NATURE'S BOUNTY TARGETING CHAIN STORE CUSTOMERS IN WESTERN U.S.

NATURE'S BOUNTY TARGETING CHAIN STORE CUSTOMERS IN WESTERN U.S. as part of the company's expansion plans, the Bohemia, N.Y. dietary supplement firm reported in an Aug. 18 stock offering prospectus. Outlining its overall growth plans, the company said it "intends to continue a strategy of increasing sales to existing customers and of attracting new customers through each of its [wholesale, retail and mail order] channels, especially the addition of chain store customers in the western U.S. and the addition of new direct mail customers." In anticipation of increased business in the western states, Nature's Bounty acquired "certain assets" including the inventory, mailing list, accounts receivable, machinery and equipment, and trademarks of California distributor Prime Natural Health Labs for $ 5 mil. cash in June. Nature's Bounty also has leased a 60,000 square-foot facility for packaging and warehousing in Carson, Calif. that enhances the company's ability to distribute its products in the Los Angeles area. Sales to retailers and chains for fiscal year 1993 (ending Sept. 30) should approach $ 60 mil. Through the nine months ended June 30, Nature's Bounty reported that sales to retailers and chains totaled $ 42.5 mil., up 35.6% from the comparable period in 1992. Overall nine month sales counting mail order and retail store sales increased 33.6% to $ 96.3 mil., putting Nature's Bounty on track to top $ 130 mil. in sales for FY 1993. Currently, Nature's Bounty markets 350 products -- primarily vitamins and other nutritional supplements -- under eight different labels. The company sells its 250-product signature brand to chains -- including Genovese Drug Stores, Osco, PayLess Drug Stores, Eckerd Drugs, Walgreens, Lucky Stores and Smitty's Supervalu -- and to major pharmaceutical distributors McKesson and Bergen Brunswig. Nature's Bounty's value-priced Natural Wealth line is marketed to deep discounters and mass merchandisers such as Albertsons, Giant Eagle, Tom Thumb, Randalls, Red Food Stores, Fleming, Spartan, and most recently Woolworth's, according to the prospectus. The company said it will target drug store chains and supermarkets in its efforts to step up sales. Nature's Bounty manufactures about 55% of all its supplements and expects "to increase such percentage substantially by December 1993." The company indicated that it has room to grow in its production facilities; the prospectus notes that Nature's Bounty's current plants "will be adequate for [the company's] operations for the next two or three years." In the mail order area, Nature's Bounty said it intends to "continue its strategy of adding new customers by acquiring the customer lists, brand names and inventory of other mail order companies which have similar or complementary products." In August 1992, Nature's Bounty purchased Beautiful Visions (USA) "primarily to acquire the mailing list," the prospectus explains. In addition, since 1989 Nature's Bounty has purchased assets from four other companies in the mail order area. Nature's Bounty mails out catalogs for the company's Puritan's Pride and Beautiful Visions product lines about eight times a year. The company calls its mail order response rate "among the highest in the direct mail industry," and promotes its mail products through Sunday newspaper ads, insert programs with other mail order companies, and special quarterly promotions. In the nine months ended June 30, the mail order business generated $ 48.4 mil. in sales, up 35.8% over the same period in FY 1992. The retail segment of Nature's Bounty comprises 30 stores and kiosks in eight states. The stores have an average selling area of 1,000 square feet, while the kiosks average 190 square feet; both carry a "full line of products" under the Vitamin World line. In 1993, the company expects to open an additional three stores. Through the nine months, the retail outlets generated $ 5.5 mil. in sales. Nature's Bounty explained in the prospectus that its retail business, in addition to selling its supplement lines, also provides the company with first-hand market research. The stores and kiosks, according to the prospectus, allows Nature's Bounty, "through direct interaction between the company's personnel and the public . . . to identify buying trends, customer preferences or dislikes, acceptances of new products, and price trends in various parts of the country. This information can be gathered and acted upon more rapidly than analyzing sales reports from wholesalers, distributors, and independent retailers," the company said. Nature's Bounty advertising is handled by an in-house staff of 14 employees. For the nine months ended June 30, the company reported spending $ 8.1 mil., or 8.4% of its net sales, on print and media advertising, including a budget for cooperative advertising with its "wholesale" customers. The prospectus covers a 2.4 mil. share offering by Nature's Bounty Chairman Arthur Rudolph, who presently holds a 15.2% stake in the company. Rudolph is liquidating nearly his entire equity stake as he steps down from the top spot at the company he founded in 1971 in order "to pursue other interests." Following the sale, he will hold 166,000 shares and will continue to sit on the company's board of directors. Rudolph, 65, will be succeeded as chairman by his son Scott Rudolph, 35, who has served as president of Nature's Bounty for the past six years and recently was named chief executive officer. The younger Rudolph, with nearly 3.4 mil. shares, will continue to control the largest equity stake in the company (about 18%) on completion of the stock offering.