Schiff Nutrition boss: BOGOs don’t build brands

16-Dec-2011 - Last updated on 18-Dec-2011 at 17:24 GMT

CEO Tarang Amin: 'The overall industry feeling is that perhaps some of the BOGOs are too much and people would like to lessen the reliance on those.'

While BOGO (buy one get one at a discount) offers have their uses, an over reliance on them is not in anyone’s best interests, according to the boss of supplement maker Schiff Nutrition.

In a conference call with analysts yesterday about the firm’s second quarter results, Schiff chief executive Tarang Amin reiterated warnings made in recent earnings calls about the dangers of excess trade spending and his view that money would be better spent on innovation and advertising.

People are asking: Is there a better way?

While BOGO-type offers continued in the trade, particularly in the joint health category, they did not always deliver, claimed Amin, who is increasing sales and marketing investment as a percentage of sales from 16% in 2011 to 22.5-24.5% in 2012 as part of his brand-building strategy.

He added: “People are looking at who is gaining share and who isn’t and they look at what tactics and strategies [the winners are employing] and say, is there a better way?

“I know from conversations with some of our customers that the overall industry feeling is that perhaps some of the BOGOs are too much and people would like to lessen the reliance on those.”

In the joint health category, which was down 12% in the 12 weeks to the end of November in the FDMx channel (IRI data: food, drug, mass merchandise excl Walmart), Schiff’s strategy of “using innovation and advertising” had helped it buck this trend and deliver a very slight increase in sales year-on-year, claimed chief financial officer Joseph Baty.

“Our sales in joint health were $22.2m in the second quarter vs $22m for the same period last year. We’re pleased by the second consecutive quarter of stability.”

Branded products now account for almost 82% of sales

Meanwhile, the firm’s overall sales growth of 16% in the second quarter compared with a category growing at around 4% was very encouraging he said. Branded sales were up 31% in the second quarter.

Branded products now accounted for almost 82% of Schiff’s sales compared with 72% this time last year, said Amin, who said that private label sales were down 25% in the year to date as the company focused on its branded products such as MegaRed krill oil and Sustenex probiotics.

Schiff now had strong, branded propositions in three of the fastest-growing areas of the supplements market: vitamin D, omega-3 oils and probiotics, and was evaluating potential deals that could further boost its branded portfolio and help it move into new markets, he said.

“We continue to evaluate acquisition opportunities.”

The allegations against us are without merit

The integration of the Sustenex and Digestive Advantage probiotics brands recently acquired from Ganeden Bioetch had been completed, he said.

“New advertising goes on air later this month for both brands; it’s something we are very excited about.”

Amin would not go into details about the recent patent infringement action brought by krill oil firm Neptune Technologies and Bioressources against Schiff and others, but said the firm would defend itself “vigorously”.

He added: “We’re involved in several cases in which we believe that the allegations against us are without merit and we’re committed to vigorously protecting our brands and our business.”

33% rise in net income in Q2, 2012

Schiff, which posted a 33% rise in net income to $2.4m and a 16% rise in net sales to $61m over the three months to November 30, is based in Salt Lake City with a sales office in Bentonville and a sourcing office in Beijing.

Its stable of brands includes Move Free and Move Free Ultra, MegaRed, Mega-D3, MegaRed Extra Strength, Tiger's Milk, Sustenex and Digestive Advantage.