GNC Holdings, Inc. (GNC) provides an assortment of health, wellness and performance products.
The company’s products include protein, performance supplements, weight management supplements, vitamins, herbs and greens, wellness supplements, health and beauty, food and drink, and other general merchandise, featuring both proprietary GNC and third-party brands.
The company’s omni-channel business model generates revenue from product sales through company-owned retail stores, domestic and internat...
GNC Holdings, Inc. (GNC) provides an assortment of health, wellness and performance products.
The company’s products include protein, performance supplements, weight management supplements, vitamins, herbs and greens, wellness supplements, health and beauty, food and drink, and other general merchandise, featuring both proprietary GNC and third-party brands.
The company’s omni-channel business model generates revenue from product sales through company-owned retail stores, domestic and international franchise activities, third-party contract manufacturing, e-commerce and wholesale partnerships.
Segments
The company operates through three segments: U.S. and Canada; International; and Manufacturing / Wholesale.
U.S. and Canada segment
This segment primarily engages in the sale of products to customers at the company-owned stores in the United States, Canada and Puerto Rico, through product sales to domestic franchisees, royalties on domestic franchise retail sales, franchise fees and through GNC.com and the company’s marketplace on Amazon.
Company-Owned Retail Stores in the U.S. and Canada
As of December 31, 2019, the company operated 2,902 company-owned stores across all 50 states and the District of Columbia in the United States, in Canada and Puerto Rico. Majority of the company-owned stores in the United States are between 1,000 and 2,000 square feet and are located primarily in strip shopping centers and shopping malls.
Domestic Franchise Stores
As of December 31, 2019, there were 956 domestic franchise stores operated by 408 franchisees. The company’s domestic franchise stores are between 1,000 and 2,000 square feet, and approximately 90% are located in strip shopping centers. All of the company’s franchise stores in the United States offer both the company’s proprietary products and third-party products, with a product selection similar to that of the company-owned stores.
Websites
GNC.com continues to represent a major part of the company’s business. The ability to purchase the company’s products through the internet also offers a method for repeat customers to evaluate and purchase new and existing products. This additional sales channel has enabled the company to market and sell its products in regions where the company has limited or no retail operations. The company might offer products on the company’s website that are not available at the company’s retail locations, enabling the company to expand the assortment of products available to its customers. The company also offers a product assortment on its market place on Amazon, the revenue of which is included in the company’s GNC.com business unit.
International segment
This segment generates revenue primarily from the company’s international franchisees through product sales, royalties and franchise fees; and also includes the company’s Ireland operations.
International Franchise Stores
As of December 31, 2019, there were 1,904 international franchise locations operating in approximately 50 international countries (including distribution centers where retail sales are made). The international franchise locations are smaller than the company’s domestic locations, and depending upon the country and cultural preferences, are located in malls, strip shopping centers, streets or store-within-a-store locations. In addition, some international franchisees sell on the internet and distribute to other retail outlets in their respective countries. The company’s international stores have a store format and signage similar to the company’s United States franchise stores. The company’s international franchise stores offer a limited product selection than the company’s franchise stores in the United States, primarily due to regulatory constraints.
The company enters into development agreements with international franchisees, which grants the right to develop various stores, for either full-size stores or store-within-a-store locations, in a territory, the entire country. The company enters into distribution agreements with international franchisees, which grants the right to distribute product through the store locations, wholesale distribution centers, and in some cases, limited internet distribution. The franchisee then enters into a franchise agreement for each location.
Manufacturing / Wholesale segment
This segment includes the company’s manufacturing operations in South Carolina prior to the formation of the manufacturing joint venture (the ‘Manufacturing JV’) in March 2019, and the company’s wholesale partner relationships. The manufacturing facility supplies the company’s U.S. and Canada segment, International segment and wholesale partner business with proprietary product and also manufactures products for other third parties. The company’s wholesale partner business includes the sale of products to wholesale customers, the primary of which include Rite Aid, Sam's Club and PetSmart.
In March 2019, the company established the Manufacturing JV with International Vitamin Corporation, which enables GNC quality and R&D teams to continue to support product development and increase focus on product innovation, while International Vitamin Corporation manages manufacturing and integrates with GNC's supply chain.
As of December 31, 2019, the company had 1,759 Rite Aid store-within-a-store locations. Through this strategic alliance, the company generates revenues from sales to Rite Aid of the company’s products at wholesale prices, the sale of Rite Aid private label products, retail sales of certain consigned inventory and license fees. The company is Rite Aid's sole supplier for various Rite Aid private label supplements, pursuant to a supply agreement with Rite Aid that extends through 2021. The operating license that comprises the company’s store-within-a store alliance with Rite Aid was extended through 2021. The company terminated the consignment agreement with Rite Aid in 2018.
Brands and Products
The company offers a mix of both GNC and third-party brands across multiple categories and products. This variety is designed to provide the company’s customers with a selection of products to fit their specific needs and to generate various transactions with purchases from multiple product categories.
The company offers a range of nutritional supplements sold under its GNC proprietary brand names. The sale of the company’s proprietary brands at its U.S. company-owned and franchise stores, GNC.com and wholesale partners, including Rite Aid, PetSmart and Sam's Club, represented 52% of total system-wide retail product sales in 2019. The company also offers products through third-party brand names. The sale of the company’s third-party products at its U.S. company-owned and franchise stores, GNC.com and wholesale partners represented approximately 48% of total system-wide retail product sales in 2019. The company’s major vendor, excluding the Nutra manufacturing facility, supplied approximately 14% of the company’s products in 2019.
The company offers a free points-based loyalty program, which enables customers to earn points based on their purchases. Points earned by members are valid for one year and might be redeemed for cash discounts on any product that the company sells at both company-owned or franchise locations. In addition, the company offers a paid membership program, ‘PRO Access’, which provides members with the delivery of sample boxes throughout the membership year, as well as the offering of certain other benefits, including the opportunity to earn multiple points on a periodic basis. The boxes include sample merchandise and other materials.
Product Distribution
Products are delivered to retail stores, wholesale distributors, international franchisees and directly to customers who make purchases online, through a third party transportation network, primarily through the company’s distribution centers located in Leetsdale, Pennsylvania; Whitestown, Indiana; Anderson, South Carolina; and Phoenix, Arizona. The company’s distribution centers support the company-owned stores, as well as franchise stores and Rite Aid locations.
Partnerships
The company has partnership with Harbin Pharmaceutical Group Co., Ltd. that allows the company to further expand its business in China.
Business Strategy
The key elements of the company’s business strategy include leading brand of nutritional supplements; product development and innovation; a differentiated retail customer experience; omni-channel development; international growth; and driving constructive industry dialogue.
Trademarks and Other Intellectual Property
The company owns or has rights to material trademarks or trade names that the company uses in conjunction with the sale of its products, including the GNC brand name. The duration of the company’s trademark registrations is 10, 15 or 20 years, depending on the country in which the marks are registered, and the company could renew the registrations.
Government Regulation
The processing, formulation, safety, manufacturing, packaging, labeling, advertising and distribution of the company’s products are subject to regulation by one or more federal agencies, including the U.S. Food and Drug Administration, the Federal Trade Commission, the Consumer Product Safety Commission, the United States Department of Agriculture, and the Environmental Protection Agency, as well as by various agencies of the states and localities in which the company’s products are sold.
The company takes various actions to ensure the products that the company sells comply with the Federal Food, Drug, and Cosmetic Act. The Federal Trade Commission continues to monitor the company’s advertising and requests substantiation with respect to such advertising to assess compliance with the outstanding consent decree and with the Federal Trade Commission Act.
Research and Development
The company recognized approximately $4 million relating to research and development in the year ended December 31, 2019.
History
GNC Holdings, Inc. was founded in 1935 by David Shakarian. The company was incorporated in 2007.
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