GNC Sales Increase 10% In 2000, Capture 14.9% Market Share
This article was originally published in The Tan Sheet
Executive Summary
A near doubling of GNC/Rite Aid "stores-within-stores" to 1,000 outlets nationwide is planned by 2002 and GNC parent Royal Numico sees the expansion as key to increasing its presence in the mass market.
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A near doubling of GNC/Rite Aid "stores-within-stores" to 1,000 outlets nationwide is planned by 2002 and GNC parent Royal Numico sees the expansion as key to increasing its presence in the mass market. In 2000, the firm opened 229 GNC franchises in Rite Aid stores, raising the current number to about 540 locations. GNC wholesale revenues, which represent sales to Rite Aid venues, leapt 28.2% to $50 mil., Numico said. The Dutch conglomerate expects continued growth in the segment as GNC/Rite Aid franchises are added. General Nutrition Companies' total sales increased 10% to $1.38 bil. in 2000, Numico announced at an analysts meeting in Amsterdam March 6. GNC-owned retail stores contributed roughly $1.08 bil. to revenues, a 9.9% increase over 1999. Fees from franchisees comprised $236 mil. of the total, an 8.2% jump from 1999 ($1=[Euro]1.07). GNC's U.S. same-store sales rose 6.5% for the year, with overseas comparable store sales up roughly 14%. Numico noted GNC currently operates over 5,000 retail stores worldwide, 62 of which opened in 2000. The supplement retailer's private label business, which includes products sold to third parties for separate-label use, dropped 56.4% to $36 mil. in 2000. Numico attributed the decrease to low margin sales. The firm plans to phase out private label operations as it focuses on its value-added products, such as GNC branded supplements. According to Numico, GNC holds a 14.9% share of the overall supplement industry, which the company estimates to be a roughly $10 bil. market. GNC's share has gradually advanced from 14.1% in 1999 and 13.6% in 1998, the firm noted. Building on the availability of Numico's MyoVive dietary supplement beverage in New York-area GNC stores, the firm is working with research-oriented hospitals in the state to introduce the product to cardiologists. Claiming MyoVive "supports patients with congestive heart failure," Numico aims to recruit cardiologists to recommend the supplement for patients who recently have suffered a heart attack. Through the firm's subsidiary, Scientific Hospital Supplies, Numico is setting up a U.S. sales force to gain entrance to hospitals nationwide. Over the next several years, Numico plans to launch the drink in large academic hospitals throughout the country. Numico reported overall Rexall Sundown sales of $433.6 mil. for the seven months beginning June 5, when the firm's sales were consolidated into Numico's accounts. By comparison, in its FY 2000 second quarter 10Q filing with the Securities & Exchange Commission, Rexall reported sales of $318.4 mil. for the six months ended Feb. 29, 2000. Royal Numico acquired Boca Raton, Fla.-based Rexall for $1.8 bil. in May as part of an effort to strengthen its position in the U.S. supplement industry (1 (Also see "Royal Numico/Rexall Sundown Eyes Private Label As Key Growth Area" - Pink Sheet, 8 May, 2000.)). In the materials presented to analysts, Numico stressed that while Information Resources, Inc. (Chicago) data indicate a decline in mass-market supplement revenue, "most of Numico's U.S. supplement sales are not reflected in IRI data, and are growing." Rexall's specialty sports products, which include the Worldwide Sports Nutrition and Met-Rx lines, saw sales of $161 mil. in 2000, a 13% increase over the year-ago period. Sales at warehouse clubs such as BJ's and Costco leapt 23% to $67 mil. for the year. However, Rexall and Enrich International's combined multi-level sales fell by 2% to $339 mil. Numico's worldwide supplement sales were $2.18 bil. for the year, up 259%. Under Numico's revised category structure, Consumer Diets & Sports (sports nutrition and weight loss products) accounted for $880.4 mil. and Vitamins & Herbs achieved sales of $1.3 bil. Reflecting the additions of GNC and Rexall, overall Numico sales jumped 83.7% to $3.95 bil., compared with $2.15 bil. in 1999. Numico's North American business achieved $1.88 bil. in sales, comprising 47.5% of the conglomerate's total revenue. The Dutch firm predicts "at least 15%" growth in 2001, continuing its average pace over the past few years. Numico additionally announced it will sell its Nutricia Dairy & Drinks Group, which consists of several dairy companies in Europe, to Friesland Coberco Dairy Foods for roughly $620.6 mil. The transfer is part of Numico's strategy to focus on "its core activities" such as nutritional supplements, the firm noted. |