On a conference call with analysts yesterday to discuss NBTY’s fourth quarter results, Nagel said: “In active nutrition, we’ve really got a fantastic category trend.
“We’re doing research right now that would suggest that high protein, low fat or low carb solutions have a lot broader application in a lot more consumer segments than purely sports nutrition.”
Bars, in particular, were “a very good fit with lifestyles and a broad range of demographics and needs”, he said, and NBTY was in the right channels to cash in.
“As they go broader in their appeal that means more sales in food, drug and mass.”
Significantly outpacing the market
NBTY, which was acquired by private equity firm The Carlyle Group last year, posted a “solid” 10.6% rise in consolidated earnings before interest, tax, depreciation and amortization (EBITDA) to $132m on net sales up 10.7% to $746m in the three months to September 30, said Nagel.
“We also closed with good numbers on Nielsen for the 13 weeks ended October 1. Overall sales of vitamins, minerals and health supplements (VMHS) in food drug and mass merchandise outlets excluding Walmart grew 6.6% over the period while NBTY significantly outpaced the industry with wholesale sales growing 11.2%.
“Similarly, we continued to gain share in the diet and sports nutrition category as the category grew 13.1% and NBTY grew at 27.5%.”
Retailers want to work with private label partners with a ‘broader capability’
NBTY’s branded portfolio was going from strength to strength, although life remained challenging in the private label supplements and contract manufacturing business, added Nagel.
“We’ve seen people with contract manufacturing capabilities getting in and bidding on individual SKUs (stock keeping units).
“Historically private label did not have as many suppliers seen as solid by retailers. Now they do. The first time you get some new competition, you get some price out of the market and everything looks really rosy. But then you have to live with those suppliers.
“If these products are going to become stable parts of retailers’ portfolios they want to work with partners with a broader capability that are going to be around a long time.”
Negative vitamin studies won’t damage the industry in the long run
Asked to comment on the effects of recent industry-bashing headlines prompted by negative scientific papers on multivitamins and vitamin E, he said: “We saw some pressure on the category in October”, but sales had quickly “normalized”.
He added: “This movement towards wellness is broader than a single study. I think it’s a blip and it’s certainly not going to damage the industry in the long run.”
He also praised the Council for Responsible Nutrition for “going on the offensive” after the studies were published and trying to put them into context.
Q4 results breakdown
Net sales in NBTY’s Wholesale/US Nutrition division (which supplies branded and private label products for leading retailers) increased 10.6% in the quarter, which the firm attributed to higher sales of branded products such as Nature’s Bounty, Pure Protein and Body Fortress.
Net sales in the European Retail arm (which includes Holland & Barrett and Julian Graves in the UK, De Tuinen in Netherlands and Nature’s Way in Ireland) surged 14.2% while net sales in the direct Response/E-Commerce channel were up 6.6%.
North American Retail net sales (Vitamin World in the US, Le Naturiste in Canada) were up 5.2%.
A robust pool of acquisition opportunities
NBTY has acquired more than 30 companies since the mid 1980s, and expects to play a leading role in further industry consolidation, according to its 2011 annual report, published last week.
“In the fragmented, global VMHS industry, there remains a robust pool of acquisition opportunities across channels and geographies.”
For the full year NBTY posted an 11.5% rise in consolidated EBITDA to $556m on sales up 4.7% to $2.96bn.