What's good for the GNC customer is great for the company's bottom line. GNC Holdings operates the world's leading nutritional-supplements retail chain devoted to items such as vitamins and dietary products. The firm makes Rite Aid private-label products and through a partnership with drugstore.com sells its products online. Altogether, GNC has some 7,200 stores, consisting of 2,900 company-owned stores in the US, Canada, and Puerto Rico, followed by 2,300 franchised stores in 46 countries, and 2,000 store-within-a-store sites in Rite Aid locations. GNC is owned by the Ontario Teachers' Pension Board Plan, its affiliate Ares Corporate Opportunities Fund II, and management. The company went public in April 2011.
The company is banking on being well-positioned to capitalize on the favorable industry trends, such as the aging US population and consumers' interest in maintaining and improving health. Vitamins account for 40% of sales. GNC points to its iconic brand and top position (in number of stores and global reach) as the specialty retailer of health and wellness products as its primary competitive strengths. The supplements peddler also cites its recent website redesign, capital investment, and entry into partnerships with PepsiCo and PetSmart as ways it plans to strong-arm its competition. (Its PepsiCo partnership involves support for the launch of a new Gatorade product; its PetSmart venture will see the launch of a line of GNC-branded pet supplements.) Extending its cooperation with PepsiCo, the two companies have formed a joint venture to develop and sell fortified coconut water products under the newly-created Phenom brand. The products debuted in GNC stores in 2011 prior to a wider release in retail stores.
GNC's strategy for growth involves boosting its company-owned domestic retail earnings and square footage while increasing its international presence. Indeed, the vitamins chain upped its retail sales from 66% of its 2009 revenues to 74% in 2010. It also plans to expand its e-commerce business and continue to leverage the GNC brand. In mid-2011 GNC acquired LuckyVitamin.com, an online retailer of nutritional supplements, for an undisclosed amount. The purchase will help the company expand its online retail business. The company is using the $414 million in proceeds from its initial public offering for working capital and general corporate expenses.
Even prior to the IPO, GNC had been working hard to shed its "muscle head" image by redesigning all of its US stores, which measure between 1,000 and 2,000 sq. ft. By luring more women and seniors into its shops, the company wants to increase its share of the nutritional supplement market. To that end, the company launched a line of women's fitness, nutrition, and wellness products in 2009 called GNC WELLbeING. (It purchased certain fish oil and probiotic products from Lifelong Nutrition that year and rebranded them under the WELLbeING banner.) It has also pumped up its website, GNC.com, with e-commerce capabilities. The company and Lifelong entered into a product development and distribution agreement in 2010 to create a branded line of supplements to be manufactured by Lifelong. (GNC board member Carmen Fortino is a board member of and stockholder in Lifelong.)
Rite Aid has extended its previous agreement to build GNC Live Well stores-within-a-store. As part of the extension, GNC will create 1,125 more stores in Rite Aid locations nationwide by the end of 2014. Aiming to extend the brand beyond its own and Rite-Aid venues, GNC has been inking deals to build its boutiques within other stores other. For example, the Canada-based Forzani Group signed on in 2009, launching performance nutrition shops in Calgary. GNC centers are expected to open in Forzani stores outside of Calgary during 2010. The move has helped to boost the company's sales of sports nutrition items from 38% of revenues in 2009 to 43% in 2010.
The company faces increasing competition from mass merchants like Wal-Mart, natural and organic grocery chains such as Whole Foods, and even traditional supermarkets and drugstores. In addition, the company is still involved in litigation stemming from its sale of ephedra-based products in 2003. (Ephedra is a steroidal stimulant that has been linked to a high rate of serious side effects and a number of deaths; the sale of supplements containing ephedra in the US was banned by the FDA in 2004.)