Discount Supplements will continue to operate as a separate business, as does GNC’s other discrete online outlet, Lucky Vitamin. GNC paid cash for Discount Supplements, but other terms of the deal were not disclosed.
"Discount Supplements offers a broad selection of competitively priced proprietary and third party products, and is a leader in the UK's sports nutrition market. This market – estimated to be approximately £300 million ($487 million) – has demonstrated consistent double digit growth, which is forecasted to continue. The on-line channel has captured nearly one-third market share, and is growing faster than the market overall," said Joe Fortunato, CEO of GNC.
Strong player in sports nutrition
GNC has focused on sports nutrition as having the highest growth potential in the supplement space. In the sports performance sector, GNC noted that it already has 27% of the market in the US, and the company’s own Pro Performance line has approached $300 million in annual sales. The products command higher prices, and celebrity tie-ins help raise awareness.
In July 2012 the company launched the Marked line of sports nutirition supplements in conjuction with actor Mark Walberg and recently began to feature Denver-based MusclePharm's product line that it developed with superstar athlete/actor/politician Arnold Schwarzeneggar. MusclePharm founder and CEO Brad Pyatt said the line is produced in accordance with UK labeling requirements and the company plans to have the brand on the market there in other channels in the near future.
"Entering the UK and other key European and Scandinavian markets are core elements of our strategic plan to expand GNC's global reach. With this acquisition, we are well positioned to capitalize on the fastest growing channel in Europe's top market,” Fortunato said.
As part of the deal, Discount Supplements will introduce some premium GNC sports nutrition, vitamin and diet sub-brands in the UK market, Fortuanto said.
"We are excited to enter the next phase of our company's growth. Combining GNC's strengths in product development and marketing with our loyal customer base will allow Discount Supplements to further develop and expand the business," said Stuart Harris, executive chairman of Discount Supplements.
Overseas growth
Discount Supplements - founded in 2004 – is expected to grow to approximately £20 million ($32.4 million) in revenue in 2013, and generate positive EBITDA margin. GNC expects the acquisition to be earnings neutral in 2013, as the EBITDA contribution is offset by deal costs and amortization of intangibles.
GNC has been on an aggressive overseas growth in recent years. It has been selling its products in China since 2011 and only recently opened its first standalone retail store in Shanghai, but expects to have 26 stores in the country by sometime next summer. The company already has 60 store-within-a-store locations in China.