SOURCE: iSatori

iSatori

January 12, 2015 18:34 ET

Macro Trends Affecting the Nutritional Supplement Industry, an Interview With Industry Veteran Stephen Adele

Industry Veteran and Chief Executive Officer of iSatori, Stephen Adele, Discusses the Five Major Macro Trends Affecting, Positively and Negatively, the Nutritional Supplement Industry and Their Business

GOLDEN, CO--(Marketwired - Jan 12, 2015) - iSatori, Inc. (OTCQB: IFIT), an emerging leader in the development and marketing of scientifically engineered nutritional supplements for healthier lifestyles, today released an interview with their founder and Chief Executive Officer, Stephen Adelé, where Sue Mosebar, Executive Editor of Real Solutions, recently sat down with Stephen to discuss the major trends materially affecting supplement companies industry wide, including his at iSatori, Inc. (www.isatori.com).

Sue Mosebar: The nutritional supplements industry saw its share of ups and downs in 2014 yet appears to remain a robust industry. What are your thoughts on this?

Stephen Adele: It [Nutritional Supplements] is a great industry that continues to grow in double digits, organically. According to Simmons (Experian Marketing), nearly 39% of all U.S. adults, representing 87.8-million consumers, are currently watching their diets to lose weight or maintain muscle weight. And many of them are turning to sports nutrition products to help them in their journeys. This segment was worth $38-billion in 2013 in US retail sales value and is expected to grow to over $40-billion by 2016 (Packaged Facts). That's why we remain committed to this industry to help meet this strong, growing demand for quality supplements to help these individuals along their physical and health transformation journeys. 

Sue Mosebar: It looks like you had really impressive growth during the first half of the year, and then it appears to have been a rough third and fourth quarter; what happened?

Stephen Adele: Yes, you are correct. We were growing, steadily, at 47% year over year, when we were negatively affected by two major unexpected events. The first we call the "post Oz era." If you recall, in June of 2014, the Senate put Dr. Mehmet Oz in front of a Congressional hearing to essentially chastise him before the general public on television, and doing so, I believe, shook the confidence of many consumers across America. This is evidenced by leading retailers, like GNC, The VitaminShoppe, and others, who experienced a massive retraction in consumer purchases of weight-loss supplements.

These hearings could have been handled much differently: I honestly believe Dr. Oz's intentions were good from his television show. He was presenting his viewers with natural options to improve their health and body weight. It was the hucksters and unethical marketing companies out there that took advantage of unsuspecting consumers and caused pretty much the entire weight-loss segment of this industry to slow down. This negatively materially affected our business in the third and fourth quarters, causing us to lose about 19% of our anticipated business.

The "post Oz era" has thankfully seen the bottom and is now stabilized, but we don't anticipate it will recover to the levels it was prior to the Oz Senate hearings. As a result, we have adjusted our business expectations, going forward in 2015, to accommodate for this new reality within the weight-loss sector.

This macro trend has affected the entire industry, and we expect, at least for the time being until consumer confidence is restored, it will remain a constant constraint for most supplement retail stores and web retailers in 2015.

Sue Mosebar: Most industries are noticing that land-based retailers are becoming more cognizant of internet retailers and their growing level of competition; what do you see going on here?

Stephen Adele: That is another macro trend affecting our supplement industry, and likely every other industry in commerce. That is, the internet continues to create more price competition for land-based stores and increases in value when the products don't necessarily need to be felt and touched before making a purchasing decision. Personally, I don't think land-based stores will ever go away, and they shouldn't, but I do think that constant downward price pressure from the internet is making it more difficult for land-based retailers to compete.

The key for these businesses will be to find other ways of creating constant and growing value for their customers. In our business, the direct-to-consumer (internet) channel and internet-only retailer channels have experienced tremendous growth this past year, at 128% and 70%, respectively. And I don't see this slowing down any time soon. It's a major strategic focus for us going into 2015, and it's one of the surest ways to keep a constant flow of higher margin revenue coming into the company. This is a macro trend I see continuing to grow, within our industry as well as across all different types of consumer packaged goods.

Sue Mosebar: How do you deal with the demands of retailers; I've heard they can be stiff and somewhat unreasonable?

Stephen Adele: In our experience, most retailers are very good to deal with. We have a long history working in our industry, and as a result, we have built very strong relationships with all of our channel partners. In fact, we place a huge emphasis on the relationships we build with our retail partners. The demands from retail have certainly increased over the last few years, and I see this as a macro trend that will continue to shape our industry. Examples of these demands might be slotting fees, promotional fees, rebates, and guaranteed sales, as well as their own internal pressures to improve their margins through higher margin expectations from third-party brands and the creation of their own private label brands. Retailers are expecting success within a few months, or returns are inevitable, so it places more emphasis on delivering strong product innovation with the correct marketing support.

The key is to find and work with retailers who view the relationship as more of a partnership. But to that end, to be a partnership, there must be equal participation from both sides. This is where we got side-swiped this past year. We experienced excessive returns from one retailer in particular, which pretty much took away our profits this past year. Whereas our business normally experiences less than three-percent in returns from retail sales, this year we experienced an unprecedented 12-percent in returns, due to a one-time major product failure. While not systemic, we have taken serious measures to ensure this level of returns won't happen again as the trend of increasing pressures from retail partners will likely not soften.

Sue Mosebar: How do brands differentiate themselves in such a crowded industry?

Stephen Adele: Good question. Prior to founding iSatori, I had been blessed to work with the industry's leading companies. The theme for success has always been innovation. Our industry thrives on it, and when you are able to create something that's truly innovative, and highly beneficial to consumers, and no else has it, you have a distinct advantage in the market.

At EAS, for example, we launched the first commercially available creatine monohydrate (under the brand name Phosphagen®), and it is now a $550-million category. More recently, at iSatori, we invented and filed for patents on a new supplement innovation for muscular performance called "bio-active peptides" (commercially available under the brand name Bio-Gro™). In doing so, we have been able to create an entirely new category in sports supplements, something that hasn't been done for over ten years -- since the introduction of nitric oxide supplements. The market rewards these types of creations with distinction and sets the brands apart from the many other copycat types of products. We don't see this trend ever going away, and as the industry becomes more crowded, these types of truly innovative supplement creations will continue to drive the industry's excitement and growth, as they now account for an estimated $4.7-billion in sales each year.

Sue Mosebar: Functional benefit claims on products seem to be getting more inflated; what is your view to this, and is this good or bad?

Stephen Adele: Competition in the nutritional supplements space is fierce, and sometimes, unfortunately, it can bring out the worst in some companies. I've always said the best way to kill a bad product is with good marketing. That's because if a product does not live up to its marketing claims, or worse, does not perform to consumers' expectations or at all, then word travels fast -- around the internet and in the gyms -- and consumers learn that it's probably not a product worth spending their hard-earned money on. The best way to combat this is threefold: (i) temper the claims and set a reasonable expectation that can be validated by legitimate science; (ii) from the first point, invest in clinical studies on your products. Not just any study, but the gold standard -- randomized, double-blind, placebo-controlled to ensure they are effective and safe for consumers to use; and (iii) spend time educating retailers and consumers alike about the true benefits of your product.

This is how we invest our time and marketing at iSatori: we work hard to educate consumers about the science we have conducted on our products and how they can potentially benefit from them. I see this as a continuously evolving trend that will grow more important over time, especially as the FDA becomes more involved in our industry, as they have lately. To set brands apart from others who do not spend time investing in this trend and to keep consumers satisfied and coming back to continually remain a customer of nutritional supplements.

Sue Mosebar: Stephen, we appreciate your time today and for sharing a more in-depth look at the major market trends affecting the nutritional supplements industry.

Stephen Adele: You are very welcome. It was my pleasure. After devoting nearly twenty years of my life to this great industry, the least I can do is try and contribute, in some small way, to us becoming a better, more reputable, and thriving industry.

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About Stephen Adele and iSatori, Inc.
Stephen Adele has been helping individuals from all walks of life create measurable results in their physiques and performance for almost 20 years and has rapidly become a respected authority. He has published numerous articles for magazines around the world, been quoted in several trade publications, appeared on radio shows, conducted seminars around the globe, is the CEO of the prestigious supplement manufacturer, iSatori, and won Outstanding Young Coloradan, Best Boss in America by Fortune magazine, and was named as a finalist for Entrepreneur of the Year by Ernst & Young.

iSatori is a consumer products firm that develops and sells scientifically engineered nutritional products through online marketing, Fortune 500 retailers, and thousands of retail stores around the world. The Company is headquartered in Golden, Colorado, and its common stock trades on the OTCQB under the symbol "IFIT." More information about the Company is available at http://www.isatori.com.

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