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NBJ

Health Clubs and Gyms Work to Bulk Up on Sports Supplement Sales

As Jeff Compton, chief operating officer and president of Europa Sports Products, told Nutrition Business Journal recently, when he and Eric Hillman started their supplement distribution company in 1985, health clubs and gyms were the main retail source for sports nutrition and bodybuilding supplements. That changed in 1999, however, when the death of a New York woman potentially linked to an ephedra-based supplement spawned lawsuits against the personal trainer who recommended the supplement, the Crunch Fitness club that employed him, and Vitamin Shoppe, the maker of the supplement. “For many years, some clubs backed off of [supplement sales],” said Michele Bell, sales and holistic services specialist for Club and Spa Synergy Group Consultants, a management consulting firm in New Jersey.

But, as nutrition has become a greater focus for the fitness industry, health clubs and gyms throughout the United States are once again pumping up their sales of energy bars, ready-to-drink (RTD) mixes and even bulk sports nutrition products. In fact, between January and June of this year, Europa's health club sales were 20% higher than during the same period last year, Compton said.

Sports nutrition manufacturers are feeling the change as well. “We have seen health clubs becoming more aware of the popularity of nutritional supplements in the last eight to ten months,” said Eric Tomko, director of sales at BSN, maker of numerous popular sports supplements, such as N.O.-XPLODE.

Channel Set to Grow

Today, health clubs generate only about 2%-3% of overall sports supplement sales, according to NBJ's 2007 Global Supplements Report on Health Club Sales of Sports Supplements. In 2005, America's 26,000 gyms and fitness centers accounted for only $400 million of the $16 billion rung up in retail supplement sales, NBJ estimates show.

But an International Health, Racket and Sportsclub Association (IHRSA) 2007 membership survey found that there is potential for health club supplement sales to grow. According to the survey of 129 members representing 883 facilities, non-dues revenue (which includes supplements and other products, as well as a range of services) reached an all-time high in terms of percentage of overall revenue in 2006, with the average club generating almost 35% of its revenue from supplements and other non-dues-related products and services. This was up from 29.7% in 2005.

As IHRSA learned from its survey, more and more health clubs are seeking to diversify their revenue sources — but only a minority percentage are currently using sports supplements to bring in new streams of money. IHRSA's reports that nearly 70% of its survey respondents do not sell sports supplements, even though 53% do include nutritional counseling and classes in their member offerings.

The good news is that, as doctors and other healthcare experts increasingly stress the importance of integrating nutrition and exercise for optimal health and weight management, more health clubs and gyms are likely to add nutrition components — including sports supplements — to their member offerings. After interviewing more than 500 fitness professionals, the American College of Sports Medicine concluded in 2007 that the blending of diet and exercise would be a significant trend for 2008. Clearly, health clubs and gyms are a natural location for this blending to occur.

BSN is one sports nutrition company that is using the growing connection between fitness and nutrition in its pitch to health clubs — and the message seems to be having an impact. According to Tomko, both Bally's and 24 Hour Fitness have upped the amount of product they are purchasing from BSN. In fact, one of the chains has increased its purchases and sales of BSN products by more than 100% year to date, Tomko said.

Capturing Health Club Sales

Tomko said he is pleased with this trend because, despite health clubs sales representing only about 10% of BSN's business, he knows how important it is to connect with consumers in the health club setting. “BSN's goal is to capture the rapidly growing health club customer base at the start of the individual's new goals for a healthier lifestyle,” Tomko said. “We hope to gain a customer for life if we can be their first experience with nutritional supplements.”

Europa's Compton, who distributes to more than 7,000 clubs nationwide, reported that for years the top-selling products in the health club channel have been nutrition bars, drinks and RTD mixes. Compton said RTD mixes and drinks from BSN, American Bodybuilding, EAS, CytoSport and Labrada are particularly hot sellers in the health club channel, while meal-replacement bars from Chef Jay, Apex, ISS and Supreme do well on the bar side.

As Club and Spa Synergy Group's Bell notes, bars, drinks and RTD mixes fit well in the health club environment because they work for the club member who wants a quick and healthy pre- or post-workout snack. In addition, these products are safe for and typically known by the general population — unlike some more sophisticated sports nutrition offerings — making them an easier sell to club members, who may not have extensive nutrition knowledge, and less of a liability issue for club operators, Bell added.

But, along with convenience items, more health clubs are beginning to sell popular bulk sports nutrition products, such as BSN's N.O.-XPLODE. Said Bell, “Higher-end clubs are now starting to do more research on high-quality supplements to recommend to their members for an increase in profit and to offer a more well-rounded approach to total wellness.”

A Missed Revenue Opportunity

Still, despite increased interest on the part of health clubs to develop sports supplement sales, Bonnie Patrick Mattalian, president of Club and Spa Synergy Group Consultants, estimates that only 20% of health clubs actually do supplement sales successfully — bringing both a profit to the club and meaningful health benefits to its membership.

“Most clubs are terrible at retail — this is especially bad when you consider that you have all these people there, like personal trainers, who really believe in the value of supplementation,” agreed Brad Stevens, founding partner of Elementals Health & Wellness, a supplement and nutritional guidance company that specializes in the health club channel. But rather than driving sales of the sports nutrition products their own clubs could carry, health club trainers too often “just send people down the street to GNC,” said Stevens, adding that health clubs tend to be too “membership-oriented” and focused solely on the “monthly draft.” As a result, “a huge amount of [their members'] wallet space is left untouched,” Stevens said.

To increase their share of their members' money, Stevens advises clubs to diversify their marketing beyond membership drives and integrate supplement marketing into their overall marketing programs. For example, clubs could integrate supplement sales into new member orientations or train their personal trainers on how to integrate nutritional advice into their coaching.

Increasing staff and member education is also essential to building up club sports supplement sales, said Bell and Patrick Mattalian, who both note that incorporating a serious education component into staff and member training can increase product and club credibility and help ensure that members use a club's sports nutrition offerings safely.

Mike Valentino, owner of 13 Gold's Gyms in North and South Carolina, said that, with a well-educated staff, sports supplements can drive 6%-8% of a gym's total revenue, compared to 2% with a staff that really doesn't know or care much about sports nutrition products. While Valentino attributes some of his products' success to good national marketing campaigns, “sales really depend on the person we have overseeing the selling of the products,” he said. “In gyms where we have someone who is in charge of our pro shops who has used supplements over the years, is interested in them, believes in them and sees their value to being aids to enhance someone's fitness program and lifestyle, we do well.”

To help his trainers do a better job of selling the value of sports supplements to his gym members, Valentino said he would like to see more support from manufacturers in the form of literature and training for his staff. He reported that when manufacturers have visited his gyms with samples and product literature, the products have been very well received. Valentino sells mostly sports nutrition products, such as protein and whey mixes, nitric-oxide products and drinks at a 60% markup over wholesale, although some of his higher priced items get marked up only 25%. (Bell noted that the typical health club markup averages between 25%-50%.)

Valentino also pointed out that, although his supplement sales dipped four years ago when more people began turning to the Internet for their sports nutrition purchases, he's managed to revive his sales through better pricing, package deals and volume sales. “Members clearly like the convenience,” added Valentino. “They already come to the gym multiple times a week, and having access to products right there saves a trip elsewhere.”

Limiting Liability

While a knowledgeable staff can help supplement sales, Valentino was a bit cautious on this front due to liability concerns. Even with signed waivers or disclaimers that specifically address supplement products, health club owners are not completely protected from being held liable should someone suffer an adverse reaction to a supplement sold or simply recommended at their facilities, said Brandi Boutwell of Sports and Fitness Insurance Corp. In addition, few insurance policies will cover a gym for supplementation or nutritional advice unless the facility has a board-certified nutritionist on staff — and even then, the professional liability coverage usually only applies to the nutritionist, Boutwell added.

To limit his clubs' liability, Valentino instructs his staff to direct people to a product's labels and literature and to stick with the “facts” when talking with members about a specific sports supplement product. But, he admitted, it's difficult — if not impossible — to eliminate all opinions and personal experiences from seeping into the supplement conversations his trainers have with members.

For this reason, Bell recommends health clubs make the investment in hiring a nutritionist to oversee their supplement sales. “Supplementation is serious business,” Bell said. “When there is a nutritionist on staff, supplements can be extremely profitable.”

Health Clubs Juice the Smoothie Bar for Sales

Along with energy bars, the other immensely popular “bar” at health clubs and gyms is the juice or smoothie bar. In fact, a 2007 International Health, Racket and Sportsclub Association membership survey found that 43% of its members had a snack/juice bar, and 14% were planning to expand their food and beverage offerings for 2007-2008.

Increasingly, health clubs are turning to businesses such as Dr. Smoothie to provide their snack and juice bar offerings. Fullerton, California-based Dr. Smoothie provides several thousand clubs across the United States and Canada with a comprehensive smoothie bar service that includes 100% crushed fruit smoothie ingredients, supplemental add-ins, coffee and vanilla beverage ingredients, smoothie and juicing equipment, and sales literature. The company also sells a line of packaged products, such as nutrition bars, botanical blends and sports drink mixes.

Dr. Smoothie CEO Bill Haugh told Nutrition Business Journal that the company's specialized ingredients make a difference in nutritional value and taste, which can consequentially make a difference in a club's revenues. He said clients have reported that adding the Dr. Smoothie system and products to their offerings increased their overall snack bar sales by 25% to 175%. Among Dr. Smoothie's top sellers is its amino drink mix containing collagen, which the company is planning to introduce in single-serving packets.

Customized Nutrition Services Provide Up-Selling Opportunities

Apex Fitness sells a wide range of sports nutrition products, including bars, drinks and weight-loss supplements, via health clubs and gyms. The Westlake Village, California-based company also provides online meal planning and nutritional guidance services to help drive its supplement sales and provide more value to health clubs and their members. Apex customers can calibrate their nutritional needs using the company's bodybugg armband, a high-tech device that tracks the calories a person burns throughout the day. This data is then uploaded into an online service, which combines this information with a person's medical history, age and body parameters and produces customized menu plans and supplement recommendations. Subscribers can also bypass the bodybugg armband and use an online questionnaire to develop their plans, although these recommendations are not as comprehensive or specific.

Apex complements its online nutrition programs by training health club staff and providing them with marketing and educational materials about the company's products and services. “The club channel remains the strongest segment of Apex's business, especially when program revenue is added,” said Apex's national account manager and master educator, Ed Slover. Apex distributes products to more than 400 24 Hour Fitness clubs and 770 other fitness centers, including chains such as Lifestyle Family Fitness, Gold's Gym and Pure Fitness. Although sales data from the 24 Hour Fitness clubs were unavailable, Slover reported that the remaining 770 clubs had sold about $8 million worth of Apex nutrition products in 2007.

Atlanta-based Elementals Health & Wellness also offers customized meal planning, along with a variety of sports nutrition products, via the health club channel. Elementals Founding Partner Brad Stevens reported that most subscribers to the company's menu-planning service purchase its Daily Vital-Pack, 7 Day Detox and Cleanse formula, Lean System and Joint Formula. Elementals recommends clubs keep some product inventory in their facilities, but the company also pays a 40% commission for club member orders placed online or by phone or fax, Stevens said.

Customized meal planning and nutrition services not only bring in revenue through product sales, but they also help clubs drive up membership numbers when offered as a membership benefit, said Stevens, who added that Elementals' health club clients have used the company's products and services to increase their overall sales by as much as $8,000 a month. Stevens said that 20%-25% of Elementals' sales go to fitness clubs and personal trainers, with 30%-40% of those sales coming from the company's menu-planning program. Stevens also pointed out that a significant number of Elementals' clients are personal trainers who sell the services and products independently of the clubs in which they work.

Health Clubs Evolving into Wellness Centers

Health clubs are no longer just weight-lifting gyms or corrals of treadmills. More and more, health clubs and gyms offer spa services, chiropractor services, on-staff dieticians and nutritionists. They are renaming themselves as wellness centers, expanding or introducing cafes and smoothie bars, and bringing in new crowds with “softer” offerings, such as yoga, dance and pilates. In addition, Bonnie Patrick Mattalian, president of Club and Spa Synergy Group Consultants, said she has seen a rising popularity in medically directed fitness centers that are associated with hospital systems. “Many older people — those 40 and older — who may have specific health needs feel more comfortable going to a place connected to a hospital,” said Mattalian, adding that many doctors are embracing alternative therapies and recommending spa services.

This merging of health and fitness venues means good news for supplement sales because these new venues — fitness clubs, wellness centers and studios — are now expanding beyond traditional sports nutrition offerings to include a larger selection of wellness products. For example, Triune, a chiropractic counseling and wellness center in Philadelphia, has added yoga and pilates to its extensive list of wellness services. The company's clientele is increasingly taking advantage of the studio's supplement offerings, many of them recommended specifically by Triune's professional staff. Dr. Jeffrey Sklar, DC, co-founder and director of chiropractic and rehabilitative care at Triune, reports that the company sells about $300-$500 in supplements a week. Triune's products include a mixture of multivitamins, natural anti-inflammatories and antioxidants from New Chapter, Jarrow and other high-end supplement companies.

As Rosemary Lavery, public relations manager for International Health, Racket and Sportsclub Association told Nutrition Business Journal, the bodybuilding-obsessed health clubs of the 1980s are a thing of the past. “These days, health clubs like to be recognized as wellness centers, leading the charge toward wellness,” Lavery said. “Clubs are trying hard to make the wellness concept something they are identified with.”

NBJ

SNWL Category Turns In Respectable But Not Stellar 2007 Performance

If one were to liken the U.S. sports nutrition & weight-loss (SNWL) sector to a professional athlete, tennis sisters Venus or Serena Williams might be a good match. Both are impressive and sometimes star performers, but injuries and other issues have kept both players from being able to consistently capture the win. The same holds true for the SNWL category — which typically has been a strong driver of growth for the U.S. nutrition industry since 1996, but which also has shouldered its share of hard knocks over the last 12 years.

Last year was one of those years when the SNWL category performed pretty well, but not well enough to break any records or bring home the gold. The category — which Nutrition Business Journal defines as weight-loss pill-form supplements, weight-loss meal-replacement supplements, sports supplements, low-carb foods, nutrition bars and sports & energy drinks — rung up a total of $19.6 billion in SNWL sales in 2007. Although sales expanded by a respectable 7% last year, this was down from the 9.6% growth the category achieved in 2006. A number of factors helped to drag down SNWL sales growth. One was the continued weakening of the low-carb category, which has experienced a precipitous decay since its peak in 2004. Sales declines of weight-loss pill-form supplements, which were down almost a full percentage point in 2007, also helped to stifle SNWL growth.

But what appears to have been most detrimental to 2007 SNWL expansion was the significant slowdown of sports & energy drink sales, which generated 51% of the SNWL category's total revenue last year. In 2006, sports & energy drink sales jumped 24% from the previous year and brought in $1.7 billion in new sales to the SNWL category. But in 2007, sales growth for this segment slowed to 13.3%, bringing down the total value of new dollars added by sports & energy drinks to $1.2 billion — $500 million less than the previous year.

On a positive note, 2007 sales of sports nutrition supplements increased 8.4% — the most this SNWL segment has grown since 2001. In addition, weight-loss meal supplements and nutrition bars were both up slightly last year, though not as much as they were in 2006.

Mass market retailers generated the vast majority — 68% — of total SNWL category sales (mainly because sports & energy drinks, low-carb foods and nutrition bars are big mass market sellers), while natural & specialty retailers accounted for 16%, network marketers 9%, mail order 2.5%, Internet 2.4% and practitioners 2.4%. Of all these channels, the Internet posted the greatest growth rate in 2007 at 18.8% — thanks to the proliferation of fast-growing companies such as Bodybuilding.com.

Weight-Loss Pills Lose Weight

An estimated one-third of Americans are obese, while another third is overweight. And, according to research published recently in the journal Obesity, virtually all Americans could have some sort of weight problem within 40 years, if current trends are not reversed. Such statistics are likely music to the ears of executives who sell dietary supplements, pharmaceutical drugs, diet programs and other products to the growing number of U.S. weight-loss consumers, who spend an estimated $33 billion to $55 billion a year in an effort to shed unwanted pounds.

Yet, despite America's growing waist-line, NBJ research shows that U.S. consumers spent about $13 million less last year on weight-loss supplements — such as Relacore or Metabolife — than they did in 2006. Total consumer sales of weight-loss pill-form supplements dropped 0.8% to $1.67 billion in 2007. Much of this loss can be attributed to the initial success of GlaxoSmithKline's over-the-counter (OTC) weight-loss drug, alli, which hit the market in June of last year and immediately shot to the front of the weight-loss pill pack. According to Information Resources Inc. (IRI), alli now drives 37.5% of sales of all OTC weight-loss offerings (which are all dietary supplements, except for alli). Backed by a $150 million marketing campaign, alli generated $354 million during its first 12 months on the market, GlaxoSmithKline (GSK) reported. Although impressive — and injurious to weight-loss supplement sales — alli's performance has so far failed to live up to some analysts' expectations. [Editor's note: For more, see “GSK's Alli Yet to Achieve Blockbuster Status in Weight-Loss Market,” on page 29.]

Still, alli's placement on pharmacy and grocery- and big-box-store shelves has sent the sales of numerous well-known weight-loss supplements falling, particularly in the mass market (which accounted for 28% of all weight-loss pill-form supplement sales in 2007). According to IRI and AC Nielsen data, Relacore sales were down 9% in the mass market in 2007, while Metabolife's sales dipped 22%. Mass market sales of all weight-loss dietary supplements dropped 10% last year, NBJ research shows. Sales of weight-loss supplements within the natural & specialty channel decreased by 1.5% in 2007. In comparison, direct-to-consumer sales of weight-loss pill-form supplements fared well in 2007, with Internet sales spiking 25% and network-marketing sales growing a more modest 1%. The Internet channel generated 8% and networking marketers 26% of total weight-loss supplement sales last year.

Meal Supplements Up Slightly

Weight-loss meal-replacement supplements — which generated 11% of total SNWL sales last year and includes such brands as Abbott's Ensure and Unilever's Slim Fast — fared better than their pill-form companions in 2007, as the segment continued to recover from the hits it took in 2003 and 2004 during the height of the low-carb craze.

According to NBJ estimates, U.S. consumer sales of weight-loss meal-replacement supplements grew 4.2% to $2.2 billion last year. The segment added $99 million in new sales — with $37 million of this money coming from the network-marketing channel (which is home to numerous multi-level marketing companies selling popular weight-loss meal-replacement products, including Herbalife, USANA and Isagenix). Total sales of weight-loss meal-replacement products within the network-marketing channel grew 9% to $642 million last year. Weight-loss meal-replacement sales via the Internet were even stronger, growing 16% to $22 million.

On the retail side, the natural & specialty retail channel grew its weight-loss meal-replacement sales 8.1% to $204 million, while mass market sales were up 5% to nearly $1.2 billion. Mass market retailers generated 55% of all weight-loss meal-replacement sales in 2007, making them a continued focus for the segment.

Although the overall weight-loss meal-replacement category grew last year, the top-selling brands each suffered revenue losses. According to NBJ estimates, sales of Slim Fast fell 8.8% in 2007, while Glucerna sales were down 16% and Boost was down 1%. In an effort to staunch bleeding sales, Unilever is repositioning Slim Fast to make the brand appear more contemporary and appeal to a broader base of consumers. In addition, the company is simplifying the Slim Fast product line to focus on bars and shakes, while also launching a few new Slim Fast offerings, such as a protein-packed caramel chew.

Beyond the branded offerings, private-label meal-replacement products grew nearly 16% to $262 million last year, as consumers looked for more economical ways to drink their lunches and dinners.

The Punches Keep Coming

Things could get a lot rougher for both the weight-loss pill-form supplement and weight-loss meal-supplement categories in the future should GlaxoSmithKline be able to successfully convince the Food and Drug Administration (FDA) to change the way it regulates weight-loss claims, which currently are classified as structure/function claims. Working with three other organizations — the American Dietetic Association, The Obesity Society and Shaping America's Health — GSK filed a citizens petition with the FDA in April, asking the agency to begin treating weight-loss claims as disease claims. Should the petition succeed — which many in the nutrition industry believe is unlikely — the ramifications would be “sweeping,” said Steve Mister, president and CEO of the Council for Responsible Nutrition, which sent the FDA a detailed and persuasive response to the GSK petition in July. [Editor's note: For more, see “Industry Hits Back on GSK Weight-Loss Claims Petition,” below.]

Even if GSK isn't successful in making it more difficult for dietary supplement companies to market their weight-loss products to consumers, the industry still has much work to do to improve its image in this area in the eyes of the media and the public. This is likely to become even more apparent this fall when HBO releases its new dramatic series Fat Sells, which chronicles the downfall of a weight-loss supplement company executive whose company is investigated by the FDA. Said the show's creator Dave Broome (who was also the mastermind behind the popular Biggest Loser series): “Everyone is looking for that magic pill to change their lives. … We're taking a world not regulated by the FDA and breaking it wide open.”

Of course, the idea that the supplement industry in general and weight-loss supplement companies specifically are not regulated is false. In the real world, the FDA and the Federal Trade Commission (FTC) have both increased their crackdowns on dietary supplement companies that make false or misleading claims about their weight-loss products, Mister said. “The FTC is going after the worst offenders through its ‘Operation Big Fat Lie’ program. This is what should be happening. The FTC should be enforcing the rules, and the industry should be policing itself.” [Editor's note: See “Industry Making Strides in Improving Tarnished Image of Weight-Loss Supplements,” starting on page 25.]

The Magic Pill

Following the ephedra ban in 2003, many dietary supplement companies began doubling their efforts to find a safe replacement for the popular stimulant, as well as support their products with improved science that increasingly includes human clinical studies.

While no one has yet to discover the offering that will bring the weight-loss pill-form supplement category back to the sales height it experienced under the ephedra surge, a number of promising products have hit the market, such as Garden of Life's fücoTHIN. Launched in fall 2007, fücoTHIN contains a patent-pending combination of fucoxanthin and pomegranate seed oil and was the No. 1-selling dietary supplement in the natural channel for the 52-week period ending in mid-June 2008, according to SPINS. [Editor's note: NBJ profiles fücoTHIN and the fucoxanthin ingredient, starting on page 30.]

Of course, the supplement industry isn't the only one searching for that magical pill that will solve the United States' (and the world's) weight problems. As Business Week detailed in its March 6, 2008, cover story, more than 20 companies — ranging from biotech startups to deep-pocketed pharmaceutical companies — are scrambling to come up with a blockbuster obesity drug that can help people lose weight without getting sick or suffering unpleasant side effects.

Compared to weight-loss pill-form supplements, which generated almost $1.7 billion in sales last year, anti-obesity prescription drugs — which include Xenical, Adipex and Meridia — brought in $212 million in sales in 2007.

According to the Natural Marketing Institute's 2007 Annual Health and Wellness Survey, consumers are looking at a variety of products — from pharmaceuticals (21%) such as Xenical to dietary supplements (12%) — to help with weight loss. And more and more consumers see weight management as their top concern, NMI reports. In fact, when asked, “What health concerns are you currently managing?,” nearly 50% of consumers said weight. In comparison, only 29% said cholesterol, while another 23% said seasonal allergies. “What this means is weight loss remains at the front of consumers' minds,” said NMI's vice president of strategic consulting, Greg Stephens.

Sports Supplements Surge

U.S. sales of sports supplements — which include a broad range of products from companies such as Iovate, EAS, BSN, CytoSport and others — increased 8.3% to $2.5 billion in 2007, according to NBJ research. As noted, this was the highest growth rate the segment has seen since 2001 and represented a stronger performance than that put in by the overall U.S. supplement category, which grew 6% to $23.7 billion last year.

Powders and formulas made up 85% of the sports supplement category in 2007 and grew 7.9% to $2.2 billion. Rising consumer prices of products containing whey-protein powder helped add $159 million in new sales to the powders and formulas segment in 2007.

Pills, which include such products as First Endurance's Optygen and iSatori Technologies' Morph, made up 6% of sports supplement sales and grew 9.5% to $145 million last year. Sales of hardcore/ready-to-drink (RTD) sports supplement drinks grew 12.5% to $227 million in 2007. CytoSport's Muscle Milk RTD beverages were among high-growth RTD sports supplements last year, with IRI reporting that the Muscle Milk brand expanded more than 125% in 2007.

Natural & specialty retailers, including GNC and Vitamin World, grew their sports supplement sales 8.5% to $1.3 billion last year. In comparison, sports supplement sales within the mass market channel grew 4.5% to $478 million. Although the majority of total SNWL category sales have migrated over to the mass market, sports supplement products — which typically appeal to the more serious bodybuilders and endurance athletes — continue to sell best in the natural & specialty channel, which drove 53% of 2007 sports supplement sales. Bodybuilding.com and other Internet companies grew their sport supplement sales 30% to $155 million last year, while practitioners generated $182 million in sports supplement sales, up 11% from the previous year.

Supplements Not Steroids

Like weight-loss supplements, sports supplements came under increased scrutiny over the last year — thanks in part to the media blitz surrounding the December 2007 release of the 400-page Mitchell Report, which investigated the use of performance-enhancing substances in Major League Baseball (MLB). The findings in the report were ultimately favorable to the dietary supplement industry, according to Natural Products Association (NPA) Executive Director and CEO David Seckman. “The Mitchell Report lends substantiation and credibility to what we have been saying for a long time: Dietary supplements have been a convenient and often unquestioned scapegoat to hide illegal steroid use,” said Seckman.

Less favorable to the dietary supplement industry were the results of a recent study by the U.K.-based sports supplement testing lab HFL Sport Science and its U.S. counterpart, the non-profit organization Informed Choice. Published in December of last year, the study found that 25% of 58 popular sports supplement products purchased through retail outlets and Internet sites in the United States were contaminated with steroids, while 11% showed existence of stimulants that are prohibited by the World Anti-Doping Agency (WADA).

To help prevent such contamination, a growing number of supplement companies are working with supplement testing labs such as HFL and NSF International, which operates its Certified for Sport program in partnership with the MLB, the National Football League and numerous other professional sports and players organizations. [Editor's note: For more on how sports supplement companies are working to prevent banned-substance contamination of their products, see “NSF, HFL and Others Help Firms Prove Their Sports Products are Safe for Athletes,” starting on page 22.]

Beyond this, the industry — through CRN and NPA — has been involved in an ongoing program to educate the U.S. Congress about the benefits and limitations of dietary supplements, including sports supplement products. In June, industry members met with more than 70 Congress members and staffers to educate them on the fact that “dietary supplements are not steroids,” CRN's Mister told NBJ. “We talked about what supplements can and cannot do. They won't make you swim like Michael Phelps, but there are advantages to taking them. They are safe products and they are regulated.”

DHEA, a precursor to the hormone testosterone, is one dietary supplement that is under particular regulatory pressure because of a bill — the DHEA Abuse Reduction Act of 2007 — that was introduced to Congress at the end of last year. The bill proposes to amend the Anabolic Steroid Controlled Substances Act of 2004 by preventing people under the age of 18 from accessing the substance and penalizing anyone who provides minors with access to DHEA. CRN opposes the bill on the grounds that DHEA is different from anabolic steroids and was intentionally left out of the Controlled Substances Act in 2004, Mister said. But members of the trade association have voluntarily agreed to follow a set list of agreed-upon guidelines when marketing DHEA, Mister added, as a way to “underscore the safety of the product” and the industry's desire to “step up and be responsible.”

Nutrition Bars Flatten

The maturing and increasingly crowded U.S. nutrition bar market experienced another up year in 2007, although the 2.1% growth achieved last year was down slightly from the 4% uptick the segment saw in 2006 — and a far cry from the double-digit expansion it experienced in the late 1990s and early 2000s. Total 2007 U.S. nutrition bar sales reached $2.1 billion, or about 11% of all SNWL category sales. The segment's modest growth in 2006 and 2007 was preceded by relatively sharp declines in 2005 and 2004.

Once again, Nestlé's PowerBar led the nutrition bar category last year, with $206 million in sales. Still, the company's Harvest and Pria brands have not performed to expectations and helped to drive down total PowerBar sales by 4% in 2007. On a different note, Clif Bar, now the No. 2 bar company based on sales, enjoyed another successful year in 2007, with its sales growing 10% to $151 million, according to NBJ estimates. Clif Bar has been particularly successful with its Luna Bar brand, which is geared toward women. Its new protein-based brand, Builder Bar, has been showing strong growth as well.

U.S. consumers continue to primarily shop conventional groceries, big-box stores and other mass market retail locations for their nutrition bars. Mass market retailers accounted for 52% of all nutrition bar sales, which were up 1.9% to $1.1 billion in the mass channel. Nutrition bar sales in the natural & specialty channel grew 1.3% to $729 million, while Internet sales — which represent only about 1% of nutrition bar purchases — jumped 21% to $23 million.

ThinkProducts — which makes a wide range of nutrition bars, including ThinkThin, Think5 and ThinkGreen — is one nutrition bar company working to grow its Internet sales by offering to pay the shipping fees for any orders over $60. “That's a big investment for us, but we felt we needed to cater to our consumers, and we want them to eat the food without getting hit by rising shipping costs,” said ThinkProducts President and CEO Lizanne Falsetto.

ThinkProducts is also tapping into a hot trend within the overall nutrition industry with its bar products: the growing demand for gluten-free foods. “Our brand is completely gluten free, and we're the first in the [nutrition bar] category that's ever had a gluten-free overtone,” said Falsetto. Along with appealing to the growing consumer base that wants gluten-free offerings to alleviate allergy or other concerns, offering gluten-free products increasingly enables double placement in both natural and mainstream stores, Falsetto said. “Retailers are putting ThinkProducts in the nutrition bar category, as well as in their gluten-free sections.”

Protein continues to be a driver of both nutrition bar innovation and sales, as ThinkProducts has learned with its protein-packed ThinkThin product. Forward Foods, maker of the Detour brand bars, recently launched its Lean Muscle Bar, which contains 32 grams of protein and is aimed at men aged 18 to 34 who “live for working out” and who typically shop at specialty retail stores, such as GNC, said Jason Stephens, Detour Bar director of sales.

Along with an extra 2 grams of high-quality whey-based protein, the Lean Muscle Bar is fortified with 2,000 mg of omega 3 fatty acids and other vitamins and minerals. “We have tried to build in some functionality with this product by delivering not only great protein but omega 3s as well,” Stephens said. “Moving forward, this will likely to be a trend [in the nutrition bar] category, where we will see more fiber and even things such as probiotics and prebiotics added to bars.” The hope, of course, is that these product developments will help to revive the category's sluggish sales.

Sports & Energy Drinks: Running out of Fizz?

The press has been buzzing with stories about energy drinks over the last few months, but the news has been far from positive — especially for the makers of Red Bull, which an Australian study found increases the risk of heart attack and stroke in people young and old. A study published in the Journal of Adolescent Health in June reported that energy drinks are linked to risk-taking behaviors in college-age adults, while a story published in August by WNBC.com in New York questioned the safety of Red Bull's taurine content.

Sales of Red Bull and other popular sports & energy drinks could be running out of steam in general. NBJ research shows that, although the sports & energy drink category grew by a robust 13.3% to $9.9 billion last year, the segment's growth was actually down quite significantly from 2006, when sales jumped 24%, and from 2005, which saw a 27% spike in sales. Still, sports & energy drinks provided much of the fuel for overall SNWL market growth in 2007, accounting for 51% of total SNWL sales and 91% of the almost $1.3 billion in new sales added to the SNWL category.

Once again, energy drinks — led by Red Bull and Hansen's Monster brand — fueled the growth of this SNWL segment. Sales of energy beverages were up 25% to $4.6 billion in 2007. Red Bull owns 33% of the energy drink category — despite all of the recent bad press. Hansen's Monster Energy Drink was the only other beverage besides Red Bull to crack the $1 billion mark, with $1.2 billion in sales last year, according to NBJ estimates. Sports drinks — which include the brands Gatorade and Powerade — produced more modest growth of 4.7% on $5.3 billion in sales last year. Gatorade still owns the largest share in the sports drink market and has found continued success and growth with its Propel Fitness Water brand.

Sports drinks currently make up 54% of the sports & energy drink category, although these products have been losing ground to energy drinks. In 2002, sports drinks accounted for about 83% of sales in this category.

The mass market accounts for the lion's share of sports & energy beverage sales — generating $9.4 billion, or about 94% of the segment's sales, in 2007. Growth in the mass market was 14%, while natural/specialty retail grew 5% to $224 million.

The economy is being blamed for at least some of the downturn in energy drink growth this year. “[The energy drink market is] still the healthiest beverage sector, but its prime Sun Belt market overlaps closely to areas where the housing bust has been the most severe, so there is definitely concern,” Beverage Business Insights Editor Gerry Khermouch told Brandweek.com earlier this month. Khermouch added that rising gas prices are also causing consumers to think twice about plunking down extra money for a $2 or $3 energy drink at gas stations and convenience stores. “After filling up, a lot of consumers don't have the heart to even enter the store,” he said.

James Tonkin, principal of Tonkin Consultants and a beverage-industry expert, said he believes the swarm of new products to the energy drink sector is helping to slow sales. “Over the last six years, the category has experienced explosive growth,” Tonkin said. “Companies saw they could make some very attractive margins in a business that costs very little to enter.” The result has been a category saturated with products — most of which don't have the stuff necessary to break through the noise and make an impact on consumers, Tonkin added. Consumers are also simply beginning to turn away from the category, in part because of the negative press surrounding products such as Red Bull, Cocaine and other highly caffeinated energy drinks, said Tonkin, who added that he believes a truly healthy energy drink is one product that could have the power to really connect with consumers.

New Life for Low Carb?

U.S. sales of low-carb foods continued to decline in 2007. Sales dropped 7.6%, which would be quite the loss for most categories, but considering the category has fallen 16% and 28% the last two years, single-digit losses may seem like a relative gain to some manufacturers active in this category. According to NBJ estimates, total low-carb sales reached $1.2 billion in 2007. This is a far cry from the $2.2 billion the category generated during the height of the low-carb movement in 2004. Since then, the category has seen more than $1 billion in sales dry up, while losing an additional $101 million in 2007.

Not surprisingly, Atkins Nutritionals, the company founded by the doctor who gave birth to the low-carb movement, has ridden the waves created by the initial success and then crash of the low-carb diet. During its heyday, Atkins was on a low-carb-product-launching spree, releasing hundreds of new offerings each year, including muffin mixes, breads, ice cream and even chocolate. Then, as consumers began to eschew the idea of following carb-restricted meal plans and as the diet came under fire from nutritionists and doctors, the company tried to distance itself from the Atkins plan as its product sales took a nosedive.

Now, bolstered by a growing body of science showing the effectiveness of carb-restricted eating on weight loss, the company's new owner is once again touting the benefits of the Atkins diet through its consumer outreach and product offerings. “The first thing we did when we bought the business was bring our brand's positioning back to its roots in healthy weight loss and weight management,” said Atkins Nutritionals CEO Monty Sharma, the former EAS and Naked Juice CEO who was brought in to run Atkins after it was purchased by North Castle Partners last year.

In an effort to reconnect with consumers, Atkins slimmed down its product line to just 60 offerings and launched a rebranding campaign this summer that is centered on the slogan “Sweet. Sexy. Science.” “Sweet stands for our new-and-improved tasting bars and shakes, while sexy is the result you get from following the Atkins low-carb diet, and science is the foundation behind our diet, which has been proven in more than 50 studies,” Sharma said.

Apparently, the repositioning is already having a positive effect on Atkins' sales, which Sharma said are projected to grow at least 2% this year — a definite improvement over the dramatic sales losses logged by the company in 2005 and 2006. “The company has gone from offering 2,000 SKUs to now 60,” Sharma said. “Although we are smaller, we are now a much stronger and more focused company.”

Industry Hits Back on GSK Weight-Loss Claims Petition

In April, GlaxoSmithKline (GSK) — maker of the No. 1-selling over-the-counter weight-loss pill, alli — joined forces with three other organizations to petition the Food and Drug Administration (FDA) to treat the weight-loss claims carried by dietary supplements and other products as disease claims.

Public comments began streaming into the FDA soon after the petition was filed, with a vast majority expressing opposition to the idea of reclassifying weight-loss claims as disease claims. In July, the Council for Responsible Nutrition, an industry trade group, hit back with its own 19-page response to GSK's motion. In it, the organization laid out four arguments — the first being that FDA has already reviewed this issue and, in 2000, decided that weight-loss claims are appropriately structure/function claims under the Dietary Supplement Health and Education Act (DSHEA) based on the intended use of these products. “One of our strongest positions is that FDA went through this evaluation process seven years ago and affirmatively decided that obesity was a disease claim but mere weight loss is not,” said CRN President and CEO Steve Mister. “FDA already looked at this and got it right the first time.”

CRN also argues in its response that the petitioners have not established the condition of being overweight as a validated risk factor for disease. Furthermore, if FDA were to grant this petition, it would “result in sweeping implications for weight-related claims for the entire category of ‘food,’ and create a slippery slope for other structure/function claims that would essentially ‘disease-ify’ many health conditions not currently considered to be diseases,” the response reads. “This would cripple the dietary supplement category as envisioned by Congress with the passage of DSHEA.” CRN also points out that many dietary supplements are well substantiated for weight loss, and to the extent that unsubstantiated or misleading claims are being made for weight-loss products, the petitioners' concerns can and should be addressed through increased enforcement of existing laws and regulations by both the FDA and the Federal Trade Commission (FTC).

Mister said he is hopeful the agency will either reject the measure or simply let the petition languish without any substantive regulatory response. “I don't see this as a hot button issue for FDA,” Mister said. “The agency tends to look at problems that pose serious health concerns.”

NBJ

Can Sports Nutrition Firms Maintain Their Muscle When Entering New Markets?

Sports nutrition was born in the 1940s within the community of athletes focused on achieving bodybuilding perfection, and many of the category's major formulation developments have been geared toward the physique enthusiast. But sports nutrition has been rapidly evolving over the years, with companies now catering to endurance and other types of athletes and attracting even those consumers who eschew physical activity but view sports nutrition products as a good way to boost their energy, lose weight or simply provide a healthier alternative to a candy bar or a Coke.

Although the evolution of the sports nutrition category is providing lucrative new product and marketing possibilities for many companies, bridging into new markets — without jeopardizing the core consumer base — continues to pose challenges for sports nutrition firms. Here, Nutrition Business Journal looks at how four companies — GenR8, FRS, Next Proteins and NuGo — are addressing these challenges and breaking new ground with their sports nutrition products.

Tailoring Your Message

Long ago, athletes outside of bodybuilding discovered there was more to performance enhancement than just carbo-loading through spaghetti dinners — and from this revelation, a host of endurance-boosting products, including the PowerBar brand, were born. But, in attracting cyclists, runners, triathletes and other endurance athletes, companies have had to radically depart from how sports nutrition products have typically been marketed to consumers.

With the traditional bodybuilding market, sports nutrition companies garnered sales using images of bulging pectorals and “edgy” scenarios that pulsated with raw power. But this marketing message, which so appeals to the bodybuilder trying to push to another level of muscle definition, has the exact opposite effect on many endurance athletes.

“A track athlete looks at that and says, ‘Look at that guy's biceps — I don't want to look like that,’” said Anthony Almada, president and chief science officer of the sports nutrition think tank IMAGINutrition Inc. and president and CEO of GenR8, which is working to launch a new generation of science-based sports nutrition products. “Both sides [endurance athletes and physique athletes] don't like each other. It's the opposite with each group: One wants to be small and fast, and the other wants to be big and strong.”

Beyond physical appearance and training goals, a number of other contrasts exist between these two athletic communities, Almada said. While endurance athletes spend the majority of their money on their equipment — such as bikes or running shoes — physique athletes put it all into supplements. In addition, endurance athletes, who generally have an overall higher level of education than bodybuilders, tend to be more skeptical about the efficacy and science behind supplements, whereas the deep emotional triggers linked to vanity in the physique community create what Almada calls “consumer evangelism” or “buying on faith.”

Almada said he learned the challenges of trying to move a physique product into the endurance community while at EAS, the company he co-founded in 1992 and ran for many years. But rather than shy away from trying to make a product work for both bodybuilders and triathletes, Almada is using the lessons he learned at EAS to simultaneously launch GenR8's first product — Vitargo S2, a patented, sugar-free, university-researched molecular carbohydrate powder — into both the physique and endurance markets.

“We have been going after both communities from day one,” Almada said. “If you look at our packaging and our marketing, we don't show a picture that would align with a ‘muscle head’ or an endurance athlete. We don't show pictures of people on our packaging at all.” GenR8's logo features a stylized number eight — designed to look like either a double bicep or a runner crossing the finish line with his or her arms raised in triumph. On the GenR8 Website, the landing page offers visitors entry into either the physique side or the endurance side, with each featuring marketing copy written to highlight Vitargo S2's benefits for that specific athletic group.

The Vitargo S2 product is made with specially designed carbohydrates that speed through digestion to quickly regenerate glycogen. According to Almada, in the six months the product has been on the market, it has been resonating with both bodybuilders and endurance athletes — in part because of its novelty, but also because it is backed by solid science, including product-specific clinical trials. It also helps that Vitargo S2 is an efficacious product, Almada said. “The majority of people who use it notice a perceptible to dramatic difference with the first one to three usage events.”

FRS Goes After the Tired Market

Despite the risk that moving into the mass market can actually distance a product from its core consumers, some sports nutrition companies — including FRS and Next Proteins — have worked to aggressively market their products to the larger crowd, under the premise that what appeals to athletes — such as increased energy, weight loss and improved nutrition — will appeal to the average consumer. [Editor's note: For another view on the challenges associated with moving into the mass market, see “Sports Nutrition Guru Anthony Almada: Avoid the Masses,” on page 16.]

The FRS Healthy Energy drink first caught on with cyclists who had experienced its energy boost in clinical trials held at Pepperdine University. Their excitement created a larger following among other high-performance athletes. In 2007, one of these athletes, seven-time Tour de France winner Lance Armstrong, joined FRS's board of directors and became its main spokesperson. While the Foster City, California-based company expected Armstrong's fame to solidify its reputation among athletes, it was surprised when it also reeled in a broader base of consumers.

“It wasn't calculated, but we discovered how much people know [Armstrong] for being serious about his health,” said FRS Director of Marketing Korinne Munson. Soon, it became clear that people were buying FRS Healthy Energy to enhance their performance at the gym, on the job and at home, Munson added.

Furthermore, after running ads on CNN.com and Yahoo to target this broader market, careful tracking of responses revealed that more than 60% of FRS's customers were women, the majority of them over age 35. “We were trying for both men and women, but we didn't expect such a big response from women,” said Munson, noting that the online ad the company used — which features Armstrong and vibrant orange graphics — did not match what it expected women would be drawn to. “[We learned that] things don't have to be pink to be targeted to women,” Munson added.

Furthering its pursuit of the over-35 female market — which FRS President and CEO Maigread Eichten said is eager for a healthy alternative to the hundreds of heavily caffeinated and sugary energy drinks on the market today — the company has placed ads on Websites such as Daily Candy, whose audience is made up of mostly young working women in major cities. The company has also built its branding message around a tagline — “Tired of Being Tired?” — to which many women (and men) can relate.

“The FRS formula combines the functions of health and energy, and everyone can use more energy, whether it's for work or for working out,” said Eichten, who, along with being a busy executive, is a mother of three. “We're all juggling a lot in our busy lifestyles.”

So far FRS's broad messaging is working. Eichten reported that the company is on track to achieve 300% growth this year with its expanded FRS Healthy Energy product line, which includes ready-to-drink (RTD) cans, concentrates, powdered mixes and chews.

Designer Whey Courts Moms

Carlsbad, California's Next Proteins has gone through a similar evolution with its Designer Whey product line, which got its start in the hardcore bodybuilding market. “Our heritage is sports and healthy lifestyles,” said Next Proteins CEO David Jenkins. “But over the last 10 years a shift has occurred stemming from mass market interest.”

Spurred on by focus group findings that showed growing market appeal for its product, Next Proteins replaced the highly technical language oriented to bodybuilders in its marketing materials with more friendly, easily understood messaging that appeals to mass market shoppers, particularly women, Jenkins said. The company also reworked its Designer Whey Website to feature product and fruit images — rather than pictures of muscled people — and to highlight a broad range of customer testimonials from athletes, cancer survivors and women struggling with weight loss. The message seems to be resonating with consumers. For the last 160 weeks, Designer Whey's French Vanilla and Chocolate flavors have ranked No. 1 in AC Nielsen's high-protein food category.

In an effort not to alienate its original core bodybuilding market, Next Proteins has maintained its large-quantity product lines, which are popular with bodybuilders and pro-athletes, while simultaneously developing newer low-calorie, high-fiber, convenience offerings, such as its Protein 2Go single-serving packs and RTD products. These products are proving popular with a number of consumer segments, including families on the go and dialysis patients, Jenkins said.

NuGo Leaves No Children Behind

Along with women, the other largely untapped sports nutrition demographic is children. With the rising concern over childhood obesity, parents, educators and health professionals everywhere are working to get children eating better and becoming more physically active — and their efforts are opening the door for nutritious products designed to help kids achieve these two objectives.

GenR8 is one sports nutrition company actively going after this younger demographic by developing RTD products that are designed to fit in a child's hands and match a kid's nutritional needs. In addition, by focusing on the soccer market through a strategic alliance with a new women's professional soccer league, GenR8 is working to connect with the youth soccer demographic, as well as with a consumer segment that has the ultimate say in what many children eat: soccer moms. “[Soccer moms] are the gatekeepers for their kids,” Almada said.

Pittsburg's snack bar company NuGo (Nutrition To Go) struck out for the kids sports nutrition market from the start. Created by an avid runner who had a chubby childhood, NuGo snack bars are building a following among parents, pediatricians and, most importantly, kids. Available in an array of kid-friendly flavors, such as Peanut Butter Crunch and Chocolate Banana, NuGo bars are also available in organic, vegan, kosher, dairy-free and low-glycemic varieties. But mostly the products stand out in the crowded nutrition bar market for their wholesome ingredients and honest labeling, said NuGo Co-Founder David Levine. “Consumers are increasingly aware that many companies are trying to trick them into believing their products are something that they are not.” Case in point: Levine pointed to how labeling requirements allow companies to say “zero trans-fats” on the front of a product package as long as the product does not contain more than one half of a gram of trans fats.

Rather than representing a sports nutrition company trying to enter new markets, NuGo is a company whose nutritious snack products reflect the convergence that is occurring between nutrition and sports nutrition, said James Tonkin, principal of Tonkin Consulting. “Americans are not as concerned with sports nutrition as they are with basic nutrition. The line is getting blurry.” Tonkin pointed to development of products such as Kellogg's new fiber and protein beverage K20 as an example of just how blurry this line is getting.

In fact, Tonkin said he believes that as the market for core athletes gets saturated, companies will do well to orient their products to people who are seeking better health by exercising more and eating better. “The big market is going to be that average, middle-class American who is a weekend warrior and gets to the gym two or three times a week, who is not obese but maybe has a few pounds to shed and who eats pretty well.”

As more sports nutrition companies move to target this market, they will need to follow NuGo's and GenR8's lead by reaching out to today's children, many of whom are growing up with instilled ideas about the importance of exercise and good nutrition, Tonkin said. “These kids are the future market.” Companies will also have to produce “less sophisticated” but “more science-based” products, Tonkin added. “Consumers are going to demand it.”

Sports Nutrition Guru Anthony Almada: Avoid the Masses

The one market Anthony Almada is not trying to reach with his new sports nutrition company, GenR8, is the mass market, the long-time sports nutrition executive told Nutrition Business Journal. In fact, GenR8's first product — Vitargo S2, a patented, sugar-free molecular carbohydrate powder — specifically says on its label, “If you're not training, do not take this product.”

After departing from EAS, the company he co-founded in 1992, Almada said he watched with frustration as EAS shifted from a well-regarded, successful sports nutrition brand to a mass market product line that declined in sales by close to 80% after hitting Wal-Mart's shelves. Why did EAS falter when it attempted to move beyond its performance-athlete origins? The company simply didn't perform as well, Almada said. That's because the fundamental laws of nutrition make a product designed for an athlete burning thousands of calories — such as a high-protein or high-carbohydrate sports nutrition bar or shake — the worst thing possible for a sedentary consumer. Consequently, EAS's products could not deliver on their promises of better performance, for which they were designed. They only delivered more pounds, Almada said.

Because of this mismatch, Almada sees mass market consumers migrating from brand to brand, from sports bar to meal-replacement drink, hooked by promises and inspirational images of great athletes, yet unable to realize the products' true benefits because they don't exercise while using them. And the cruelest twist to this attempt by companies to grow outside of their core is that they also risk losing the people who gave their product credibility to start with: the athletes. “What you typically see with performance nutrition is that it's birthed within the community of enthusiasts,” said Almada, citing PowerBar, which got its start in Berkeley, California's running community, as an example. After seeping into the culture of runners, PowerBar's product gained a reputation for being healthy food. And it's this reputation that drives a Wal-Mart shopper — who has no intention of going for a walk, let alone a jog — to grab a PowerBar for a mid-meal snack on his way out of the store.

The problem is, when everyone begins using a sports nutrition product, the product begins to lose appeal to the core athlete because the product has become associated with the novice, the inactive person, Almada said. In addition, once a sports nutrition product makes it onto the shelves of Wal-Mart or other mass retail locations, it may gain broader distribution — but it's also likely to have its profit margins chopped by retailers catering to price-conscious consumers rather than to performance-seeking athletes, who are willing to pay a premium for a product that works.

For these reasons, Almada advises sports nutrition companies to bypass the mass market altogether and focus on chasing down the “whopping” numbers of men and women who are engaged in physical activity by selling through specialty retail channels, such as sporting goods or bike stores. “If you go into a bike shop, you will have a much larger percentage of people there who are the performance athlete,” Almada said. “And if you look at the number of people who cycle on the weekend and/or compete, it's a staggering number.” (According to the Sporting Goods Manufacturers Association's 2008 survey, close to 52% of respondents reported using road biking as a frequent or regular means of exercise.) Following his own advice, Almada plans to sell GenR8's products almost exclusively through GNC and Bodybuilding.com in the United States. In the United Kingdom, GenR8 will be targeting multisport, cycling, running and soccer shops, in addition to pharmacy and nutrition retailers, Almada said.

Crossing Cultural Boundaries: A Necessity For the Future of Sports Nutrition

Although soccer is the No. 1 sport in the world, few sports nutrition companies are targeting these athletes — even though doing so would open up untapped markets in the United States and around the world, said Anthony Almada, president and CEO of GenR8, a new sports nutrition company that is going after the global soccer market. Of course, as Almada notes, marketing to the soccer market inside and outside of the United States requires a cultural literacy that spans languages as well as consumer predilections.

Given the fact that almost 45% of Americans speak a language other than English at home, learning how to appeal to specific cultural niches is something all nutrition companies will need to do if they want to continue growing in this increasingly multilingual and multicultural country, said James Tonkin, principal of Tonkin Consulting. But appealing to different cultural groups requires more than just dual-language labeling, Tonkin added. Companies must also use taste, imagery and branding to connect with consumers. For example, Tonkin said Cintron energy drink has developed a high appeal within the Latin marketplace because of its Spanish-language packaging, but also because the product's distinctively fruity flavors have hit the right note with Latin taste buds.

In going after niche cultural segments, marketers must also make sure they are targeting the right markets for their products in the right ways, Tonkin said. In 2005, Vitamin Branding Corp. launched a sports nutrition line under the brand Everlast Nutrition with the hope that this well-known boxing name would appeal to the overall Latino market, which makes up a significant portion of the sport's U.S. fan base. “The launch of Everlast Nutrition for Latinos is a milestone for the traditional … nutrition market,” Brian Robinson, chairman of Vitamin Branding, told Drug Store News in 2005. “Additionally, it offers the Everlast Nutrition brand an extension opportunity into a culture that embraces the Everlast brand.”

Yet, despite the high hopes, Everlast Nutrition flopped. Almada conjectured that brand's failings are rooted in the larger problem faced by many sports nutrition companies seeking to expand outside of their traditional marketplace: The performance promises that endear these companies' products to athletes will not always extend to the fans of these athletes. In other words, while the Everlast brand holds some cache in the boxing world, boxing fans, in general, are a sedentary bunch and are not looking for sports nutrition products — even ones with a name such as Everlast.

Following his own advice, Almada plans to sell GenR8's products almost exclusively through GNC and Bodybuilding.com in the United States. In the United Kingdom, GenR8 will be targeting multisport, cycling, running and soccer shops, in addition to pharmacy and nutrition retailers, Almada said.

As more sports nutrition companies move to target this market, they will need to follow NuGo's and GenR8's lead by reaching out to today's children, many of whom are growing up with instilled ideas about the importance of exercise and good nutrition, Tonkin said. “These kids are the future market.” Companies will also have to produce “less sophisticated” but “more science-based” products, Tonkin added. “Consumers are going to demand it.”

Sports Nutrition Guru Anthony Almada: Avoid the Masses

The one market Anthony Almada is not trying to reach with his new sports nutrition company, GenR8, is the mass market, the long-time sports nutrition executive told Nutrition Business Journal. In fact, GenR8's first product — Vitargo S2, a patented, sugar-free molecular carbohydrate powder — specifically says on its label, “If you're not training, do not take this product.”

After departing from EAS, the company he co-founded in 1992, Almada said he watched with frustration as EAS shifted from a well-regarded, successful sports nutrition brand to a mass market product line that declined in sales by close to 80% after hitting Wal-Mart's shelves. Why did EAS falter when it attempted to move beyond its performance-athlete origins? The company simply didn't perform as well, Almada said. That's because the fundamental laws of nutrition make a product designed for an athlete burning thousands of calories — such as a high-protein or high-carbohydrate sports nutrition bar or shake — the worst thing possible for a sedentary consumer. Consequently, EAS's products could not deliver on their promises of better performance, for which they were designed. They only delivered more pounds, Almada said.

Because of this mismatch, Almada sees mass market consumers migrating from brand to brand, from sports bar to meal-replacement drink, hooked by promises and inspirational images of great athletes, yet unable to realize the products' true benefits because they don't exercise while using them. And the cruelest twist to this attempt by companies to grow outside of their core is that they also risk losing the people who gave their product credibility to start with: the athletes. “What you typically see with performance nutrition is that it's birthed within the community of enthusiasts,” said Almada, citing PowerBar, which got its start in Berkeley, California's running community, as an example. After seeping into the culture of runners, PowerBar's product gained a reputation for being healthy food. And it's this reputation that drives a Wal-Mart shopper — who has no intention of going for a walk, let alone a jog — to grab a PowerBar for a mid-meal snack on his way out of the store.

The problem is, when everyone begins using a sports nutrition product, the product begins to lose appeal to the core athlete because the product has become associated with the novice, the inactive person, Almada said. In addition, once a sports nutrition product makes it onto the shelves of Wal-Mart or other mass retail locations, it may gain broader distribution — but it's also likely to have its profit margins chopped by retailers catering to price-conscious consumers rather than to performance-seeking athletes, who are willing to pay a premium for a product that works.

For these reasons, Almada advises sports nutrition companies to bypass the mass market altogether and focus on chasing down the “whopping” numbers of men and women who are engaged in physical activity by selling through specialty retail channels, such as sporting goods or bike stores. “If you go into a bike shop, you will have a much larger percentage of people there who are the performance athlete,” Almada said. “And if you look at the number of people who cycle on the weekend and/or compete, it's a staggering number.” (According to the Sporting Goods Manufacturers Association's 2008 survey, close to 52% of respondents reported using road biking as a frequent or regular means of exercise.) Following his own advice, Almada plans to sell GenR8's products almost exclusively through GNC and Bodybuilding.com in the United States. In the United Kingdom, GenR8 will be targeting multisport, cycling, running and soccer shops, in addition to pharmacy and nutrition retailers, Almada said.

Crossing Cultural Boundaries: A Necessity For the Future of Sports Nutrition

Although soccer is the No. 1 sport in the world, few sports nutrition companies are targeting these athletes — even though doing so would open up untapped markets in the United States and around the world, said Anthony Almada, president and CEO of GenR8, a new sports nutrition company that is going after the global soccer market. Of course, as Almada notes, marketing to the soccer market inside and outside of the United States requires a cultural literacy that spans languages as well as consumer predilections.

Given the fact that almost 45% of Americans speak a language other than English at home, learning how to appeal to specific cultural niches is something all nutrition companies will need to do if they want to continue growing in this increasingly multilingual and multicultural country, said James Tonkin, principal of Tonkin Consulting. But appealing to different cultural groups requires more than just dual-language labeling, Tonkin added. Companies must also use taste, imagery and branding to connect with consumers. For example, Tonkin said Cintron energy drink has developed a high appeal within the Latin marketplace because of its Spanish-language packaging, but also because the product's distinctively fruity flavors have hit the right note with Latin taste buds.

In going after niche cultural segments, marketers must also make sure they are targeting the right markets for their products in the right ways, Tonkin said. In 2005, Vitamin Branding Corp. launched a sports nutrition line under the brand Everlast Nutrition with the hope that this well-known boxing name would appeal to the overall Latino market, which makes up a significant portion of the sport's U.S. fan base. “The launch of Everlast Nutrition for Latinos is a milestone for the traditional … nutrition market,” Brian Robinson, chairman of Vitamin Branding, told Drug Store News in 2005. “Additionally, it offers the Everlast Nutrition brand an extension opportunity into a culture that embraces the Everlast brand.”

Yet, despite the high hopes, Everlast Nutrition flopped. Almada conjectured that brand's failings are rooted in the larger problem faced by many sports nutrition companies seeking to expand outside of their traditional marketplace: The performance promises that endear these companies' products to athletes will not always extend to the fans of these athletes. In other words, while the Everlast brand holds some cache in the boxing world, boxing fans, in general, are a sedentary bunch and are not looking for sports nutrition products — even ones with a name such as Everlast.

Following his own advice, Almada plans to sell GenR8's products almost exclusively through GNC and Bodybuilding.com in the United States. In the United Kingdom, GenR8 will be targeting multisport, cycling, running and soccer shops, in addition to pharmacy and nutrition retailers, Almada said.

NBJ

ISatori Technology's Evolution Mirrors Company Founder's Own Personal Transformation

With a pull-up bar and his first DP weight set, Stephen Adele was just 13 when he started working out in his basement, where he created the foundation for a lifelong love of bodybuilding. Now 36, Adele remains dedicated to physique development for himself — and his customers — as CEO and founder of iSatori Technologies. But as Adele's life has changed, so have iSatori and its founder's vision for the six-year-old Golden, Colorado-based sports nutrition company. “Interestingly, as I have evolved as a person, [iSatori has] started to change,” said Adele. “My problems 15 years ago, when I was a bodybuilder, are a lot different than my problems now, being a father with three little girls.”

As many entrepreneurs do, Adele has used his life experiences to grow and develop new products and sales strategies for his company — and the approach has delivered solid results. ISatori expanded 50% in 2007 and is poised to double its growth in both 2008 and 2009, Adele said. Although he wouldn't provide specifics, Adele said sales have been “very robust,” despite the sluggish economy.

Adele has also been recognized for his business acumen. In 2007, he was chosen as a semi-finalist for Ernst & Young's Entrepreneur of the Year award, which, according to the professional services organization's Website, recognizes executives whose “ingenuity and perseverance have created and sustained successful, growing business ventures.”

ISatori's newest products are a clear reflection of the company's evolution and decision to shift at least part of its focus to reaching the mass market. Voots, a children's chewable supplement packed with 12 fruits and vegetables, was launched in summer 2008 and ships to Wal-Mart, as well as to natural retailers such as to Whole Foods Market. ISatori's Hardcore Energize Bullet, an energy drink packaged in a unique 2.9-ounce plastic vial, debuted in December 2007 and can be found at 7-Eleven, while the company's Energize all-day energy tablets are hot sellers at Wal-Mart and other mass market chains.

Adele's strategy of developing a small number of sports nutrition and other products to target specific customer bases and retail channels is one many sports nutrition entrepreneurs shy away from for fear of alienating their core consumers. But not iSatori — which aims to cater to hardcore bodybuilders and endurance athletes, as well as to soccer moms, weekend warriors and everyone in between. “I don't see our products being positioned to one defined set group of consumers,” Adele said. “Rather, I see us moving, continually changing and advancing through life with our customers. As their needs change, so will our products and approach to them.”

ISatori's Epiphany

The name iSatori comes from the Japanese word, satori, which means to have an epiphany or awakening that can be deepened with constant training. Adele said he added the “I” to the name to “make it more personal.” Rather than simply sell products, Adele said his raison d'être is to build relationships with customers and help them achieve their fitness goals — whatever they may be.

“What we like to say around here is [that] everybody, at one point or another in life, wakes up and has a satori moment,” Adele said. “They look in the mirror and say, ‘I'm not happy with what I see or how I feel.’ It's our job to put out our hand and say, ‘We're here to help you,’ and bridge the gap.”

Adele got his start in the sports nutrition business in 1995 at EAS (Experimental and Applied Sciences) when he was right out of college. The former Mr. Teenage Colorado, Mr. Colorado and Mr. Wyoming was a natural fit for the sports nutrition business. EAS owner Bill Phillips and Phillips' brother Shawn mentored Adele, put him in charge of international sales and gave him responsibilities that allowed him to develop his business skills at an early age. “I had the opportunity not just to sell product outside of the United States, but to set up a complete operating center for international,” Adele said. “It allowed me to learn all facets of the business.” He learned about regulations, government compliance, reformulating products, marketing products and forging successful channel strategies, among other things.

Adele knew that one day he'd like to start his own company. He got his break in 2001, when he left EAS. But launching iSatori came at a price. Adele and his wife, Julia Lacy-Adele, maxed out credit cards, took out a second mortgage and borrowed money from friends. “Failure was not an option,” Adele said. “We were going to make this work.”

The company launched in 2002 with Lean System 7, an ephedrine-free weight-loss supplement. The timing was perfect. The Food and Drug Administration (FDA) had just begun investigating the use of ephedrine alkaloids and ephedra in dietary supplements for posing unacceptable health risks. The official ruling banning the sale of ephedra came in February of 2004. “[Lean System 7] is still a great seller for us in the marketplace,” Adele said. “It was the one that led the way for us.”

Built to Last

Today, iSatori boasts only 10 products, but Adele said each is a brand built to last. “We are careful how we bring products to market. We eliminate the bad ones early,” he said. “One of our core values is science, which is actually doing research on a product to make sure it does what you say it's going to do and, equally important, that it's safe.”

Meta-Cel, a creatine supplement, was recently the company's first product to be discontinued. Adele said the product “ran its course,” and instead of creating a new-and-improved version, iSatori evolved Meta-Cel into its 3-XL offering, a product that contains three forms of creatine combined with nitric oxide components.

Product development, Adele said, is an ongoing process that requires asking what's next. Rather than react to what other sports nutrition companies are doing, Adele said he prefers to be the one blazing new trails. “To be honest, I don't pay a lot of attention to my competitors,” he said. “We have never sought out to be a ‘me too’ company. If I can't do it better and truly create a revolutionary breakthrough to a category, and [if] I can't do it differently, I don't want to do it at all.”

ISatori's chief competition comes from companies that approach the marketplace by “building a sustainable, meaningful suite of branded products,” said Adele, citing Living Essentials, Iovate Health Sciences Research Inc. and BSN as examples. Like iSatori, these companies have their eggs in many baskets, as the sports nutrition market increasingly finds demand for its products far beyond brick-and-mortar specialty stores. “Our goal at iSatori is to build a legacy of branded products that are here long after I am,” Adele said.

In addition to Voots children's chewables, Energize all-day energy tablets and the Hardcore Energize Bullet energy drink, iSatori's products include Morph, a time-activated muscle builder; 3-XL, a creatine formula; Curvelle, a weight-loss supplement for women; Eat-Smart, a meal-replacement shake; H-Blocker, a beta-alanine and carnosine booster; Isa-Test, an anti-estrogen, testosterone formula; MX-LS7, a fat burner; and Lean System 7, which can be purchased at GNC and Vitamin Shoppe. The company's products are distributed through Europa Sports Products and other specialty chains on land and online. ISatori's land-based U.S. retailers number more than 30,000, Adele said.

While you won't find all of iSatori's products in the same stores, its products are offered by just about every major land-based and online retailer that sells sports nutrition products, Adele said. ISatori hasn't yet moved into independent health food stores, which is something Adele is considering pursuing.

ISatori plans to grow by exposing more people to the company's products, as well as by adding new products — including “pocket-friendly” offerings that make sense in a down economy, such as the company's new Harcore Energize Bullet, which retails for $2.99 at 7-Eleven and is still moving despite high gas prices and lighter consumer wallets.

“We are growing nicely in the current recession, but that isn't by accident,” Adele said. “When we looked at product development a year ago, we knew times were going to get tough for people, which is why we developed a product like the Hardcore Energize Bullet.”

Blazing Trails Online

Adele declined to discuss his sales strategies or how iSatori broke into convenience stores, one-stop shopping giant Wal-Mart and natural grocer Whole Foods. All he would say about his approach to the market is this: “Sales strategies have moved more so than ever before onto the Internet” — which may signal how Adele plans to drive his business in the future.

Adele said bodybuilders have always been more likely to research and seek out specialized supplements, such as iSatori's new Morph, but mainstream consumers, such as busy moms or fitness enthusiasts, are becoming savvier, thanks to the Internet. All you need to do is use Google to find product reviews and other information to help you achieve your goals, Adele said. “People are self-educating at their own pace.”

Another benefit of the Internet is that it holds sports nutrition companies — and all companies, for that matter — to a higher level of accountability and transparency. “There's no more hiding anything. Consumers will figure it out,” Adele said. The Internet also allows people to easily communicate whether a product worked for them, comment on customer service and discuss where the best price can be found.

To support its products and lend customers guidance in using them, iSatori publishes a print magazine, Real Solutions, and Adele has a blog and has authored books and nutrition plans, including The Sports Supplement Buyer's Guide and the 21-Day Ultimate Energy Plan.

“We're always trying to maximize the value for our customers,” Adele said. “That's why we include lots of books and programs and guides to provide a more holistic approach. It's not just: ‘Here's a supplement.’ It's: ‘Here's a supplement, an unconditional 60-day money-back guarantee if it doesn't work for you, an eight-week program to help you reach that particular goal you're after, and we have live operators by phone or by e-mail that are always here to help you in case you need guidance along the way.’”

The Future Is Already Here

So what's next for iSatori? Adele said one of the industry's biggest trends — delivery systems — will continue to drive new product development at his company and others. One of iSatori's newest products, muscle-builder Morph, provides an example. In developing Morph, iSatori took ingredients that have been available in the marketplace — such as beta-alanine, L-arginine-L-malate and L-citrulline — and re-engineered them to work better. Taken 30 minutes before you train, Morph offers three products in one: a pre-workout “muscle-fiber activator,” an intra-workout “blood and plasma expander” that adds pump and vascularity, and a post-workout cell regenerator. “The bodybuilder only has so much money to spend on supplements, and when you're thinking about the value of your purchase, you can look at it and say not only do I know it works — because there was a study — but it also is alleviating my need for three products,” Adele said.

ISatori's Energize tablet also uses time-release technology to provide a lasting energy boost, Adele said. “That pill has taken us into new markets, i.e., food, drug and mass. It's the number one energy pill in its category — as well as at Wal-Mart, which has really tapped us into new markets beyond the specialty market and bodybuilders.”

As Adele notes, Energize has been embraced by just about anyone who needs more energy. ISatori's market for Energize is “middle-aged America with a family,” Adele said. “They're people out there really working their butts off. They've got a lot of responsibilities, and they're just physically and mentally drained.”

So far, iSatori has successfully straddled the line between specialty and mass markets. But does Adele worry about eventually losing his core bodybuilding customer base? “Not at all,” said Adele, adding that iSatori will continue to develop supplements for bodybuilders and athletes. “While I'm still a bodybuilder, even more importantly, I'm a husband and a father now,” Adele said. “This new influence in my life has directed me to come up with new ideas that will make a positive impact on the lives of my current customers and a new broader base of customers as well.”

It's this introspective approach that brought such quick success to Adele and his young company, said Bob Weinstein, vice president of sales for FutureBiotics, a maker of natural vitamins, supplements and other health products. “Stephen eats, breathes and sleeps the category,” said Weinstein, who has worked in natural foods for 37 years and in sports nutrition for 15 years. “And he looks like a model consumer for what he sells.”

NBJ

NBJ Chews the Fat With Executives From Four Growing SNWL Companies

In an effort to put our finger on the pulse of the sports nutrition & weight loss industry, Nutrition Business Journal posed a series of questions to four leading and innovative firms: BSN, a manufacturer of sports supplements for physique and performance athletes; First Endurance, a manufacturer of nutrition products for cyclists and other endurance athletes; Max Muscle, which operates a national sports nutrition franchise and manufacturers its own lines of nutrition products; and Nutratech, a raw-material supplier of the weight-loss supplement ingredient Advantra Z.

NBJ: How have your company's sales trended in the last few years, and to what do you attribute these sales trends?

First Endurance: Our sales are just about doubling year to year. We attribute this growth to a huge boom in the endurance sports nutrition market, offering the best endurance products in the market, increased advertising and high-profile sponsorships. We've increased our advertising approximately 50% in 2008 and have added more print advertising, more Web advertising, and more athlete and team sponsorships. We are now the official supplement sponsor for all Ironman North American races.

Max Muscle: We continue to grow at a double-digit pace. This is the result of our strong focus on research and development, our innovative product development and marketing, and our ability to deliver a consistent experience through our franchise stores.

Nutratech: We attribute Nutratech's high double-digit growth rate to the fact that manufacturers and marketers in the [sports nutrition & weight-loss] categories are recognizing that some fad ingredients have little science to support them or have been proven not to work. This has bolstered sales of tried-and-true diet and fitness ingredients such as Advantra Z, which is supported by sound research and has a proven track record of performance.

NBJ: What new products has your company launched this year, and what products are you planning to launch later this year or in 2009?

BSN: In March, we increased the efficacy of our three core products — NITRIX, N.O.-XPLODE and CELLMASS — by infusing them with our new Advanced Volumizing & Performance Technology (AVPT) matrix. Protected by four patents, AVPT contains new compounds and special creatine analogs — such as an N-butyrated form of creatine called Creatine ABB — that are designed to deliver the extreme anti-catabolic protection demanded by advanced physique and performance athletes. In August, we released VOLUMAIZE, a new category of supplements designed to be taken during training. VOLUMAIZE is a hypertrophic activating myocellular expander that anaerobic and aerobic athletes mix with water and drink during their training session to increase glycogen and nutrient compensation.

First Endurance: We launched two new flavors of our Electrolyte Fuel System during-exercise drink mix earlier this year. We'll be launching a liquid shot, our version of an energy gel, this fall.

Max Muscle: Femme Lean & Balance for women, Anabolic Cuts for men, Nitro EXT, XTR BCAA formula, Xtingisher and ACM are a few of the innovative and science-based products we have recently introduced. Our chief scientific officer, Dr. Phil Harvey, is a busy man these days. We have more than 30 products in development at any given time.

NBJ: What are the hottest sports nutrition ingredients or products right now, and why?

First Endurance: In the endurance category, electrolytes continue to be a huge selling point for consumers.

BSN: BSN sources ingredients using its own in-house staff working in concert with local experts in countries around the world. This enables us to effectively scan the globe for the next breakthrough physique and performance-enhancing compound. That said, ingredients represent one of several pieces of the physique and performance puzzle. Ingredients really only become useful to consumers when placed within the context of the appropriate supplement infrastructure. A look at our current supplement formulas reveals that they consist of complex and integrated infrastructures. These infrastructures allow an ingredient that might otherwise produce mediocre effects to suddenly come to life for the physique and performance athlete.

Nutratech: Unfortunately, the weight management and sports nutrition markets can be very driven by fad ingredients that do not have proven track records or scientific support. This is not a recipe for long-term success. In both sports nutrition and weight management, supplements that include thermogenics, such as Advantra Z, best address consumer needs and concerns because thermogenesis is the only proven method of weight loss and of leaning up and trimming down for optimal performance and physical fitness.

Max Muscle: Arginine-alpha-ketogluterate is still popular for its ability to create increased blood flow to the muscles for a great pump. Also, carnosine pre-cursers, beta-alanine, histidine and ribose are being used for longer and stronger workouts. We believe in many different combinations of amino acids for sports performance. BCAAs — which are in our top-selling product, XTR — are something we love to use.

NBJ: What sports supplements, ingredients or products are on the verge of popping in the second half of 2008 and 2009?

First Endurance: Beta-alanine has been gaining steam because of the clinical studies that have shown it can improve endurance performance. First Endurance introduced a product with beta-alanine called OptygenHP last fall, and it has become our No. 1-selling item.

BSN: Some major breakthroughs will come in the area of supplement formula infrastructure design. Also, consumers can expect to see breakthroughs in the area of supplement usage, as exemplified by BSN's creation of the ‘N-Training’ (during training) product category. Each day can be subdivided into a specific number of supplement usage occasions, which we have termed ‘supplement timing windows.’ The sports nutrition industry has hardly scratched the surface in this regard. BSN will continue to remain on the innovation frontier by defining new and more powerful supplement usage occasions. This establishment of new usage occasions necessitates delivery systems that make it easier for consumers to take supplements on such occasions, and BSN is testing a number of different delivery systems at this time.

Max Muscle: Volumizers, energizers and proteins will continue to be popular. We will continue to focus on them and others, particularly in the endurance and weight-loss categories.

NBJ: How would you define your current customer base?

BSN: BSN's current customer base consists of men and women 18 to 50 years of age who are committed to realizing their true physique and performance potential. Our customers are also very educated in physique and performance matters.

Max Muscle: Our customers are very diverse and include students, businessmen, moms, weekend warriors and pro athletes. We are very proud that our marketing drives all types of customers on a consistent basis.

Nutratech: The Advantra Z consumer is anyone who wants to improve athletic performance or achieve a statistically significant weight loss with proper diet and exercise.

First Endurance: Our customers are very educated and affluent cyclists, runners and triathletes who typically compete.

NBJ: Are you working to expand your customer base?

First Endurance: Because First Endurance is still a relatively young, niche company — we were established in 2002 — we still have a lot of potential with the high-end endurance customer base. First Endurance will continue to focus on our core customers. Because we have had such success with our core customers and have a lot of growth potential within this group, we aren't in a hurry to move quickly into the mainstream. Over time, we see ourselves moving more and more into the mainstream. We just don't want to do it until the time is right.

BSN: In 2008, BSN entered into a multi-year agreement with the Ultimate Fighting Championship (UFC) and became its official nutritional supplement provider. This agreement will catalyze our expansion into the market consisting of mixed martial arts (MMA) fighters and fans of this sport, while simultaneously building brand awareness across all sports. We are also increasing our emphasis on the female consumer. Externally, this can be seen in marketing initiatives — such as the print ad campaign that ran in OK magazine and the recent signing of two marquee female spokesmodels.

Max Muscle: The magazine we publish, Max Sports and Fitness, has a broad interest and helps us market to all targets.

NBJ: How is the current economic downturn affecting your company?

First Endurance: Our sales continue to exceed forecast month after month and have been very inelastic, even with the current state of the economy.

Max Muscle: We have increased our same-store sales numbers for the past 43 months, so we have not had any real impact from the recessed economy.

BSN: We are feeling the effects, as is every single business, though not in entirely negative ways. Consumers may actually shift to brands at the upper echelon of the sports nutrition marketplace during tough economic times in an attempt to find physique and performance supplements that deliver maximum results. This may seem counterintuitive, but we do see it happening.

NBJ: Is your company being affected by rising ingredient or supply prices, and has your company had to institute its own price increases?

Nutratech: We have recently seen increases in our costs due to rising energy prices and inflationary pressures. But for the time being — and hopefully into 2009 — we don't anticipate passing along these price increases to our customers. Keeping our prices steady is part of our strategy to give manufacturers one more reason to include Advantra Z in their sports nutrition and weight-management formulas.

First Endurance: We are seeing costs increase for shipping, components and ingredients, particularly for proteins and carbohydrates. But, at this time, we have not increased prices. We are going to continue reviewing costs month to month and evaluate it as time progresses.

Max Muscle: We have had to raise the prices on our proteins by as much as 30%. By not reducing our quality as a result of higher prices, we feel our products are still in high demand.

BSN: BSN has definitely felt the effect of today's food prices — which began to soar in 2007 and are projected to remain elevated through 2017, according to some estimates — especially with respect to the price of raw whey protein, a derivative of milk. We have seen a considerable increase in the manufacturing cost of our protein products, including SYNTHA-6 and TRUE-MASS. We did institute a slight price increase for our products in August. This was our first price increase since going into business in 2001, and it's in direct response to the current economic climate. We have also seen considerable increases in the sourcing, extraction and ultimate integration of novel ergogenic compounds into our products. Despite the soaring prices we began seeing for raw whey protein over a year ago, we did not increase the price of our protein products, choosing to absorb that cost, which was significant. But we have come to the point now where the institution of a slight price increase is a necessary measure to keep pace with the world market. It's too early to tell whether this price increase will affect our sales. But our customer base is fiercely loyal to the BSN brand, and we are confident that they will contine to embrace the line.

NBJ: What role does research play in developing and selling a successful sports nutrition or weight-loss products, and do you see this role evolving?

BSN: Research is at the heart of innovation. By research, I don't just mean in a sterile-laboratory sense of the word, but also in a creative way, such as by the development of new concepts in supplement infrastructure design, delivery systems, supplement usage occasions and even marketing technologies. Ultimately, I see research becoming more proprietary. There will still be studies conducted by academic research institutions published in peer-reviewed scientific journals, but the most productive research will arguably be done by supplement companies themselves, using approaches that bring to market more innovative products more quickly.

First Endurance: Research is the foundation of First Endurance, and all products that First Endurance develops are based on human scientific research. We refuse to reduce costs by using ‘pixie dust’ amounts of ingredients just to dress up our labels. Our formulations utilize the same levels — and sometimes more — of the active ingredients that were used in the actual human scientific research. We believe companies will need to focus on research to be able to offer customers effective products that they will buy again and again.

Max Muscle: We see research getting better and better with the top companies. R&D should always be something that all of us are working on. Products that are safe, ethical and deliver results — that is what R&D is all about.

Nutratech: Research is essential. We've built the Nutratech business via our unwavering commitment to scientifically supported raw materials. We've invested in independent studies and supported independent research wherever possible. As a result, Advantra Z is one of the most studied diet and fitness ingredients in the industry. This means manufacturers can use Advantra Z with confidence and use our research results in marketing their products to consumers. Scientific research will only play a more and more important role as the sports nutrition industry evolves.

NBJ: What are the three most important characteristics of a successful sports nutrition or weight-loss supplement company?

BSN: Passion, integrity and creativity.

Max Muscle: True and honest labels, great R&D, and great customer service.

Nutratech: The best companies are innovative, committed to science and quality, and have strong relationships with both their retail and consumer audiences.

First Endurance: The most successful companies have: 1) established brand loyalty; 2) know their consumers, probably because they are their consumers; and 3) offer their consumers something unique or superior or give them a clear reason for buying what they're selling.

NBJ: If you were to start a new sports nutrition or weight-loss supplement company today, what would be the first things you would do?

Nutratech: First, I would focus on thermogenics because thermogenesis is the only proven method of weight loss and of leaning up and trimming down for optimal performance and physical fitness. Then, I would help build industry credibility by eschewing fad ingredients and sticking to tried-and-true raw materials that have solid scientific support. Finally, I would invest in education — for retailers, consumers and sports professionals — to foster greater understanding and acceptance of performance-enhancing dietary supplements.

First Endurance: First, I would make sure I understand the market backward and forward. Second, I would evaluate the category and competition and do a SWOT [strengths, weaknesses, opportunities and threats] analysis. Third, I would develop a detailed business plan and follow it.

BSN: I would make sure that everyone I hired had high levels of passion, integrity and creativity and that they were committed to sustaining, if not increasing, those levels with the passage of time.

Responses for this edited Q&A were provided by BSN President and CEO Chris Ferguson, First Endurance Vice President of Sales and Marketing Michael Fogarty, Max Muscle President Sean Greene and Nutratech President Bob Green.