The publicly traded Carlsbad, CA-based contract manufacturer released its financial results for the first quarter of its fiscal 2023 last week. Founder Mark LeDoux reiterated what the company had to say when it reported its year end results for 2022 earlier in the fall: Inflation and the final dregs of the demand surges seen during the pandemic have conspired to put the entire industry into something of a holding pattern.
“Much like many other industries, we believe the dietary supplement industry has entered a period of constrained growth due to the effect inflation is having on consumer behaviors. This inflationary impact appears to have affected the Sports Nutrition Industry most significantly, but there are indications that other areas of the dietary supplement industry are experiencing the same economic pressures,” LeDoux said in a statement.
Sport nutrition most profoundly affected
NAI based its assessment on the severe drop in royalty revenues for its Carnosyn ingredient, which is a branded, patented form of beta-alanine. Beta-alanine is has been studied for its affects in promoting carnosine levels in the muscles, buffering acidosis that comes with long, hard workouts and other indications.
NAI saw royalties for Carnosyn fall to $1.4 million in the quarter, which represented a 71.5% drop from the $4.7 million the royalty business brought in during the same period in 2021. LeDoux said several things were at work, including that in 2022 the sports nutrition industry was still in the recovery phases from the period when most gyms were closed and product sales were down. That bump in sales makes subsequent quarters look weaker than they otherwise might, but LeDoux said there’s no doubt that inflation is taking a bite of consumers’ pocketbooks. And sports nutrition products, being more on the discretionary purchase side of the coin, might be especially vulnerable.
Despite his sobering words about the sports nutrition sector and that effect it has had on NAI’s bottom line, the company seems to be humming along otherwise. During the three months ended September 30, 2022 increased $4.8 million, or 12.5%, to $43.1 million as compared to $38.3 million recorded in the comparable prior year period. During the same period, private-label contract manufacturing sales increased $8.2 million, a 24.4% increase from the comparable quarter last year.