Because it embraced all of its challenges and came out on top. The first thing GNC did right was changing its marketing. Long a favorite of muscle builders, GNC made the smart move by pushing that hard core product to the back and gearing its advertising towards women (including ESPN’s Jenn Brown) and dedicating more of its stores to boomers.
Many were also concerned about GNC’s margins. GNC doesn’t make much money off the brands owned by others and there were plenty of people I spoke to who thought that brand loyalty in the vitamin space was hard to come by (consumers just bought the cheapest stuff they could get their hands on). But GNC grew its own brands like Mega Men, Ultra Mega and Pro Performance and the company had a very successful launch of its new Beyond Raw sports nutrition line. More than half (about 56 percent) of the products now in their stores are owned and produced by GNC. About 80 percent of its business is in vitamins, minerals, herbs, supplements and sports nutrition products.
Not only has GNC excelled at making its own products, it did well producing vitamins and supplements for third party vendors like Rite Aid , Sam’s Club and Drugstore.com. To address online competition, it bought one of the biggest players in the marketplace, LuckyVitamin.com, for $21 million. LuckyVitamin.com currently offers over 30,000 SKU’s. Proving the power of the brand, GNC.com sales have risen between 30 and 40 percent this fiscal year.
And lastly, the grew sales occasions and had larger transactions with their customers. That’s led to increasing its impressive streak of consecutive quarters of same store sales growth to 25 in the midst of a tough economy.
Not surprisingly, stores continue to grow. GNC has 7,567 stores worldwide, with 76 percent of those stores in the US alone. They’ve grown by 125 units in the US this year and 140 units internationally.
The one exposure point for GNC seems to be its $900 million-plus debt load. But, last month, Moody’s cited the company’s health by upgrading GNC’s debt ratings.
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