Say a product will provide an energy boost and put it into a simple 2- or 3-ounce format, and consumers are likely to buy it. At least that’s the premise behind the flood of energy shot products that have hit the U.S. market over the last year. Alacer Corp., makers of the popular Emergen-C powdered fizzy drink supplements, is the latest company to jump into the energy shot market, which Nutrition Business Journal estimates rung up $560 million in sales last year. “We have a healthy respect for the remarkable sales volume achieved by the market’s energy shot players,” said Alacer Corp. President and CEO Ron Fugate. “That’s why we have worked to bring something very special, a real breakthrough, to the energy shots and dietary supplement segments.”
Alacer began shipping three Emergen-C brand shot products to Wal-Mart, CVS, Rite Aid and other mass market retailers in July. Full distribution to all Emergen-C retailers will be completed in October. Two of Alacer’s Emergen-C shots are targeted to energy-seekers: Emergen-C Health & Energy Booster and Emergen-C Alert Energy & Focus Booster. But unlike some of the other energy shots on the market, Alacer’s offerings were not designed with teenage or college-age consumers in mind. “Our shots are targeted, not to people who want to have energy to party all night, but rather to those who want the energy to focus on the task at hand,” said Ken Vargha, Alacer vice president of sales and marketing. Alacer’s Emergen-C Alert shot contains green tea extract and vitamin B-12.
Known for its immune-support powdered offerings, Alacer also introduced an immunity shot called Emergen-C immune System Booster. This product provides 1,000 mg of vitamin C, zince and a blend of prebiotics. The formula taps into what NBJ sees as an emerging trend within the shot market: products that provide an efficacious dose of a condition-specific remedy. Healthy Brand Builders, the company run by beverage industry expert James Tonkin, is also releasing an immune-support shot product under the brand Coremune later this year. This product will feature the natural branded ingredient Wellmune.
Through a distribution partnership with Convenience Valet, Alacer Corp. is following the lead of the super-selling 5-Hour Energy by moving its shot products into convenience stores and gas stations. To date, the convenience channel has generated a large portion of energy shot sales, but the growing number of shot products moving into this channel is forcing some convenience retailers to cut down on how many shot brands they will carry. “Cash raps and small displays are not enough to hold the category,” said James Tonkin, principal of Healthy Brand Builders. “Eventually retailers may have to develop additional space to sell shots in the store.”
Alacer’s shot products will retail for $2.99 for a single shot or $4.99 for a double shot pack, making them competitively priced with other energy shot products on the market. Vargha said initial retailer enthusiasm for the Emergen-C shot products surpassed the company’s expectations. “We were surprised by the demand, which exceeded our initial capacity,” he added. “We are now back on track to supply everyone with as much product as they want.” Alacer will launch a national ad campaign for its new shot offerings in October.
NBJ’s Sports Nutrition & Weight Loss issue, which publishes this month, includes an in-depth look at the energy shot market that features interviews with 5-Hour Energy, 6-Hour Power, Red Bull and other brands operating in the category. To order the issue, subscribe to NBJ or download a free 32-page sample issue, go to NBJ’s subscriber page.
Related NBJ links:
$560 Million Energy Shot Market Pumps Up Flattening Energy Drink Sales
Powdered, Effervescent Delivery Modes Grab Growing Market Share
2009 Supplement Business Report
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Be a Sport
The Federal Trade Commission (FTC) made an example out of infomercial pitchman Donald W. Barrett and his associates on August 13 when they were found guilty of taking advantage of customers by making false claims about and unauthorized charges for two dietary supplement products. The U.S. District Court for the District of Massachusetts ruled in favor of the FTC and ordered the marketers of Supreme Greens and Coral Calcium to pay a total of $68.6 million in fines because of false and misleading claims. The marketers used infomercials to make illegal claims that the products could cure conditions such as cancer, Parkinson’s disease and heart disease.
Direct Marketing Concepts Inc. and ITV Direct Inc., marketers of the Supreme Greens products, were both charged with making unsubstantiated claims. In addition, the companies were punished for making unauthorized credit and debit transactions through a deceptive continuity program that would periodically bill customers’ credit cards for additional product orders without their express consent. The court froze the assets of the companies and ordered them to pay $48.2 million to the customers they ripped off. The courts also ordered King Media Inc. and Triad ML Marketing Inc., marketers of the Coral Calcium products, to pay $20.4 million in consumer refunds.
The courts also explicitly ordered the companies not to misrepresent their products in the future, though Nutrition Business Journal suspects they are sufficiently motivated not to do so by the $68 million in fines. In addition, the companies were presented with a laundry list of offenses that they are barred from participating in, including: “Misrepresenting that scientific research validated their claims; making any health, performance, or efficacy claims about any food, drug, dietary supplement, cosmetic, or device unless such claims are true, non-misleading and substantiated by competent and reliable scientific evidence; failing to disclose that promotional programming is, in fact, a paid advertisement; and billing consumers or charging their credit or debit cards on an ongoing basis without their consent.”
In April, the FTC charged a group of Delaware-based supplement suppliers with making false and deceptive claims surrounding the sale of hoodia gordonii. NBJ offers a direct-to-consumer selling web seminar in which regulatory expert Ivan Wasserman, who is an attorney with Manatt, Phelps & Phillips, discusses the ramped up enforcement efforts by the FTC and what supplement marketers can expect out of the agency over the next year.
Related NBJ Links:
FDA Increases Enforcement Efforts, Warns Internet Marketers About Swine Flu Claims
Direct-to-Consumer Advertisers Must Overcome ‘Tremendous Distrust’ on the Hill
NAD Turns in SlimForce 7 to FDA, FTC for Unsubstantiated Advertising Claims
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Deceptive Hoodia claims rile FTC
General Nutrition Centers Inc. (GNC), one of the largest U.S. retailers specializing in dietary supplements, reported a revenue increase of 2.3% and sales of $432.4 million for the second quarter of 2009, despite being negatively impacted by the Iovate Health Science’s voluntary recall of its Hydroxycut weight-loss products. Each of the company’s three divisions posted positive growth compared to the same period in 2008: retail by 0.8%, franchise by 6.3% and manufacturing/wholesale by 7.4%. Same-store sales improved by 0.3%, but would have grown by 3.8% were it not for refunds and lost sales associated with the Hydroxycut recall, the company reported.
This marks the 16th consecutive quarter that the company has posted positive same-store sales growth for its 5,300 retail locations in the United States. “Once again GNC’s financial results were strong despite the continuing recession and the impact of the Hydroxycut recall,” CEO Joe Fortunado said in a prepared statement. “The strength of our brand and core product categories of vitamins and sports nutrition compensated for the short-term loss of sales and margin in the diet category as a result of the recall. Also, our performance highlights the fact that we are significantly less dependent on the diet portion of the business than in the past.”
While many retailers have experienced lackluster sales this year, GNC has grown its business by 2.5%, or $21.5 million, over the first six months of 2009. That figure would have been closer to 5%, but sales were negatively impacted in both quarters by the Hydroxycut recall.
The company’s manufacturing/wholesale division is up 3.5% for the first six months of 2009 compared to the same period in 2008 and is outpacing its other two divisions, something Fortunado said GNC has prioritized in a down economy. “If you remember back to the [Royal Numico N.V.] days, we cut out almost all contract manufacturing. That was a Numico decision and that was a very, very bad decision on their part,” Fortunado told Nutrition Business Journal in March 2009. “Today we’re doing over $125 million in contract manufacturing business. So that’s not only accelerating, but we’ve made a very pointed effort strategically to go after more contract manufacturing to get better absorption in our manufacturing facility.” Revenues increased over the first six months of 2009 in GNC’s other two business segments as well, retail by 2.3% and franchise by 2.8%.
Fortunado also pointed to a historically loyal base of dietary supplement consumers as part of GNC’s formula for success. “If you look back over history, we have developed tremendous brand loyalty at GNC. In the vitamin business, I think the brand loyalty is second to none,” he said. “The brand loyalty in the sports business is continuing to accelerate.”
NBJ will explore the sports nutrition retail landscape in more depth in our upcoming Sports Nutrition and Weight-Loss issue, which will be available in September. The issue will include a feature on Hydroxycut and the ramifications of that recall on the industry. To order a copy of the issue, subscribe to NBJ or download a free 32-page sample issue, go to NBJ’s subscriber page.
Related NBJ Links:
Q&A With Joseph Fortunato, Chief Executive Officer of GNC
2009 NBJ Summit Recap: Transforming Adversity into Opportunity
Sports Illustrated Slams Supplements and DSHEA
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FDA seeks recalls of “tainted weight loss pills”
New initial public offerings (IPOs) came to a near standstill in 2008, as the public market environment grew increasingly inhospitable for companies throughout the course of the year. Now, the IPO market is starting to show signs of new life, although the 21 IPOs launched this year remain a far cry from the hundreds that occurred annually just a few years ago. In recent months, IPOs have been announced for two U.S. nutrition companies that are performing well in the current recession. In June, Vitacost.com, an online retailer of dietary supplements and other health and wellness products, revived its IPO plans by submitting an updated amendment to the original S-1 filing the company logged with the Securities and Exchange Commission (SEC) two years ago. Six months after pulling its previous IPO filing, the parent company of supplement retailer Vitamin Shoppe, VS Holdings, once again filed to go public in July.
Boca Raton, Florida-based Vitacost.com plans to raise as much as $143 million—up from the $57 million the company originally planned to raise—with its IPO. The company’s stock will be listed on the NASDAQ Global Market under the symbol “VITC.” Vitacost.com, which sells its own line of supplements under the Nutraceutical Sciences Institute (NSI) brand, reported that its sales for the 12 months ended March 2009 totaled $156.3 million. The company has more than doubled its revenue and grown its operating cash flow by a factor of 10 since its original public offering filing in 2007. During the first quarter of 2009, Vitacost.com’s overall gross margin increased to approximately 33%, the company reported. One key element of Vitacost.com’s growth strategy is to sell more NSI branded proprietary products, which have a significantly higher gross margin for the company. The company also plans to grow its distribution platform and manufacturing capabilities and expand internationally.
As Nutrition Business Journal reported in July, Vitamin Shoppe plans to raise as much as $143.8 million on the New York Stock Exchange with its IPO.
“Public offerings by companies with strong financials will get done in 2009,” David Thibodeau, managing director of Canaccord Adams, told NBJ Summit attendees in July.
Related links:
With Sales Thriving, Vitamin Shoppe Parent Files for IPO
Is There a Google IPO in the Nutrition Industry?
2009 Direct-to-Consumer / Non-Retail Industry Sales Report
E-commerce Is Now a Must for Nutrition Firms
Alticor, the $8 billion global network-marketing company behind the massive Nutrilite supplement brand, and Metagenics, a leading manufacturer and distributor of medical foods and nutraceutical products through the health practitioner channel, are joining forces. The companies announced on August 11 that they have entered into a joint venture agreement through which Alticor will obtain a substantial ownership interest in Metagenics, which has made a name for itself within the supplement industry with its strong focus on creating and marketing science-backed products directly to medical doctors and other healthcare practitioners.
Details of the agreement were not disclosed, but Metagenics’s current shareholders will continue to retain a significant interest in the company. Alticor, the parent company of Amway Corp. and Amway Global, surpassed the $3 billion sales market with its Nutrilite supplement brand in 2007, the company told Nutrition Business Journal last year. In North America, several hundred thousand independent business owners sell Nutrilite products, which are also available through Amway’s Website.
Metagenics is also a leader in the field of nutrigenomics and has made significant scientific investments in this area, which looks at how genes interact with specific nutrients, through its nutrigenomic research center. Nutrigenomics is also an area that Alticor has invested in with its Nutrilite brand.
Here’s what the two companies had to say about the deal:
“Today is an extraordinary day for Metagenics and its employees and customers around the world as we join forces with a partner that shares our commitment to science-based nutrition and wellness,” said Jeffrey J. Katke, chairman and CEO of Metagenics. “Alticor is an $8 billion global company with an unwavering dedication to research and the development of best-in-class products. We are confident that this joint venture will give Metagenics new opportunities to expand and grow—allowing us to further enhance the innovative product offerings our trusted healthcare professionals have come to expect.”
“Metagenics remains dedicated to its values,” Katke added. “We believe this joint venture, by giving us access to financial resources to support our internal growth and our acquisition strategy, will help Metagenics realize its vision of reversing the chronic illness epidemic. Metagenics will continue to operate as a stand-alone company, delivering medical foods and nutraceuticals through health care professionals around the world.”
“Alticor and Metagenics share a philosophy for promoting good nutrition, healthy living and natural science,” said Jim Weaver, vice president - Alticor Corporate Enterprises. “Each company boasts a deep commitment to science and nature with leading research and development teams dedicated to harnessing the power of plant-based, natural, scientific research. This joint venture fits into our strategy to bring complementary brands into our family of businesses, and we are pleased to be partnering with Metagenics’ world-class employees and management team.”
Related links:
2009 Direct-to-Consumer / Non-Retail Industry Sales Report
Research, Practitioner Education Increase Sales for Metagenics
Nutritional Genomics: Field Is Growing, But Commercial Success Remains Elusive
