Weekly News Update

November 1, 2001

Coke Buys Odwalla in $181 Million Deal

The Coca-Cola Co. (KO) has announced that it will be purchasing Odwalla Inc. (ODWA) in a $181 million deal that will help Coke gain a stronger hold on the non-carbonated beverage market. Coke will begin a tender offer for all ODWA's outstanding shares for $15.25/share. According to both companies, certain ODWA shareholders, representing approximately 57 percent of the shares outstanding, have committed to tender their shares in the offer.

ODWA will become part of Coke's Minute Maid juice division, and its CEO Stephen Williamson will remain. He said, ""This opportunity is about sharing that vision and our products everywhere as we grow this company together. I know the entrepreneurial spirit of Odwalla will be nurtured by the opportunity for growth that this new relationship represents."" The deal gives KO a stronger presence in the chilled-juice category, which according to The Wall Street Journal, is growing about 30 percent per year. ODWA shares were up to $15.17 at the close of trading on Oct. 31.

Senate Bill Gives FDA $1 Million for DSHEA Enforcement

An amendment to the Senate Agriculture Appropriations Bill, Amendment 2013, would provide $1 million to be allocated to the Center for Food Services and Applied Nutrition at FDA to ensure enforcement of the Dietary Supplement Health and Education Act (DSHEA). The amendment would make enforcement actions a ""top priority"" for the agency, according to industry champions Sens. Orrin Hatch, R-Utah, and Tom Harkin, D-Iowa, who heads the Senate Agriculture Committee. The monies would be used to make sure that supplements products are accurately labeled and that claims are truthful, not misleading and substantiated, as required by DSHEA.

Harkin expressed hope that the farm bill could become law this year as members of both the House and Senate plan to meet daily to iron out differences in each branch's version of the legislation.

SPINS Releases New Data on Consumer Trends in Health and Wellness Market

San Francisco-based market research firm SPINS and ACNielsen, based in Stamford, Conn. have recently released data showing that consumers increasingly see natural and organic foods, dietary supplements, and other health-oriented products as an essential part of their overall shopping needs. The data highlights high growth rates vs. one year ago for health and wellness items in categories such as premium food and beverages, health-oriented products, indulgence foods, and even shares information about regional trends. For a more in depth look at this new data see pg. 11 of the November issue of Natural Business.

FDA Sends Warning Letters Regarding Unapproved Supplement/Drug Combination Products

FDA has sent warning letters to two companies informing them that they are selling unapproved drugs because they are combining the OTC painkiller acetaminophen with dietary supplements. The products are called Melagesic PM Caplets, made by B.F. Ascher and Co. Inc. of Lenexa, Kan., and Inholtra Joint Pain Caplets, marketed by Omni Nutraceuticals (ZONE). FDA is insisting that the companies correct the violations immediately.

Separately, FDA said it may soon ban the sale of any product containing cow brains or spinal tissue, either here or abroad, due to risks of mad cow disease.

Industry Associations Warn Against ""Natural"" Anthrax Treatments

Both the Silver Spring, Md.-based American Herbal Products Association (AHPA) and the Newport Beach, Calif.-based National Nutritional Foods Association (NNFA) have issued warnings about false claims that natural remedies exist for the treatment of the disease anthrax. NNFA has received inquiries from its members about products which are being marketed as alternative preventatives and treatments for anthrax and has issued a statement saying that no natural therapies have been approved for treating any form of anthrax infection. It is recommending that retailers refuse to stock or sell products claiming to treat the disease; to not promote the use of legally labeled dietary supplements as a cure or treatment; to advise customers who believe they are infected to seek medical attention and contact the local health department.

In a statement, NNFA Executive Director David Seckman said, ""Let's be very clear, no dietary supplement or other natural product has been approved for the treatment of anthrax. … Even the most vague intimation that a product or combination of products will ward off or cure anthrax infection will be widely viewed as preying on the fears of a frightened public.""

AHPA has reminded manufacturers, marketers and retailers that federal regulations governing dietary supplements do not permit claims suggesting a supplement can diagnose, mitigate, treat, cure or prevent"" any disease. In an open letter to practitioners of

complementary and alternative medicine, AHPA stated ""There are not, however, any defined natural healing protocols for the treatment of any form of anthrax infection,"" and recommended that the practitioners contact the Atlanta-based Centers for Disease Control for information on anthrax at www.sph.unc.edu/about/webcasts/bioter_10-8_stream2.htm. For more information contact AHPA's Director of Communications Robin Gellman at 301.588.1171, ext. 107.

GMO Labeling Activists Take the Battle to Store Shelves

Consumers in at least 11 cities descended upon grocery stores yesterday, labeling foods suspected of containing genetically modified ingredients with warning stickers. Volunteers in San Francisco, Chicago, Los Angeles, Seattle, Portland, Burlington, Vt., Long Island, Boston, and the states of Arizona and Rhode Island also organized demonstrations outside the stores, expressing their anger at the government's refusal to label genetically engineered foods. For more information, visit www.labelthis.org.

OATS Increases Sales, But Still Shows Loss

Wild Oats Markets Inc. (OATS) posted 3Q01 sales of $222.2 million, a 7.2 percent increase over 3Q00's $207.2 million. Net loss was $2.9 million or $.12/share vs. a net income of $1.1 million or $.05/share last year. Store comps were 5.5 percent, and margins were lower than expected, impacted by pricing reductions, advertising costs and other costs associated with implementing the chain's ""Fresh Look"" program, according to Tucker Anthony Sutro Capital Markets analyst Carole Buyers.

Also, as part of a rebranding initiative, OATS has changed the name of its Alfalfa's Market stores to Wild Oats Market. OATS acquired the Alfalfa's chain in 1996. Additionally, The Wall Street Journal reported that OATS has reached an agreement for an amendment to its credit facility by which it will grant a security interest in its assets, including higher interest rates and agency fees, as well as limits on new leases and capital expenditures. The credit facility will be capped at $125 million.

Gaiam Shows Strong Growth in 3Q

Broomfield, Colo.-based Gaiam Inc. (GAIA) declared 3Q01 net sales of $24 million, a 76 percent increase over 3Q00's sales of $13.6 million. 3Q01 net income was posted at $969,000 or $.07/share vs. $579,000 or $.05/share for the same period last year. For the nine months ending Sept. 30 sales increased to $63.6 million from $37.6 million for the same period of the previous year. Net income was up to $1.9 million or $.16/share from $983,000 or $.09/share.

On Oct. 1 GAIA had no debt, $25 million in cash and a credit facility of $15 million with Wells Fargo Bank. It also purchased 49.9 percent interest it had in two renewable energy businesses during 3Q01. Tucker Anthony Sutro reiterated its Strong Buy rating with a $22 price target, noting that sales far exceeded expectations. Tucker Anthony Sutro also said ""We believe Gaiam's products will continue to gain acceptance in the current environment because they embody certain values that consumers are currently embracing. Such values include spirituality, inward thinking, and an emphasis on the home.""

More Stocks & Financial News:

Horizon Organic Holding Corp. (HCOW) posted 3Q01 net sales of $39 million, up 17 percent vs. 3Q00 net sales of $33.4 million. HCOW announced 3Q01 net income of $592,000, or $.06/share vs. $277,000 or $.03/share. For the nine months ending Sept. 30 net income was $799,000 or $.08/share vs. $1.1 million or $.11/share for the same period the previous year.

Herbalife International Inc. (HERBA) has announced an 18.6 percent increase in net income, from $11.8 million or $.39/share in 3Q00 to $14 million or $.44/share in 3Q01, including the impact of foreign currency fluctuations. Net sales decreased to $261.6 million from $271.9 million in 3Q00. Additionally, HERBA has hired board member and former Deloitte & Touche vice-chairman, Francis Tirelli as the company's new CEO and president.

Penton Media Inc. (PME) reported 3Q01 revenues of $61.5 million and a net loss of $17.3 million, excluding one-time items, or $.54/diluted share vs. a 3Q00 net loss of $1 million or $.03/diluted share. The loss was attributed to a difficult business environment and the moving of three out of four of its fall trade shows due to the terrorist attacks on Sept. 11.

Monterey Pasta Co. (PSTA) reported a net income of $1.1 million or $.08/share for 3Q01 vs. an income of $1.8 million or $.13/share in 3Q00. and net revenues of $15 million vs. $12.2 million for the same period last year.

Natural Health Trends Corp. (NHTC) has initiated an open market stock buyback to begin immediately. The company showed net sales of almost $10 million in 2Q01.

Imperial Ginseng Products Ltd. (IGP) has announced FY01 revenues of $5.3 million and a net loss of $2.3 million or $1.86/share vs. revenues of $4.5 million and a net loss of $1.9 million or $1.91/share in FY00.

Nature's Sunshine Products Inc. (NATR) declared a $0.033/share cash dividend to be paid on Nov. 16 to all common shareholders on record as of Nov. 9.

Opta Food Ingredients Inc. (OPTS) reported 3Q01 revenues of $5.8 million vs. $6.5 million in 3Q00. OPTS posted a 3Q01 net loss amounting to $1.3 million or $.12/share vs. a net income of $217,000 or $.02/share in 3Q00. Results for the quarter include a one-time charge of $713,000 or $.07/share, related to the write-off of inventory that no longer meets quality standards.

The Quigley Corp. (QGLY) posted $6.7 million in revenue for 3Q01 vs. $3.5 million in the same quarter last year. Net income was $314,000 or $.03/share vs. an income of $114,000 or $.01/share in 3Q00. Revenues for the quarter reflect a change in accounting principles by which certain advertising promotions are reported as a reduction of sales as opposed to a marketing expense.

Holland-based Koninklijke Wessanen NV (N.KWS) expects net profits to be between $67.8 and $72.3 million for FY01. The company has recently bought back 5.8 percent of its common shares and plans to reduce its total number of outstanding shares by as much as 17 percent in the coming months.

Cyanotech Corp. (CYAN) says net sales were $2 million for 2Q01, down from 2Q00's $2.4 million. CYAN posted a 2Q01 net loss of $509,000 or $.03/diluted share vs. a loss of $40,000 or $.00/share in 2Q00.

DrugMax Inc. (DMAX) has reached a loan modification agreement with LaSalle Business Credit Inc., increasing its line of credit from $15 million to $23 million.

Natrol Inc. (NTOL) posted a 3Q01 net income of $1 million or $.08/diluted share vs. a net loss of $521,000 or $.04/diluted share in 3Q00. Net sales decreased 4.9 percent, to $21.2 million from $22.3 million last year.

Pure World Inc. (PURW) reports a loss of $405,000 or $.05/share for 3Q01 vs. a net income of $101,000 or $.01/share in 3Q00. Revenue was $4.6 million vs. $8.7 million last year. The company says that it expected a significant decrease in revenue, as it concluded work on a large contract in Oct. 2000.

Nu Skin Enterprises Inc. (NUS) has announced a net income of $12.5 million or $.15/share for 3Q01, a 16.6 percent decline from 3Q00's income of $15 million or $.18/share. Sales were $224.2 million, up from the previous years' sales of $215.6 million. Nu Skin subsidiary, Provo-based Pharmanex, reportedly exceeded revenue from the NuSkin division in 3Q01 for the first time.

Briefs:

General Nutrition Centers Inc. (GNC) has announced that more than 75 percent of its franchise operators have accepted a settlement to three lawsuits seeking class action status for all GNC's U.S. franchisees. The settlement requires GNC, among other provisions, to provide franchisees with about $2.7 million in wholesale credits on purchases of the company's private-label products over the next 24 months.

Mannatech Inc. (MTEX) has been issued a patent for its glyconutritional blend, called ""Compositions of Plant Carbohydrates as Dietary Supplements."" Glyconutrients are core ingredients in nutritional supplements and topical products.

Hauser Inc. (HAUS) has signed an exclusive agreement with Australian-based Clover Corp. (CLV.AX) by which HAUS will distribute CLV.AX's complete line of DHA-rich tuna oil products.

Desert Health Products Inc. (DHPI) has entered into a five-year exclusive distribution agreement with Norway-based Trim and Fit International. Terms of the agreement include Trim and Fit's distribution of 15 million tablets of DHPI's snore relief and 8 million tablets of its allergy relief products per year.

Phlo Corp. (PHLC), a manufacturer of beverages containing patented and patent-pending biotechnologies, has appointed the Missouri division of Coca-Cola/Dr. Pepper Bottling Co. as its Missouri-area distributor.

Hormel HealthLabs, a wholly owned subsidiary of Hormel Foods Corp. (HRL) announced its intention to enter into an exclusive sales and marketing agreement with U.S. Food Corp. which would involve the ""NutriMil Plus"" brand of lactose-free products, a whey protein beverage line.

Fort Bragg, Calif.-based gourmet specialty coffee company Thanksgiving Coffee Co. was named a recipient of California's 2001 Waste Reduction Award Program for its efforts to reduce waste and protect the environment. The award was presented to the company by the California Environmental Protection Agency.

Nutraceutix Inc. (NUTX) has entered into an exclusive agreement with Delta, British Columbia, Canada-based Imedex Nutraceuticals by which Imedex will have exclusive packaging, sales and distribution rights to Nutraceutix' LivBac probiotic products for the Canadian market.

Botanicals International of Long Beach, Calif., has been granted a patent for its new process by which herbal powders are formed, making them denser, more granular, and less dusty without the use of fillers or excipients.

Portland, Ore.-based Healthnotes Inc. has licensed its Healthnotes Healthy Living Product Suite to Costco Wholesale Corp. (COST) for use in its online pharmacy.

Dave Smith, co-founder of Smith & Hawken, and Peter Roy, former president of Whole Foods Market (WFMI) have joined organic flower retailer Organic Bouquet Inc. as president and board member, respectively.

Research Briefs:

The Hartman Group has released its 2001 Children's Wellness Syndicated Study. The study conclude that having children, concern over specific health conditions, and transitioning to a wellness lifestyle are the three primary reasons American families enter the children's natural products market. Parents interviewed in the study also expressed concern over the increased availability of high-calorie and sugar-filled foods to kids, thereby indicating opportunities in the natural snack-food sector. For more information, contact Julie Huntemann, 425.452.0818, or visit www.hartman-group.com.

In an evaluation conducted by White Plains, N.Y.-based ConsumerLab.com, the company determined that 60 percent of nutrition bars did not meet their label claims. Only 12 of the bars tested passed the review, with undeclared carbohydrates being the most common exclusion from the product labels. The complete report is available at www.consumerlab.com.