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Under new management, GNC shifts focus


PITTSBURGH GNC last month named Beth Kaplan its president and chief merchandising and marketing officer, interesting for the fact that Kaplan was one of the executives who originally helped brainstorm the partnership between Rite Aid and GNC on the GNC LiveWell store-within-a-store locations that have served as a significant point-of-difference for the drug store chain since 1999.

Only then she was with Rite Aid as a senior executive vice president. “Obviously, we thought it was a fabulous idea almost 10 years ago. It makes me feel great that it has grown into the strong relationship that the two companies enjoy today as evidenced by the renewal of the agreements and the additional commitments to store openings,” Kaplan said.

“GNC has a very unique position in the market,” Kaplan noted during a recent interview with Drug Store News. “There’s no specialty retailer in this space that begins to have the scale that GNC has. GNC, as a brand, has enormous equity with consumers.”

She is planning to capitalize on that equity to reach the growing number of consumers interested in health and well-being products.

And GNC isn’t just about sports nutrition and diet aids, Kaplan said, though those businesses do figure prominently into the overall GNC mix. “GNC’s initial DNA is built around vitamins and supplements,” she said. “Our customer base is equally male and female, which makes it very different from Rite Aid.”

“I think you’re going to see a change in philosophy over the next several years at GNC,” noted Scott Van Winkle, managing director of equity research firm Canaccord Adams. “There is a lot of untapped opportunity in weight management and nutrition advice,” he said, between an aging population and a population becoming more and more involved in its battle against the bulge. “In service offerings versus just product sales,” he added.

The Rite Aid/GNC partnership helps to differentiate Rite Aid’s dietary supplement offering from chain competitors CVS and Walgreens, and affords GNC an opportunity to extend its brand name beyond the mall stores and strip centers where GNC stores are located. “Once again, our exclusive GNC store-within-a-store performed better than the overall vitamin category,” reported Mary Sammons, Rite Aid president, chief executive officer and chairman, during a conference call last month discussing the retailer’s third-quarter results. “We added 60 more during the [third] quarter [of fiscal 2008], bringing our total of GNC departments to almost 1,400.”

In the fall of last year, the two companies had agreed to extend their partnership with the addition of 1,125 GNC LiveWell centers through the end of 2014. That contract also provides Rite Aid with the option to extend the contract through 2019 and open an additional 250 stores during this period.

“This is a great time to join GNC,” Kaplan stated. “[Chief executive officer] Joe Fortunato and his senior management team have done a wonderful job expanding GNC’s franchise as the largest global specialty retailer of nutritional supplements. Moving forward, my focus will be on brand-building initiatives that broaden our relationship with our customers, particularly women, while expanding our product offerings.”

In addition to planned openings of its brand identity through Rite Aid, GNC also is growing in its own right, with more than 100 new stores to open within 2008, and with a special emphasis placed on franchising opportunities. “As GNC grows, it maintains its position as the leader in the supplement industry,” stated Tom Dowd, GNC executive vice president of store operations and development. “Research shows the GNC brand name has 94 percent recognition, and we look forward to building on that success.”

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