FitLife Brands takes hit on unit prices but boosts profits by switching to captive GNC distribution

By Hank Schultz

- Last updated on GMT

Related tags Brand management Brand Marketing Gnc

FitLife Brands takes hit on unit prices but boosts profits by switching to captive GNC distribution
Switching to a captive distribution mode within the GNC network has helped dietary supplements marketer FitLife Brands realize higher profits on flat revenue, the company announced recently.

In releasing its preliminary year-end 2014 results, the Omaha, NE-based company showed net income in the range of $1.6 million to $1.7 million.  That was about a 25% increase over the 2013 figure of $1.3 million, the company said. 

 Revenue was more difficult to calculate, the company said, because of the change in the way it distributes its products.  In 2014 the company moved to hitch its wagon fully to the GNC star, migrating completely over to GNC’s centralized distribution platform for fulfillment to the GNC franchise network.  FitLife took this step even though it mean slightly lower unit prices, said chief financial officer Mike Abrams, because it meant more consistent demand for less work.

“We saw a solid increase in volumes related to strong sell through and increased penetration into domestic and international franchisees,” ​Abrams said.

Prices down, but costs down even more

Revenue for the year came in at about $20 million, essentially unchanged over 2013.  If the company had been distributing its products in its old decentralized model, that figure would probably have been about 9% higher, Abrams said. The shift into captive GNC distribution proved to be worth it, he said.

“While realized pricing was affected by the previously-discussed shift to centralized GNC distribution, we more than offset this with, among other things, lower distribution costs and reduced operating expenses,”​ he said.

FitLifeFitLife markets its supplements under the brand names NDS Nutrition, PMD, CoreActive and SirenLabs. The company, based in Omaha, NE, changed its name last year from Bond Labs. The company has pursued a brick-and-mortar strategy, with distribution of its products in more than 3,000 GNC stores and 1,200 other franchised outlets nationwide. FitLife markets more than 50 different dietary supplements in the sports nutrition, performance, weight loss and general health categories.

FitLife seems to have gotten over the hump that has foiled some other smaller and even midsize supplement manufacturers.  It has managed to ramp up production and distribution while at the same time keeping costs in check and improving profitability. 

New Product launch

The company has lagged a bit on its product introduction cycle, however. In mid 2014 the company announced a new product line that would launch in GNC stores in the fourth quarter of 2014 or the first quarter of 2015.  The company is now targeting the end of March as the earliest date for the launch of this new brand, called Metis Nutrition. The new line will add on to the company’s existing offerings, which are sold under the NDS Nutrition Labs, PMD, SirenLabs and CoreActive brands and are targeted primarily toward sports nutrition and active lifestyle consumers. In concert with the news of the Metis launch FitLife announced line extensions in its core brands. 

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