Natural Foods Merchandiser

IdeaSphere Expands Its Circle

You won?t find much about IdeaSphere Inc. in the press. And forget about checking out its Web site—it doesn?t have one. Yet the company has managed in little more than two years to line up a talented management team, acquire a respected brand of nutritional supplements, and position itself for maximum impact in an industry that has no defined leader.

?We intend to be that dominant player,? says IdeaSphere?s president, Mark Fox, who estimated that company revenues could exceed $200 million this year.

The industry Fox wants to dominate is the health and wellness business, and IdeaSphere is his way to get there. As Fox describes it, IdeaSphere is more of a ?one-stop? lifestyle enterprise than just another natural products company.

Besides selling natural and organic foods, beverages and nutritional supplements through retail outlets and online channels, IdeaSphere also publishes nutrition and science newsletters and magazines. And it puts the healthy living philosophy of celebrity motivational speaker and lifestyle coach Anthony Robbins on prominent display.

Based in Grand Rapids, Mich., the company is closely held by its principal owners, which include Robbins; Amway heir Dave Van Andel, who serves as chairman and chief executive officer; Peter Lusk, vice chairman of a $1.5 billion global hedge fund; and Fox, an industry veteran.

Industry analyst Patrick Turpin, a managing director at USBX Advisory Services in Santa Monica, Calif., thinks the time is ripe for consolidation in the industry. With baby boomers increasingly turning to supplements and weight-loss pills to stave off the scourge of aging, the market for health and wellness products continues to expand.

Turpin estimates that sales of weight-loss supplements and formulas, a $4.5 billion-a-year industry, are growing at 13 percent annually. Likewise, the $2 billion-a-year sports-nutrition field hums along at a 9 percent annual growth rate.

?The category has gone from being a niche category to a high-growth category with strong tailwinds behind it,? Turpin says. ?That creates an environment that is attractive to a few dominant brands.?

While it does make its own line of vitamins and nutrition supplements, IdeaSphere is counting on the better-known brands it owns to turn it into a major player in the industry. Quietly, but methodically, IdeaSphere has been acquiring or partnering with existing brands and companies to build a portfolio of products and services.

IdeaSphere plucked Twinlab Corp. out of bankruptcy late last year and now owns its venerable line of nutritional supplements. Around the same time, the company signed up to be the marketing and distribution arm for A2 Corp., a New Zealand-based company that wants to introduce a new milk product to the global marketplace either this year or next.

?It seems like they haven?t made much traction in developing their own products, so the acquisition of Twinlab was an attempt to seek out a platform to more successfully market products other than the ones they?ve developed themselves,? Turpin says.

Fox says the company hopes to launch about 20 new supplement and vitamin products this year. Meanwhile, it continues to hammer out partnership deals. IdeaSphere is in negotiations with a large apparel company and a major chain of natural grocery stores whose names Fox would not disclose.

But IdeaSphere?s focus is not only on physical products, Fox says. IdeaSphere also wants to incorporate educational and informational components into its operations. That?s why it purchased publishing company Rebus LLC, which gives IdeaSphere the capability to relay its healthy-living gospel to the masses via the printed word.

?In a way, we?re the anti-supplement supplement company because we?re not going to tell you that there?s a silver bullet out there,? Fox says. ?We?re talking about a new approach to having a healthy life.?

That approach includes a heavy dose of what the company refers to as ?emotional fitness.? And who better to take on that subject than Robbins, emperor of the late-night infomercial and currently IdeaSphere?s vice chairman of sales and marketing.

?One channel that they?ll be exploiting is the Tony Robbins masses,? Turpin says.

And what a following it is. Robbins has been on late-night television for years, exhorting people to realize their potential and selling tens of millions of books and tapes in the process. Now, IdeaSphere is tapping into that fanatical client base.

But Robbins says his larger-than-life persona is just a part of IdeaSphere?s recipe for success.

?I don?t want to just splash Tony Robbins across all the products,? Robbins says when reached by phone during one of his whirlwind weekends of meetings and East Coast TV appearances. ?I?m looking to be a strategist and engineer. I?m involved because I?m passionate about changing the quality of people?s lives.?

Because Robbins is less of an IdeaSphere brand and more of a visionary, the company is turning elsewhere for brand identity. With its acquisition of bankrupt Twinlab?s assets in December, IdeaSphere picked up a successful line of vitamin, herbal, diet, energy and sports-nutrition products, including well-known names like Metabolift and Ripped Fuel.

?Twinlab is still one of the best brands in the natural foods industry,? says Scott Van Winkle, an analyst who follows the company for Adams, Harkness & Hill in Boston. ?It?s a viable business that simply needs to be restructured.?

Twinlab got into trouble a few years ago when one of its big retailers, GNC, faltered during some ownership changes. More publicly damaging was the controversy that developed over ephedra, an herbal stimulant that was present in many of the company?s products. The supplement had been linked to health problems throughout much of the 1990s and the federal government finally banned it at the end of last year.

Even though Twinlab phased out ephedra from its products in early 2003, it couldn?t overcome the damage the stimulant had done to its business. Coupled with Twinlab?s distribution problems, the ephedra mess led to lawsuits and several years of declining revenue. In 1999, Twinlab reported annual sales of $315 million. By 2002, sales dropped by more than half, to $146 million. In September 2003, the company filed for Chapter 11 bankrupcy protection.

IdeaSphere was the winning bidder in bankruptcy court, picking up Twinlab?s assets for $57.5 million and assuming $3.7 million of the company?s liabilities, according to Fox. Significantly, IdeaSphere made sure that the terms of the deal excluded the company from the litigation Twinlab still faces as a result of the ephedra debacle.

The company will retain all 460 Twinlab employees, adding a sizeable bulk of personnel to IdeaSphere?s existing staff of 30 employees in Grand Rapids and 42 employees at Rebus in New York City.

On the production side, the acquisition gives IdeaSphere Twinlab?s manufacturing facility in Utah, so it will no longer need to outsource those operations. Combined with 6,000 acres of organic farmland on which it grows its raw materials, Fox says the company now has complete oversight of its entire supply chain.

?We have ultimate product quality because we are one of the few companies that controls the product from seed to shelf,? he says.

Fox hinted that more acquisitions could happen down the road; but he also says IdeaSphere doesn?t have any growth milestones it is aiming for at this time. While not specific about the company?s capital reserves, he says IdeaSphere is in a comfortable position.

?We have access to capital,? he says. ?Given the partners? history, capital is not an issue.? Some of that cash flow results from IdeaSphere?s relationship with Alticor Inc., formerly known as Amway Corp., a $4.9 billion enterprise also based in Grand Rapids. In fact, Alticor was largely responsible for spawning IdeaSphere as a concept. Besides Van Andel, Bill Nicholson—who was chief operating officer at Alticor for nine years—is a partner and vice chairman of IdeaSphere.

Turpin says that while IdeaSphere may be sitting pretty with plentiful cash reserves, it isn?t the only company in the health and wellness field trying to carve out a leading position. Turpin says some ?industry heavyweights? are currently putting together business plans to launch competitors to IdeaSphere, complete with their own versions of Tony Robbins.

?IdeaSphere is not going to be the only high-profile entrant into this market,? he says. ?You will see other entrants with celebrities backing consolidation.?

John Aguilar is a free-lance business reporter in Denver.

Natural Foods Merchandiser volume XXV/number 3/p. 64, 67-68

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