Sports Nutrition’s Unique and Evolving Retailing Landscape

As sports nutrition continues to post stellar year-over-year growth rates, the consumer health industry is increasingly turning its attention to this once niche category. As such, traditional pharmaceutical companies, ingredients giants and retailers alike are seeking to capitalize on this important off-shoot of health & fitness movement. One of the most important aspects to achieving success in sports nutrition is an understanding of the category’s unique distribution landscape. While channel preference can vary widely by market, understanding the overarching trends that affect multiple regions can provide an advantage to savvy producers.

Specialty retailers remain a key channel in many important markets

In many established sports nutrition markets, non-grocery retailers have a long history with the category. In North America and Western Europe – the two largest and most mature regions – some of the first brick-and-mortar outlets to sell sports nutrition were gyms (which Euromonitor International’s tracks under other non-grocery retailers). In its infancy, sports nutrition products skewed heavily to hardcore bodybuilders and strength trainers and the few, mostly small active producers relied on personal trainers and gym owners as brand ambassadors and de facto sales representatives. Gyms remain an important outlet to this day in some countries, and the other non-grocery retailers channel is particularly important in less developed retailing markets where there is a strong tradition of state-subsidized athletic programs, like Russia and China.

In many markets, these other non-grocery retailers – which also include sports goods stores – have gradually lost share over the last decade, as a growing number of brick-and-mortar outlets have warmed to the category. In the world’s two largest markets – the USA and Australia – nearly 40% of 2012 category value sales went through other healthcare specialist retailers, which include non-pharmacy retailers that focus on vitamins and dietary supplements, weight management and sports nutrition products, such as General Nutrition Centers Inc (GNC), whose footprint expands over 8,200 locations globally. Early on, this channel capitalized strongly on mainstream retailers eschewing the category and over time has, through its commitment to broad product selection and consumer education, become a leading resource for both core users and category newcomers.

A GNC Outlet in Istanbul’s Trendy Beyoglu Neighbourhood

GNC Outlet in Instanbul

Source: Euromonitor International

Internet retailing comes of age

No category of consumer health has adopted internet retailing like sports nutrition. During the review period, internet retailing’s share of total category sales increased from 9% in 2007 to 16% in 2012. While the category’s relatively high prices certainly contribute to internet retailing’s appeal – products online are often priced at considerable discounts to brick-and-mortar retailers – internet retailers have also been some of the most innovative in terms of community building and consumer education. Leaders like the US-based Bodybuilding.com – which offers custom sites for streamlined shopping and shipping in a number of international markets – have built extensive in-site social networks, where users can read about category-relevant news and developments from respected fitness professionals, discuss supplements and workouts in forums, track their fitness progress and learn about ingredients in short and concise overviews.

Taking community building one step further, a growing number of supplement-focused internet retailers have been utilized crowdsourcing techniques for marketing campaigns, including launching fitness contests that focus on the “body transformations” of regular users to highlight product and fitness regime efficacy. Contests like Bodybuilding.com’s $100,000 Transformation Challenge (open to US, Canadian – excluding Quebec – and EU citizens) or GNC’s recently launched Me on GNC challenge (open to US citizens) have generated considerable buzz and can lead to meaningful short-term consumption boosts. These sorts of contests are also proving popular with a growing number of international producers who sell directly to consumers via their websites, including the UK’s Maxinutrition (owned by GlaxoSmithKline Plc) and South Africa’s Ultimate Sports Nutrition (USN Pty Ltd).

At first look, it may seem paradoxical that among the largest sports nutrition markets, internet retailing tends to have the highest share of distribution in developed markets, where finding the products in brick-and-mortar retailers is generally much easier than emerging and developing markets. While the relatively high price of sports nutrition products, a dearth of local producers and the challenges of getting into brick-and-mortar that strong US and Western European brands face in regions like the Middle East and Africa and Eastern Europe certainly contribute to this phenomenon, the bigger concern for the industry is the category’s reputation in unexploited markets like South Africa or Russia. These products tend to be relatively unknown among large swaths of the population or viewed as suspect and potentially dangerous. Furthermore, widespread counterfeiting in these regions has scared many consumers away from internet retailing. While the rise of the health and fitness culture and more concerted efforts to break into these markets by internationally respected brands will likely help erase the lingering stigma attached to the category, internet retailing likely faces an uphill battle in many emerging and developing markets, as local production increases and quality control efforts are better advertised  (including the use of third-party good manufacturing practice  – GMP – and banned-substance-free certification) could lead to faster uptake among store-based retailers.

Global Category Size and Internet Retailing’s Distribution Share by Category, 2007-2012

Global Category Size and Internet Retailing Distribution Share by Category 2007-2012

Source: Euromonitor International

Mainstreaming opens new demographics and new channels

With so much concentration in specialty retailers and ecommerce, it may seem that sports nutrition offers limited appeal to mainstream grocery and mixed retailers. However, the industry’s monumental push in the last decade or so to clean up its once-rogue image and the overwhelming positive media coverage of key ingredients, including protein, has ushered in an era of “mainstreaming”, whereby the category is rapidly attracting the attention of non-core users and distribution channels alike.

In a number of mature, mostly Western markets, legions of non-athletes, casual athletes and wellness-minded consumers have made protein one of the world’s most in-demand functional ingredients. In order to appeal to this demographic, many large sports nutrition producers have toned down their advertising and invested in more convenient and approachable formats – such as protein ready-to-drink (RTD) or smaller packages of protein powder. This willingness to adjust has sparked greater category uptake among grocery retailers in markets like the US, UK and Germany, where protein bars, protein RTD and even powders from respected producers like Cytosport Inc, Optimum Nutrition (Glanbia Plc) and EAS (Abbott Laboratories Inc) are now widely available.

A number of forward-thinking retail giants have even taken it a step further by investing in the category directly with private label offerings. While a number of US retailing heavyweights – including Target Corp and Walgreen Co offer private label protein supplements for general health maintenance, retailers like Dirk Rossman KG – Germany’s second-largest parapharmacy/drugstore chain – and the UK’s largest grocery chain Tesco Plc have launched sports-focused private label lines. Rossman’s WellMix line launched a handful of protein products in February 2012 and has since developed into a broad portfolio of sports nutrition, weight management and health & wellness snack food products, while Tesco’s Nutri 1st brand was one of the first private label brands to expand beyond protein powder into more niche products like mass gainers and bulk creatine. While private label tends to be strongest in mature, Western markets, there have also been launches in developing markets. In India, the 200-outlet strong parapharmacy/drugstore chain Guardian Lifecare Pvt Ltd offers its Xtra Muscle brand alongside GNC products, for which Guardian is the Indian master franchisee.

Regional Distribution Splits by Channel, 2012

Regional Distribution Splits by Channel 2012

Source: Euromonitor International