Are there any attractive investment targets left in sports nutrition? With so much activity in recent years—Glanbia snatching up both Optimum Nutrition and BSN, GlaxoSmithKline buying Europe’s Maxinutrition, TA Associates and VMG Partners making respective investments in Dymatize and Vega—the pool of quality talent might be growing a bit thin.
Quality talent in sports nutrition often looks like charismatic and committed founders who understand the category and effectively navigate the challenges of growth without sacrificing quality.
With DMAA making national headlines as the most recent cause for concern in some corners of the category, NBJ decided to ask two active investors in the space to describe their approach to navigating market terrain.
Here’s how the smart minds think about sports.
Inside the minds of top sports nutrition investors
Joe Rhodes, Stockton Road
Rhodes is the founder of Stockton Road Capital (SRC) based in Hoboken, N,J. In the last 15 months, Stockton Road has invested in such notable sports nutrition brands as Designer Whey (through Designer Protein and its rollup to Athena Wellness Brands) and Maximum Human Performance (MHP).
Says Rhodes: “In vetting specific sports companies, I tend to consider the following five points:
I want to feel like the company and its products play in a meaningful category so there’s real opportunity to grow. With sports nutrition, this is sort of a given, but I do want to know there is big market potential.
Next, I look for a great brand with authenticity and a core base of highly dedicated consumers. I want to see that if people try the products, they love the products.
Safety & regulatory.
I also look at the legality, appropriateness and safety of the products themselves, including marketing claims and the GMP compliance of the value chain.
Finally, I assess whether SRC can be a good partner and truly add value to the business. With our most recent investment, Designer Protein, we purchased the business from a founder who wanted to move on to new things. An operating partner, Cyrill Siewert, took over leadership of the business in the interim. We then recruited a worldclass CEO, Grace Jeon, to lead the business and our role through Cyrill stepped back to a more advisory role as chairman.
In other investments, we’ve backed existing management teams and look more to support them with our experience and insights.”
Brian Smith, PCGA
Smith is partner at Partnership Capital Growth Advisors (PCGA) based in San Francisco. At PCGA, Smith was closely involved in the Athena Wellness transaction, as well as an investment with TSG Consumer Partners in Cytosport, home to MuscleMilk. Prior to joining PCGA, Smith worked in corporate development at EAS.
Says Smith: “The No. 1 issue I consider? Making sure that a potential investment’s ingredient decks and product profiles meet the strict quality standards of a strategic buyer. Beyond that, I tend to ask myself five specific questions:
- How much headroom remains in the exisiting distribution channels?
- How easily can this company cross over into new channels, like FDM, convenience stores and international?
- Can the company expand its consumer base along that continuum from hardcore to enthusiast, or is it pigeonholed?
- With the current product portfolio, do opportunities exist to infill with formats for each usage occasion?
And finally, who do I sell this to? What’s my exit strategy?”