Source: LOHAS Weekly Newsletter
Published: Friday, October 01, 1999

WASHINGTON—At the same time natural products companies sought in September to make more effective use of the Internet by securing funding, pricing IPOs, and launching websites, pundits, as is their prerogative, questioned the viability of either too tightly or too loosely defining this new niche.

For example, they question whether online and bricks-and-mortar vitamins and supplements retailer Vitamins.com pigeonholed itself with its choice of name and whether online vitamins and supplements retailers are positioning themselves more as “dot com” stocks for upcoming IPOs than as healthy-living stocks.

Washington, DC-based Vitamins.com in late August raised $22.5 million in equity capital from venture capital firms including San Francisco-based Acacia Venture Partners; New York-based CIBC Capital Partners; Teaneck, NJ-based DeMuth, Folger & Wetherill; and Wellesley, MA-based Grove Street Advisors. In addition, Vitamins.com received a funding commitment for undisclosed terms from Youngstown, OH-based discount drugstore chain Phar-Mor Inc. (PMOR). Vitamins.com CEO Robert Haft helped raise $1 billion to rescue PMOR from bankruptcy earlier in the decade but left the company in 1996. Vitamins.com also entered an exclusive marketing agreement with PMOR that includes Web kiosks in high-

volume Phar-Mor stores.

Haft plans to take Vitamins.com public eventually, according to a recent article in the Red Herring. Phar-Mor had FY98 sales of $1.1 billion.

Commenting on Vitamins.com’s positioning, analyst David Restrepo of Jupiter Communications told the Red Herring that Vitamins.com could be pigeonholing itself with its choice of domain name. Even though the vitamins market is large, Restrepo says, only brand-loyal customers shop for supplements alone and, with the exception of exclusive brand names, vitamin sales online tend to flow through more comprehensive drugstores or natural foods stores.

Speaking of names, a New York-based, deep-discount online vitamins and health supplements store was launched on Sept. 15 with a name similar to Haft’s Vitamins.com, USAVitamins.com. The latter, founded by Jad Sayage, who serves as CEO, offers more than 10,000 vitamins, herbs, homeopathic medicines, teas, sports products, and health and beauty aids, all discounted up to 50%.

Moving closer to realizing its goal of becoming a public company, VitaminShoppe.com on Sept. 13 set the terms on its pending IPO at 4.5 million Class A shares with a price range of between $10/share and $12/share, for a value of between $45 million and $54 million. VitaminShoppe.com had filed on July 27 for an IPO of up to $57.5 million (see Natural Business, September 1999, pg. 8).

And, in related news, Webvan Group, which filed a $345 million IPO on Aug. 6, says it hopes to price its shares between $11/share and $13/share, which would value the company at about $4 billion, according to The Wall Street Journal.

VitaminShoppe.com’s pending IPO and that of MotherNature.com prompted one analyst to suggest that the pending offerings “are looking to be considered as ‘dot com’ stocks as opposed to healthy-living stocks—obviously because of the higher valuations for those IPOs—and this is reflected in their choice of underwriters. It’s potentially short-term thinking,” the analyst says, “because healthy living is the space that [these companies] actually do business in, and the investment houses that are doing a lot in the Internet space will not have the ability to help them after the IPOs are completed because they don’t have the expertise or vested interest in the healthy living sector.”

In the organic arena, Penns Creek, PA-based Walnut Acres Organic Farms launched on Sept. 2 its revamped website with more than 1,000 products, easier site navigation and free shipping with the first online purchase. The site also features The Green Pilot, a new online magazine by Walnut Acres that focuses on sustainable living. The website launch is Walnut Acres’ first major step since its $4 million capital infusion from David Cole, former president of America Online’s Internet services (see Natural Business, September 1999, pg. 4). “This is our first step toward becoming the online organic grocery store,” says Cole, who serves as Walnut Acres’ chairman.

And, as the groundswell for the social responsibility movement among consumers grows, Los Angeles-based socially responsible information and shopping website EthicalShopper.com launched on Sept. 14 featuring a combination of apparel, travel items and products for kids, the home, body and spa. EthicalShopper.com says it will deal only with companies that are socially, environmentally, employee, community and animal conscious. Its website offers for each product information that explains why the product was chosen for the site. The site also serves as a portal for social and environmental charities.