Weekly News Update

November 2, 2000

Analyst Urges Wild Oats' Board to Sell

Wild Oats Markets' (OATS) stock plummeted 55 percent to $5.03/share Oct. 27 after the company released dismal 3Q00 earnings that led Carole Buyers, VP at Tucker Anthony Capital Markets, to urge the Wild Oats board to sell the company. According to Buyers, the company’s problems are ""deep rooted"" in its store base, growth strategy and its vulnerability against Whole Foods Market (WFMI). ""We believe more than ever that the board needs to sell the company,"" she wrote in a research note dated Oct. 30.

Similarly, after reviewing Wild Oats’ quarterly report, Adams, Harkness & Hill (AHH), in a report issued Oct. 27, said: ""The only near-term catalyst now is the potential sale of the business.""

Wild Oats posted a 3Q00 net income of $1.1 million or $.05/share—a 75 percent decrease from the retailer's 3Q99 net income of $4.5 million or $.21/share. As a result, Tucker Anthony reduced its Buy rating on OATS to Market Perform; AHH cut its Market Perform rating to Accumulate; and U.S. Bancorp Piper Jaffray dropped its Buy rating to Neutral. For the complete story, see the November issue of Natural Business.

Pepsi Buys SoBe

PepsiCo (PEP) on Oct. 30 said it has reached a definitive agreement to buy a 90 percent stake in Norwalk, Conn.-based South Beach Beverage Co. (SoBe). Although terms of the deal were not disclosed, anonymous sources told Natural Products Insider that Pepsi will pay $370 million for the 5-year-old alternative drink maker. According to PepsiCo., SoBe will remain in Norwalk and operate as a separate unit under the leadership of John Bello, co-founder and CEO, who will retain an equity stake in the company. Pepsi-Cola North America President and CEO Gary Rodkin says the purchase of SoBe enables Pepsi to enter the ""exploding market of for new age refreshment"" and strengthen its link with young consumers.

Separately, The Wall Street Journal on Oct. 31 said that FDA has given PepsiCo’s Tropicana unit the go-ahead to make a health claim that potassium is linked to a reduced risk of high blood pressure and stroke. Potassium is found naturally in orange juice.

Whole Foods Explores Strategic Alternatives for Amrion

Whole Foods Market (WFMI) on Oct. 26 said it has retained investment-banking firm Dain Rauscher Wessels to evaluate strategic alternatives and opportunities for Whole Foods’ majority stake in Amrion, a Thorton, Colo.-based supplements maker that recently changed its name to NatureSmart.

The announcement came shortly after the company discovered ""events and circumstances"" that have ""permanently impaired"" its investment in American WholeHealth, a chain of integrative medicine centers based in Reston, Va. As a result, Whole Foods says it will recognize a pretax, noncash charge of $10 million in 4Q00 to write off its preferred stock investment in the company.

Additionally, Whole Foods anticipates that Amrion will recognize a 4Q00 after-tax charge of about $10 million to write off its preferred stock investment in American WholeHealth and a charge of approximately $2 million to $3 million to reflect a loss on its investment in Real Goods Trading Corp. (RGTC), which recently announced its merger with Gaiam (GAIA). Whole Foods says it expects to record $11 million to $13 million in 4Q as a charge against its $46 million recorded investment in Amrion.

On Oct. 26, Whole Foods shares fell $5.25—roughly 10 percent—to close at $47/share. Chase, Hambrecht & Quist downgraded its Buy rating on the company to Market Perform. U.S. Bancorp Piper Jaffray, however, maintained its Buy rating. Whole Foods closed Nov. 1 at $47.38. The company expects to release its 4Q and FY00 results on Nov. 21.

Van’s Buys Veat Gourmet

Torrance, Calif.-based Van’s International Foods has acquired Benicia, Calif.-based Veat Gourmet, a producer of soy-protein meat analogs, for an undisclosed price. The purchase was funded by KCA Foods LLC, the investment group that bought Van’s International in January. Under the terms of the deal, Veat Gourmet products will now be marketed and shipped from Van’s Los Angeles frozen-foods plant.

Financial News: GAIA, QGLY Post Net Gains; HERBA Reports Earnings Decrease; IVC Posts Net Loss

Gaiam (GAIA) posted a 3Q00 net income of $579,000 or $.05/share vs. a 3Q99 net income of $552,000 or $.06/share. As a result, Tucker Anthony Capital Market reiterated its Strong Buy on the company.

Quigley Corp. (QGLY) posted a 3Q00 net income of $114,000 or $.01/share vs. a 3Q99 net income of $18,000 or $.00/share.

Herbalife (HERBA) reported a 3Q00 net income of $11.8 million or $.39/diluted share vs. a 3Q99 net income of $15.5 million or $.51/diluted share.

IVC Industries (IVCO) reported a 4Q00 net loss of $2.6 million or $1.24/diluted share vs. a 4Q99 net loss of $8.2 million or $3.84/diluted share. The company had 4Q00 net sales of $17.6 million, down 20 percent from 4Q99 net sales of $21.9 million.

Briefly:

Spectrum Organic Products (SPOP) on Oct. 30 announced that it has signed an exclusive contract with Vineland, N.J.-based Venice Maid Foods to provide Venice with its organic raw materials. Spectrum will also act as the exclusive master distributor for all organic products made by Venice, the company says.

Nutritional products marketer Advantage Marketing Systems (AMM) has signed a letter of intent to acquire Universal Nutrition Corp., a health, diet and beauty products developer in Norcross, Ga. Terms of the deal were not disclosed. The acquisition is subject to shareholder approval and the execution of a definitive agreement.

Effective Nov. 1, supplements supplier Hauser (HAUS) was delisted from the NASDAQ National Market because its minimum bid price is lower than $1. Hauser is eligible for trading on the OTC Bulletin Board.

The American Herbal Products Association (AHPA), Consumer Healthcare Products Association (CHPA), the National Nutritional Foods Association (NNFA) and the Utah Natural Products Alliance (UHPA), filed a joint Citizen Petition calling on FDA to adopt a national standard for the formulation, labeling and marketing of ephedra products. To read the petition, visit www.ahpa.org and click on ""news.""

Portland, Ore.-based complementary and alternative medicine information provider Healthnotes on Nov. 1 announced that it has singed an agreement to exchange content with Boulder, Colo.-based New Hope Natural Media’s Healthwell.com.