The Vitamin Shoppe’s better-than-expected initial public offering (IPO) on October 27 demonstrated that the public markets, which have been generally turned off by retail plays in recent years, see lots of opportunity in the dietary supplement and nutrition sector. The IPO was the first for a retail-based company in almost two years, and it raised about $150 million for the 434-store supplement chain. A week before The Vitamin Shoppe’s better-than-expected opening day, a group of 20 smaller nutrition-related companies convened in San Francisco for the fifth meeting of the Nutrition Capital Network (NCN). The purpose of the gathering was to network with private-equity and strategic investors and hopefully wow them with their 10-minute business pitches. Just as The Vitamin Shoppe’s successful opening day showed that the overall IPO market is beginning to thaw, the NCN meeting proved that innovation within the nutrition industry remains strong and that investors continue to see opportunities in the growing health and wellness market.
Chaired by Grant Ferrier and Thomas Aarts (who founded Nutrition Business Journal in 1996), NCN was created to help grease the financing wheels for entrepreneurs and introduce investors to the next generation of successful brands in the nutrition, natural and organic, and green product industries. More than 80 companies applied to present at NCN V. Ranging in scale from startups to a $100 million brand, the 20 chosen represented successful and growing businesses in the food and beverage, food service, supplements and nutrition, and skincare categories. “The level of sophistication in early-stage companies continues to grow, but the passion and drive of the individuals behind them has not subsided,” said Ferrier, who is NCN’s CEO and co-chairman. “We saw that in the 20 companies that presented last week but also in the 80-odd that applied during this cycle.”
Each company that presented represented an innovative technology or tapped into a growing trend within the overall nutrition industry. Below are a few highlights:
Cambridge Theranostics: Based in the United Kingdom, Cambridge Theranostics sells a lycopene-based supplement called Ateronon that is backed by a wealth of compelling research showing its ability to inhibit the oxidation of LDL (bad) cholesterol (oxidized LDL is what triggers heart attacks and other cardiac events). Ateronon is currently sold in 75% of all UK retail pharmacies, and the company is looking for capital to fund its expansion into the United States, the Middle East and China. Cambridge Theranostics is focused on educating practitioners and pharmacists on the benefits of Ateronon so that they will recommend it for their patients and customers.
Dale and Thomas Popcorn: What was interesting about this company is how successful it has been with both its retail brand (Popcorn, Indiana) and its direct-to-consumer brand (Dale and Thomas) without having made any real investment in advertising. Popcorn, Indiana is now the No. 2 popcorn behind Smart Food, and its better-for-you popcorn is selling well in alternative retail chains such as Bed Bath & Beyond and Best Buy.
Freshology: This Burbank, California-based company sells fresh, gourmet, portion-controlled meals directly to consumers, with the goal of taking on companies such as Nutrisystem and Jenny Craig. Freshology is also launching a line of frozen foods next year, and its business model taps into the growing consumer demand for healthy, customized meal solutions. With a production facility at the Burbank Airport, Freshology is able to send its fresh meals all over the country, and I see potential for the company partnering with gyms, wellness clubs and weight-loss clinics to offer fresh, portion-controlled meal solutions to their members.
Froozer: This Lake Mary, Florida-based company’s pitch was certainly the wackiest—and the best tasting. Froozer President Arnold Zweben wheeled in this machine that looked like a frozen yogurt maker. Into the machine went a bunch of frozen fruits and vegetables and out came this cold puree that looked and tasted a lot like soft serve ice cream—only it contained no added sugar, dairy or other ingredients. The machine is called a Transmogrification Unit, and it transforms frozen fruits and vegetables into a whole food frozen confection in seconds. The company said it has done a bunch of focus group research with kids, who like the product because it tastes and looks like soft serve ice cream. Froozer has developed a production system that is able to produce push up pops or other frozen confections made entirely of whole fruits and vegetables. The one I tasted was made with strawberries, bananas, turnips, tomatoes and cucumbers. It was really good and was something my two young boys would have loved.
Herbs of Mexico: Founded in 1948, Herbs of Mexico operates one health and wellness retail store dedicated to the Hispanic community in East Los Angeles, with a second store opening soon. The company wants to open more stores for the growing Hispanic population, which tends to be heavy users of herbal products and other complementary and alternative (CAM) therapies. In fact, Martin Lopez, Herbs of Mexico’s managing owner, said 80% of Hispanics use herbal products and 60% view herbs as medicine. The company also has an e-commerce model and is focused on first expanding its retail locations throughout the Southwest, where it hopes to open 35 to 40 stores in the next five to seven years.
Heritage Foods: Heritage Foods was founded by Patrick Martins, who founded Slow Food USA (he’s sort of a celebrity in the slow foods movement). Through a successful Internet/mail-order catalog model, Heritage Foods sells ethically raised heritage meats (such as Berkshire pork and Bourbon Red turkeys). With all of the recent meat safety scares and the backlash against factory farms, Heritage Foods could represent the future of meat production in the United States—at least for the growing segment of consumers who care about where their meat comes from and how it was raised. The company doesn’t appear to be going after the organic label, but in some ways what it is doing could do more to influence consumer purchasing habits.