Centers filled a void in our comprehensive product line for diabetics,” said Doug Ziegeler, who moved from Health West to become the centers’ director of operations.
The new owners designed an aggressive expansion program. They have opened two more stores in Torrance and San Bernardino and plan to open several more in Southern California before the end of the year.
Ambitious Franchising Program
They have also expanded the company’s direct-mail program. The center’s Health O Gram catalogue, a.k.a. the HOG, goes out to 180,000 people worldwide. Its Professional Information Gram, or PIG, goes out to 50,000 doctors, nurses and diabetes educators.
Finally, UniHealth has launched an ambitious franchising program for the centers. Although no franchises have been sold yet, the company has received more than 50 inquiries, primarily from doctors, nurse-educators and diabetics themselves.
UniHealth is not the only company actively seeking to establish specialty stores for diabetics. Its largest competitor is Minneapolis-based Diabetic Centers, which has six stores in Minnesota, Kansas City and Salt Lake City. DCI plans to set up more units in Taiwan and several other places.
“I think there is potential for expansion,” said Steve Crees, vice president of the privately held company. “There is definitely room for more than one specialty store per city. The field is very competitive.”
Crees estimates that customers spend about $1,000 to $1,300 each a year in his stores, which generate $10,000 to $70,000 in sales a month, depending on their locations.
“So you can figure out how many patients you need to support a store,” he said.
Part of Long-Term Strategy
Even with UniHealth’s muscle behind it, the four retail Sugarfree Centers and the mail-order operation combined generate only about $2.5 million a year. Nonetheless, they represent an important part of UniHealth’s long-term strategy.
“It is an example of complete product line management,” said Ziegeler. “A diabetic never has to leave our system.”
A diabetic can receive inpatient care at a UniHealth hospital, outpatient care from a UniHealth HMO or home health service, and supplies and equipment from Sugarfree Centers.
“Before, once they left the hospital, the service was fragmented,” Ziegeler said.
The staff at the Del Mar Sugarfree Center says it has slowly adjusted to the new corporate ownership. There has been pressure to raise some prices and change some buying practices to reduce inventory costs. Sales goals are being set and the corporate office encourages Ockel to charge $45 an hour to train somebody who has bought a piece of equipment elsewhere.
Non-Diabetic Clientele
Even so, the markup on medical supplies is only 20%, which means Sugarfree Center is less expensive than many pharmacies. The margins on food items are somewhat higher.
“We want 25% of our sales to come from the food lines,” said Ziegeler, who believes the Sugarfree Center can attract non-diabetic, health-conscious consumers through its food selection.
The Del Mar store expects to move from its office suite to a more traditional retail location within several months. But it won’t change its basic mission. “We are a support center for diabetics,” Ockel said.
“They offer a unique service,” said Dr. Nozetz. “They are dedicated to education.”
But the store’s real value for diabetics, said Rose DeBord, is that “it makes it easier to survive when the forbidden things are no longer forbidden.”
