Branded supplements such as MegaRed and Digestive Advantage now account for almost nine out of every 10 dollars of revenue generated by Schiff Nutrition International, bosses have revealed.
Speaking on a conference call yesterday to discuss the Utah-based firm’s fourth quarter earnings, chief executive Tarang Amin said 89% of Schiff’s sales came from branded products in the three months to May 31, 2012, compared with 73% during the same period last year.
Schiff is focused on four key areas: Heart health (MegaRed, which contains Aker BioMarine’s krill oil), joint care (Move Free), immune support (via new acquisition Airborne) and digestive health (via recent acquisitions Digestive Advantage and Sustenex - which contain Ganeden’s ultra-resilient probiotic BC30).
Deep price discounts don’t build brands
Greater focus on these brands also explained a sharp rise in gross profit margins to 49.5%, compared with 38.2% a year ago, added Amin, who has been steadily ramping up sales and marketing investment as a percentage of sales (16.2% in 2011; 22.7% in 2012) as part of his brand-building strategy.
He added: “We believe that the category and our leading brands are better served through advertising and innovation rather than by the deep price discounts that are prevalent in our industry.
“This quarter, we started a new Move Free campaign including TV, print, digital, in-store and a new website. Early results are promising…
“We will continue to refresh each of our key brands. We are gearing up the marketing for Airborne and look forward to applying the same brand-building capabilities that we’ve used with other brands.”
Accelerated sales growth for our brands and lower levels of price discounting
Schiff is also working more closely with retailers, he said. “Our most important focus is to help grow the category for our retail partners…
“We participated for the first time in many of their key themed promotions. Our efforts resulted in accelerated sales growth for our brands and lower levels of price discounting.”
IRI: FDMx supplement sales up 4%; Schiff Q4 sales up 30%
IRI data for the 12 weeks ending July 8 show that the overall supplements category grew by about 4% in the food, drug and mass merchandise (FDMx) channel (excluding Walmart), said chief finance officer Joseph Baty.
“Joint care was down 6%, probiotics grew 10% and fish oil and overall immune support were relatively flat.
“But Schiff Nutrition net sales increased 30% for the three months ended May 31, reflecting significant branded growth and new product contributions from MegaRed Extra Strength and Move Free Ultra and the impact of the probiotics [Digestive Advantage and Sustenex] and Airborne acquisitions.”
Full year sales up 21% to $258.9m
Schiff posted a 35% drop in net income to $2m and a 30% rise in net sales to $67.4m in the three months to May 31.
For the full year (52 weeks to May 31, 2012), net income rose 8.7% to $13.7m and net sales rose 21% to $258.9m.