Fitness Focus Fuels Supplement Sales, but Not Where You Might Expect 

Author: Andria Cheng

August 9, 2017

Health-conscious consumers are spurring growth in the vitamins, sports protein drinks and nutritional supplements category, but this CPG spending bright spot isn't necessarily boosting results at specialty retailers focusing on the vitamins and supplements trade.

Vitamin Shoppe, for instance, on Wednesday reported an 8.3% decline in Q2 comparable sales, including a 7.6% drop in physical-store sales and a 20% plunge in comparable online sales. That followed a Q1 comparable sales decline. Before this year, same-store sales have been down or basically flat in each of the past three years, compared to a peak 8.2% increase in 2012.

Meanwhile, larger rival GNC in late July reported a 0.9% same-store sales drop in US company-owned stores, including GNC.com, while comparable sales at US franchise locations edged lower 1.1%. The decline also followed drops in Q1 and in each of the past three years. In 2012, GNC also saw a peak sales gain of 11.5%.

In contrast, US retail sales of vitamins and dietary supplements have risen an annual average of 5.5% since 2011 to $14.47 billion in 2016, according to Euromonitor data. That’s a bright spot in the mature CPG industry. An IRI study of actual sales in the category found that increased demand for weight control products, nutritional bars and probiotics led the 5.8% sales gain of nutritional supplements in the year through August 2016, outpacing the 1.2% increase in the $760 billion CPG industry during the same time.

If your first instinct is to blame Amazon for the underwhelming performance at GNC and Vitamin Shoppe, you are only partly right. Yes, IRI data does show that Amazon helped drive higher online sales of vitamins and weight control products, but Amazon, with the various perks and two-day free-shipping it offers Prime members and its ability to undercut its rivals by price, is only part of the story.

Major retailers from Walmart to Costco are also gaining share as they stock more of the sports protein powder and other in-demand diet supplements. For instance, while 2016 sales at specialty stores like a Vitamin Shoppe declined 1.4%, Walmart alone saw sales in the category jumped 7.3% while warehouse clubs led by Costco saw a 10.3% sales surge, IRI data showed. Grocery and drug stores also saw gains of at least 5.5% each, according to the IRI study.

Vitamin Shoppe CEO Colin Watts has said in an earnings call in May that the company’s sports side of the business has faced a progressively worsening competitive environment.

“There has been a significant expansion of assortment at food, drug, mass and club channels as well as a greater focus by major online competitors in the sports category over the past year,” Watts said. “Many are using price to attract new customers.”

Meanwhile, the few sports protein manufacturers that dominate the market have increased their focus on online and mass channels, “which has been to the detriment of the specialty channel,” Watts said, adding its research also showed sports customer tends to be less “channel loyal and more price-sensitive” than its core customer.

IRI data showed weight control product and nutritional bar sales last year rose 10% and 4.9% respectively, outpacing 1.2% growth in multi-vitamin segment, for instance.

To be sure, both GNC and Vitamin Shoppe bear some responsibility for not responding to changing consumer shopping patterns faster.

In the age of price transparency, where consumers can easily compare price on their mobile devices, GNC, for its part, in late December closed all of its 4,400-plus stores for one day to make sure it has the same price both in stores and on GNC.com, replacing what it described at the time “multiple pricing structures across channels and membership levels.”

The “One New GNC” move also includes, as Interim CEO Robert Moran said in July, ending its “addiction” to the “excessive promotions in BOGOs,” or such deals as buy one and get one free offers.

The company also has unveiled a new loyalty program, My GNC Rewards, which includes a free membership and a $39.99 Pro Access one that gives perks like free shipping all year on GNC.com or access to a dedicated support line. GNC said in July its new membership program has signed up about 7.8 million members. This year it also opened a store on Amazon.com.

“Because more than 50% of online products searches happen on Amazon, and of those, 37% buy that product in the store, we believe Amazon is not a death knell for brick-and-mortars, but a great advertising platform that puts us right in the path of countless new customers,” Moran said in July. GNC is also expanding its private label lines including Beyond Raw and Total Lean and is better training its store-employees to better assist customers.

“We are not satisfied with where we are and we are testing vehicles that can move the needle faster,” he said.

Vitamin Shoppe, for its part, is also doing something similar while also trying to up its ecommerce features to better integrate with its stores. It is cutting costs and expanding its private label products and training employees. Like GNC, it is also focusing on its over 6 million active Healthy Awards members, who the company said represented close to 90% of total sales. Last year, Vitamin Shoppe introduced buy online and pickup in store and made its online site more “mobile friendly.”

Still, the jury is out on whether the various initiatives can work fast enough to reverse sales declines.

“The results during the quarter were disappointing and the challenges are clear,” Watts said in a statement Wednesday. “The market environment evolved more quickly than we anticipated, particularly in the sports categories.”


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