Nutraceutical plots growth through acquisitions, consolidation
market as it goes after better growth for 2006, and focusing on
brand positioning and consolidation of manufacturing and raw
material sourcing.
The Utah company's core strategy is to acquire, integrate and operate the manufacturing, marketing and distribution of branded nutritional supplement businesses. It currently boasts 3,000 SKUs, 650 of which are sold only overseas.
For the 12 months ended September 30, the company reported a 5.3 percent increase in sales compared with the prior year, to $148.2 million. However income from operations dipped to $21.0 million, compared to $22.8 million in 2004.
While the company's primary focus has been on VMS in the past, it has increased its efforts in other areas of the natural products market.
"Our ongoing strategy is to increase domestic health and natural food store market share, grow internationally and enter other strong natural product categories," said chairman and CEO Bill Gay.
"Acquisitions are an integral part of our strategy since nutritional supplement growth rates continue to be relatively flat."
According to Euromonitor International, the US dietary supplements market was worth an estimated $6.5 billion in 2004, growth of four percent over 2003. In 2002-3 growth was 2.6 percent, and in 2001-2 just 1.3 percent.
Although this does indicate some improvement, it is still in stark contrast with the growth rate in 1997-8, of 10.5 percent.
Three strategic acquisitions in the past 18 months - of supplement companies Pioneer and Natural Balance, and health food store chain Pilgrim's Natureway - have made a "positive contribution" to net sales for fiscal 2005, according to Gay.
However selling, general and administrative expenses rose disproportionately to sales, during fiscal 2005 to $55.1 million, and 8.5 percent rise.
Gay said: "We always find seek ways to manage our controllable expense structure while trying to offset less controllable expenses, including legal fees, insurance and corporate governance costs, which increased during fiscal 2005."
Nutraceutical's legal activity this year includes its April legal victory over the FDA in the US District Court in Utah, where Judge Teena Campbell ruled that in favor of the company in its challenge to the legality of the outright ban on products containing ephedra.
She ordered the FDA to carry out a dose-dependent toxicology study and impose a ban on use of the herbal only at and above the level at which it is found to produce toxicity, and enjoined the government agency from taking any enforcement action to block Nutraceutical from selling supplements containing 10mg or less of ephedrine alkaloids per daily dose.
The company has yet to announce whether it plans to reintroduce an ephedra product but if the FDA succeeds in its appeal of the ruling (currently pending) the option could, once again, be taken out of its hands.
