GNC Taking Rite Approach To Mass Market Entry

General Nutrition Companies will add 1,500 full-line mass market locations over the next three years through a deal with Rite Aid involving the installation of GNC "stores within stores" in the drug chain's outlets nationwide, the firms announced Jan. 7.

Under the licensing agreement, the GNC stores will be manned by specially trained Rite Aid personnel and sell GNC's complete line of products, which include vitamin/mineral supplements, sports nutrition and herbal products.

Rite Aid is cutting back its housewares and general merchandise sections to accommodate the GNC stores, which will range in size from 400 to 1,000 sq. ft.

The cost of adding the GNC stores is estimated at $35,000-$50,000 per store. Rite Aid, however, expects its vitamin/supplement sales in the stores housing GNC outlets to double in the first year. The store chain will continue to carry other manufacturers' supplement products.

Rite Aid has recruited former Leiner Health Products Exec VP Stanley Kahn to run the new venture for the company. Kahn was with Leiner for 19 years.

The GNC outlets will begin to open in the first quarter on the East Coast. GNC is based in Pittsburgh and Rite Aid in Camp Hill, Penn.

Rite Aid operates about 3,900 drug stores in 30 states and Washington, D.C. GNC has 3,898 retail specialty stores mostly under the General Nutrition Centers name - 2,566 of which are company-owned and 1,332 of which are franchises - in all 50 states, Puerto Rico and 23 overseas markets. The GNC stores in Rite Aid outlets will be company-owned.

Rite Aid and GNC also have agreed to develop and sell a new vitamin and nutritional supplement line called PharmAssure, to be manufactured by GNC. The brand will be sold at all Rite Aid stores as well as in GNC's 3,650 U.S. stores. The line will be on shelves in October.

PharmAssure will consist of 40-50 SKUs of "premium" formulas targeting specific problems and prevention aspects such as "bone health." The line will include at least one product based on Procter & Gamble's patented calcium citrate malate, which GNC licenses exclusively ("The Tan Sheet" Aug. 18, 1997, p. 13). More than 100 SKUs of "simple" combination and single-ingredient products such as natural vitamin E also will comprise PharmAssure.

Rite Aid and GNC plan to support the launch of PharmAssure with more than $30 mil. for TV and print ads during the brand's first year. The advertising is expected to be funded by savings associated with GNC becoming the exclusive manufacturer of Rite Aid's private label vitamins and supplements, the firms said.

The companies also are teaming to create a Web site devoted to nutrition, www.gnc.riteaid.com. The site is expected to be up and running by Oct. 1.

Users will be able to buy nutritional supplements, vitamin products and OTCs, as well as get prescription refills online. Eventually, the site will be enhanced to allow health care professionals to put new scripts online, the firms noted. The site also will offer free information on nutrition and pharmacy care.

Rite Aid and GNC have allocated $9 mil. to advertise and market the new Internet site for its first three years. The firms are sharing fulfillment and other costs.

GNC commented the alliance "strengthens" its "leading brand position by adding 1,500 new locations, most of which will be in free-standing Rite Aid stores representing real estate and consumer access that is incremental to GNC's stated growth plans." Most GNC stores are in shopping centers and malls, while most Rite Aid stores are free-standing.

Rite Aid said the venture is an "ideal complement" to its Vitamin Institute pharmacist education program, which trains pharmacists about vitamins, minerals, herbs and other nutritional supplements and how to counsel consumers in their use. The stores also will feature GNC's "Bionutritional Encyclopedia," an interactive, touch-screen educational device that provides information on supplements to consumers.

"Outside of our pharmacy business, nutritional supplements are Rite Aid's fastest growing category, and retail is the fastest growing channel for selling nutritional supplements," the drug chain noted.