Nutripeak.com Buys eNutrition.com
Published: Wednesday, November 01, 2000
eNutrition in a stock-for-stock transaction.
Nutripeak Chairman and CEO Barry Blake says that the investors involved in the deal declined to discuss specific terms. A recent report by Salomon Smith Barney equity analyst Greg Badishkanian, titled “Clicking on Nutrition,” notes that “As many dot coms burn through cash and eventually go bankrupt, e-tailers with strong balance sheets should have the opportunity to acquire these companies at below book values. Assuming status quo with the equity markets, acquisition targets will be valued at between 1/4x and 3/4x sales, which is roughly salvage value.”
While timing was a major factor in the deal, Blake says that one of the most attractive aspects of the acquisition was eNutrition’s relationship with Woodland Hills, Calif.-based health and fitness publisher Weider Publications, because Nutripeak’s primary target is fitness enthusiasts. Nutripeak’s research indicates that fitness enthusiasts are heavy supplements users, are price sensitive and make up the largest single segment of supplements buyers.
It is interesting to note that another report by Badishkanian, titled “Internet: Nutritional
E-tailers,” says that eNutrition’s strategic relationship with Weider included several million dollars annually in “free advertising” for eNutrition in Weider Publications.
Nutripeak was also interested in merging with eNutrition because of the latter’s position as one of the largest pure-play dot com supplements companies in the industry.
“[The acquisition] drastically increased our Internet business, and for us it was a profitable endeavor because we did not keep all of the employees,” Blake says. He says eNutrition had between 60 and 80 employees, and Nutripeak hired three of them, including Lou Cumming as executive VP of operations and Steve Casas as chief technical officer.
In addition, Blake says that, as a stand-alone channel, Nutripeak’s Internet business has been profitable for most of 2000, and he expects this to continue with the integration of eNutrition into the Nutripeak brand, which was scheduled to be completed by Nov. 1.
Blake attributes the profitability to customer acquisition costs of less that $5 per customer; a marketing focus on search-engine placement, database mining, and leveraging of storefront presence to build Internet traffic; and to the company’s direct relationships with its many manufacturers.
“We go 90 percent direct to manufacturers, which gives us the ability to price products extremely competitively,” Blake says. “People won’t pay you extra for content, particularly if you’re dealing with an informed consumer. Our conversion rate is four times that of the industry,” including eNutrition before the acquisition, VitaminShoppe.com (VSHP) and MotherNature.com (MTHR), Blake says. Nutripeak also has an average order size of more than $100, according to the company.
Nutripeak’s long-term strategy is to be in the top 50 markets, to have 200 to 300 stores located in major metropolitan areas, and to use the Internet and direct mail to reach the rest of its customers.
Blake considers General Nutrition Centers (GNC), a subsidiary of Netherlands-based Koninklijke Royal Numico (NUM.M), to be Nutripeak’s major competitor and says his company competes by coming in under GNC’s price umbrella and selling branded supplements at everyday low prices. Nutripeak plans to open a new store in January 2001, and Blake said several locations are under consideration.
Nutripeak was incorporated in January 1999 and launched its website in April 1999. The company acquired 10 nutritional products bricks-and-mortar stores in the Los Angeles area and two in New York when it merged in April 2000 with Culver City, Calif.-based sports nutrition retailer Sports Nutrition Depot. Nutripeak’s annual sales are between $5 million and $10 million, according to Hoover’s Online.
Regarding the failed ZONE deal, ZONE President and CEO Klee Irwin declined to comment, but sources indicate that the company may have acted prematurely and put out a press release announcing its intended acquisition before having a binding deal in hand.
In related news, Wild Oats Markets (OATS) has terminated its e-commerce partnership with eNutrition as of the acquisition and has no relationship with Nutripeak, says OATS CEO Mike Gilliland.