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Clorox’s $700 million deal to buy Nutranext suggests omnichannel era in M&A

wellnext rebrands as nutranext
Nutranext’s portfolio of brands includes Rainbow Light, NeoCell and Stop Aging Now, and gives Clorox presence in a variety of channels.

Clorox’s decision to buy the Nutranext family of supplement brands for $700 million in a deal announced Monday could be a sign of a must-have requirement for strategic acquisitions, insiders say.

The obvious and urgent need of big legacy consumer packaged goods companies to buy into health and wellness has been obvious for years. The natural products industry is growing as conventional brands remain sluggish at best. But Clorox picking up a stable of smaller brands suggests big companies like the $17 billion corporation are examining their omnichannel strategy closely. Growth and scale were always important, but an ominchannel presence has become a crucial piece in the M&A puzzle.

“I believe that Clorox was as interested in their direct-to-consumer capabilities and brands as they were in the vitamin and minerals supplement category,” said William Hood, investment banker at William Hood & Co. While brands like NeoCell and Natural Vitality stand out for being on trend with collagen and magnesium, respectively, Hood says none of the brands were likely attractive on their own to companies like Clorox as strategic buys. It is the range of brands and the channels where they sell that likely made Nutranext a target. “The sum was larger than its parts,” Hood said.

Rainbow Light is strong in the natural channel, as was Clorox’s 2007 buy, Burt’s Bees, which proved that the gib CPG was comfortable in natural retail. In 2016, the company bought Renew Life, a probiotic brand with a large presence in natural. But the direct-to-consumer expertise of Stop Aging now was likely more attractive to Clorox, Hood says.

David Thibodeau, investment banker at Wellvest Capital, echoed Hood’s observations, noting that Stop Aging Now and NeoCell were the most attractive brands in the mix. “They weren’t buying this for Rainbow Light,” Thibodeau said.

Both Thibodeau and Hood called the deal yet another obvious sign that big CPG has figured out that the future is in natural products and wellness, a future largely defined by millennials’ interest in natural health alternatives. When the millennial interest is matched with proven strategies to sell online—where millennials shop—interest from strategic investors can be strong and valuations high.

Hood said that M&A interest is unlikely to stall out unless there is an economic downturn and broad equity shakeout. Beyond that difficult-to-predict prospect, he sees another strong year to follow the historic activity of 2017, a year that included immense acquisitions like Amazon buying Whole Foods Market and Nestle buying Atrium Innovations.

For Thibodeau, the level of M&A in supplements could become a matter of supply and demand. Nutranext’s large portfolio delivered on scale, but strategic investors aren’t looking to cherry pick small companies, he said. There is a limited number of mid/large brands left to buy. “At some point, we’re going to start running out of inventory,” he said.

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