Care/of’s rise and fall: What the company’s financial circumstances reveal about the economics of personalized nutrition

Founded in 2016, Care/of was among the first businesses to mass market personalized nutrition, offering consumers tailored vitamin packs to meet daily dietary recommendations. All customers had to do was fill out a 5-minute health survey before a supplement order was filled. When asked by NutraIngredients-USA for a comment earlier this month, a spokesperson for Bayer said the multinational company wants to focus its efforts on "future innovations that help people manage their personal health”.

Representatives for Care/of might argue that was what the company intended since its inception. 

For our series, consultants, personalized nutrition company founders and CEOs were asked about the initial success and later defeat of Care/of, including the potential financial missteps the company may have made in its push into brick-and-mortar retail. 

Protecting Bayer’s ‘center’​

In prior reporting about the company’s closure​, NutraIngredients-USA interviewed a source close to Care/of who acknowledged that company revenue was down, though they did not specify to what extent or for how long. As part of Bayer’s Consumer Health portfolio, Care/of may have been a financial anomaly within that division.

Although several Bayer departments experienced a slump in sales in 2023, Consumer Health had witnessed a more than 6% year-over-year increase​, or greater than €6 billion (US $6.42 billion), in sales. The multinational corporation projects a 3% to 6% sales growth in the Consumer Health branch. Moreover, the first quarter of this year proved better than expected for Bayer​, potentially giving credence to the CEO’s recent restructuring measures​.

Whether Care/of’s closure was part of the restructuring process, a consequence of low revenue, or a combination thereof, Bayer’s departure from its acquisition was an attempt to “fall back and protect its center” said Joshua Anthony, founder and CEO of personalized nutrition consultancy Nlumn.

“Even a relatively large investment in the grand scope of Bayer may not be nearly as important as what they needed to do to make sure their foundational business is successful,” Anthony said.

One other factor possibly playing into Care/of’s rise was the global pandemic. Supplement sales increased during the height of COVID with consumer concern over health, but then sales dropped in recent years​.

“During the pandemic, people became acutely aware their health,” Anthony said.

However, as the pandemic waned, consumer sentiment turned, he added. Customers seek fewer supplements and have less desire for vitamin regimens.

Less investment​

Part of Care/of’s early success may have been due to timing. Not only do experts say the company was a vanguard, but it came to fruition during a period when capital was flowing more freely.

That environment is no longer a reality for startups.

According to PYMNTS​, venture capitalists invested more than $170 billion in the U.S. in 2023 across 15,000 deals, which is approximately 30% lower than the previous year.

“When I've talked to investors, one of the things they're struggling with to some extent is they have invested over the course of the last few years in different portfolio companies, and they're trying to make sure that those are successful before investing in others,” Anthony said. “In some cases, what's happened is they've stretched themselves a bit. There is money out there, but investors are just being more cautious right now.”

For new companies entering the personalized nutrition or supplementation market, they are going to have to present a unique perspective to the industry, such as an omnichannel strategy and novel formats, according to Noah Voreades, founder and managing director of GenBiome Consulting.

“New companies that are coming into the personalized nutrition or supplementation space are going to have to have a different angle, finding some level of differentiation that meets consumers where they're at in the wellness and preferred shopping journey," he said. "They're going to have to understand how to differentiate against well capitalized digital health and incumbent brands."

Venture capital firms will require a return that’s several times the money they invested and will demand it within the next five to seven years, he added.

Grew too quickly?​

Personalized nutrition was brewing much longer than Care/of’s foray into the market, however, the company took front and center after key industry developments: Theranos, the now defunct company that claimed its technology could precisely and efficiently test for diseases such as cancer and diabetes, became a global phenomenon. Additionally, DNA testing was expanding in the mid 2000s; mineral and caffeine metabolism tests were becoming common place; hair and saliva analyses for hormones were mass marketed, to name a few.     

For Care/of, this was time to realize the promise of growing consumer demand for personalized nutrition, said Kenn Israel, founder and manager of Innovation Nutrition Consulting. In 2022, the global personalized nutrition market​ was valued at $11.2 billion and is expected to reach $45.9 billion by 2023.

“There were a whole bunch of early-stage players in personalized nutrition and a mad dash of global strategic [firms] to get on board,” Israel said. “Care/of was going to revolutionize the dietary supplement space, but all the details hadn’t been worked out.”

Whether details had been worked out, Care/of received funding early on and quickly. Two years after it launched, it had raised $46 million in funding. Then two years after that, Bayer announced that it would buy majority stake in the company, valuing Care/of at more than $225 million.

Was Care/of expanding too rapidly?

Voreades said he doesn’t think so.

“I don't think Bayer’s decision to close down or pull back funding would have been due to a growth issue,” he explained. “Bayer is a large company that has robust supply chain capabilities. I’m speaking in general terms, but high-growth companies can sometimes find a substantial amount of value with large strategic firms because they are exceptional at channel expansion, geographical expansion and operations."

Entry into retail​

In 2021, Care/of launched a new line of vitamins at Target stores, raising questions about how the company planned to differentiate itself from other supplement brands. Could it get a personalized nutrition message across inside a store as opposed to selling online?

“I didn't see its point of difference on the shelf,” Anthony said. “If you're going to expose yourself to the shelf, which obviously is expensive, you better make sure that you're getting good return on your investment.”

Anthony added that supplement companies don’t want to be in a position where consumers choose another brand because they were able to find ones that were cheaper in store or ones with greater name recognition.

People may have been familiar with Care/of in the niche it filled but maybe not from a general consumer point of view, he said.

“In the absence of establishing your point of difference or why somebody's going come back to your brand, a lot of people will brand switch.”