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.