Where Are Supplement Companies Going Wrong?

by Matt Weik

In a world where money talks, the supplement industry is no different. People want to use products that work, and retailers want to buy products that will increase their sales. There is, however, a fine line that many supplement companies walk on in terms of growth strategies. One of which, is trying to move into mass market in hope of moving volume. Some will say it’s smart, others will say it’s a sure way to lose business. Let’s explain.

The Market

The supplement industry is a niche market. We have distributors who generally sell only to retailers within the space such as gyms, health clubs, supplement stores, nutrition stores, smoothie bars, and the similar. When a supplement company starts moving outside of what we call the “health and fitness” specialty space, they start getting away from their core values. I’ve seen this personally with a very large company I worked for in the past. I was with this company for just about ten years and I saw a major shift from health and fitness to mass market simply because they want to move more volume—and it’s their choice and right to do so.

What people don’t understand is that a supplement company starts in those grassroots mom and pop brick and mortar stores. They create the demand for the product when pushing it in their location. The more margin a retailer can make off your products, the more they are going to be willing to push it. On the flip side, retailers especially like when a brand is out there marketing and promoting their products so that when a customer walks through the doors, they already know what they want and it’s a quick sale.

Greed

Where things start to go sideways is when a supplement company starts to get greedy. They want to grow quickly so they drop their pants along with their pricing and go mass market. They cut their prices so low that most of the time these mass market locations are selling product at the same price that the supplement stores and gyms are buying it for. So what does this create? Turmoil. What these brands now have on their hands are hundreds of retailers who want to drop their line because it doesn’t make sense to put product on shelf if a mass market chain down the street is selling the same product at a much cheaper price. Why would they want to shrink their margins to the point where they aren’t making any money as well as taking up valuable space on shelf that they could slot a new brand or expand an existing line they carry and make much better margins? It simply doesn’t make sense to maintain a relationship with a brand who used those specialty retailers to help build the demand just so they could open up a new channel and push more volume.

A very famous old school brand based out of Columbus, OH did just this and if you can read between the lines with who I’m talking about, you’ll notice that you don’t see them in any supplement stores or gyms anymore—yet if you say their name, everyone knows who they are. However, if you walk into a grocery store or a wholesaler, you’ll see their products all over the place in their nutrition section. I think it’s wise to stick with brands that stay true to their values and what helped them build their business. I have no issue with brands wanting to grow though. I know it seems like I’m trying to cap a brands growth by what I’m saying. In fact, I don’t even have an issue with brands selling mass market if they want, but they should have MAP pricing across the board to keep it on a level playing field for all retailers, both big and small.

What’s the Fix?

There are a few ways to go about this. One would be to stick with your guns and grow within the health and fitness/specialty space. There are tons of gyms, health clubs, supplement stores, nutrition stores, etc. out there to open up and sell product to. That would be one way to not lose your core by going mass market.

A second option would be something else I spoke about earlier which is MAP pricing. For those who don’t know, MAP pricing is Minimum Advertised Price. It’s the lowest a retailer is allowed to sell a product at and is set by the manufacturer. If a brand would do this across the board, they could literally sell anywhere they want without other retailers getting upset. However, generally mass market locations try and get the lowest price possible and if doesn’t make sense for them, they simply won’t carry the line or product.

Another option is to go mass market. What? But Matt, I thought you just said that kills a brand in the specialty channel? It does. BUT, you could just as easily tweak formulas and make another line of products and sell those only to mass market retailers. Generally, the people who are buying from mass market retailers are either trying to buy product for as cheap as possible, or they are new to buying supplements and aren’t aware that they could go to a supplement store and generally get something with higher quality. So getting back to my point about having a separate line in these mass market retailers, they could have protein powders with lower protein contents, something like a plain monohydrate creatine, a simple BCAA product, a fat burner of some sort, etc. Just make it different is what I’m trying to say. Or, create a whole new line of products (a new sister brand) that will only be sold in mass market. You have manufacturers doing this all over the place, so it isn’t out of the question or out of the norm.

There is no right or wrong answer here and there are more ways to go about growing your business without “pooping” on the retailers that helped you get your business off the ground. I respect those manufacturers who stay true to their business model and respect all retailers and treat them equally. You don’t realize how much you appreciated someone’s business until it’s gone.    

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