With great power comes great responsibility, right? But does the “Peter Parker principle” still apply when you are the undisputed king of the entire vitamins, minerals, and supplements (VMS) market? Even before the “Great Shutdown” period, “household, health, and baby care” was the largest consumable category on the Amazon marketplace…of which “vitamins, supplements, and sports nutrition” was the biggest subcategory. But the 2020s has seen Amazon’s power within the supplement industry become even more impactful…as the rate at which the retail giant is gobbling market share is unprecedented and seems almost limitless at this point. And much of its success can be attributed to the famous “Amazon Flywheel.” Customers love the almost endless selection, lower pricing, and overall customer experience on Amazon. Brands enjoy the lower barriers-to-entry on Amazon…knowing they can reach people immediately, generally at a lower cost structure. This allows more opportunity for innovation from those supplement brands, thus making Amazon an incubator of product attributes and trends. Right now, it's estimated that four out of every five online transactions for supplements happen on Amazon. Moreover, ecommerce accounts for over 25 percent of total supplements market sales. According to recent SPINS 52-week data for the period ending May 19, 2024…Amazon sold $14.88 billion in VMS products, which was up an astounding 22.4% YoY. If you were wondering how that stacks up against the portion of supplement sales at other major retailers, Amazon’s lead is significant…to the tune of more than double the second-largest VMS selling retailer. But as Amazon continues to grow, supplement brands face the stark reality of figuring out how to navigate an increasingly dynamic online marketplace environment. Amazon can no longer be a passive sales channel and supplement brands (small and large) should be using every tool the online marketplace offers to help drive sales performance. Currently within the VMS category on Amazon, the top 5 sellers are Garden of Life, Optimum Nutrition, Now Foods, Pure Encapsulations, and Nutricost. I'll also share some top growing Amazon supplements brands and breakdown performance in subcategories like Protein, Hydration, Pre-workout powders, Greens, and Creatine. But four months ago, in my last supplement industry content piece related to Amazon, you might remember that I left off by declaring that despite the increased run-ins with the FDA recently…I didn’t believe the leading online marketplace wouldn’t indulge in the “poison pill scenario” that was defined by me as totally abandoning the supplement categories. Instead, Amazon would figure out how to increase its compliance hurdles to appease governmental agencies and supplement industry stakeholders. So, in an sort of industry disrupting move, Amazon increased its compliance hurdles to appease these various parties…starting initially with hot button FDA supplement subcategories like sexual enhancement, weight management, and sports nutrition. Amazon’s new policy mandates that the company selling supplements in those beforementioned subcategories must receive third-party testing documentation directly from either Eurofins, UL Solutions, or NSF International…which are currently the only testing, inspection, and certification firms qualified by Amazon. Additionally, the testing requirements have expanded a bit past the original GMP compliance and label claim verification.

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Have you heard something from a trusted source that was so wild it still required additional research before you’d believe it? Well…have you heard the story of how McDonald’s did an “extreme makeover” on a vegetable that would make not only Ty Pennington jealous, but also Willy Wonka. During a private event in November 2014, the CEO was asked a question regarding what the company was doing to get kids to eat healthier. He stated that McDonald’s had successfully developed broccoli that tasted like bubble gum, but the foodtech masterpiece never reached Happy Meals because children were allegedly confused by the taste. So, where does this stack up against other McDonald’s missteps like the sketchy pineapple for buns Hula Burger or them selling their 90% stake in Chipotle 18 years ago because they wouldn’t serve breakfast or add drive throughs?

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With OWYN in the mix, will Simply Good Foods need to make some tough decisions soon, as it now needs to spread resources and budget dollars across three portfolio brands? In this latest episode, I'll utilize the Q3 2024 Simply Good Foods Company (NASDAQ: SMPL) earnings report, earnings call, and supplemental presentations that were filed on 6/27/2024 as the backdrop to provide broad nutritional snacking market insights. In fiscal Q3 2024, Atkins Nutritionals brand dragged down portfolio performance, as Quest Nutrition beat categorical competitors in tracked channel retail takeaway (at 13.5% YoY growth). What's at the heart of the Quest Nutrition success? Quest Nutrition is still known for the original Quest Bar. That means the company needs the bar business to be healthy for any of this innovation risk to make sense. Here’s the good news…the core bar business is growing. In fact, this year it had tracked channel retail takeaway growth of 2%. Additionally, Quest Nutrition has proven it's one of the few brands that can successfully extend across multiple product forms...and its customer base expects them to come into an indulgent snacking category and flip it into great tasting (high protein, low sugar) offerings. The snacks segment of Quest Nutrition, which now accounts for almost half of all retail sales, saw retail takeaway growth increase 27%. But if we take this one layer deeper…the salty side of the Quest snacks segment had quarterly retail takeaway growth of about 50%. Quest chips now represent about 25% of the total Quest Nutrition revenue and provide a substantial share of new users to the brand. I’ve been a broken record when it comes to stating that salty snacks are where the excitement (and focus) should be placed within Quest Nutrition. The size of the total addressable salty snacks market suggests significant and continued upside on this business. We will see how the crackers perform over time, but I’d like them to tackle categories like pretzels or trail mix next. In the meantime, Quest Nutrition has signaled it will focus on a multifaceted acceleration plan that includes growth levers like new Quest Chip flavors, pack types, and channel expansion. Also, I run through what's causing the weak brand performance at Atkins Nutritionals and explain actions the company is taking to change it…especially against the backdrop of GLP-1 weight loss solutions. In my opinion, you’re going to see weight management brands like Atkins (and others) get repositioned on the right side of GLP-1 second-order effects through both product innovation (e.g. Atkins strong)...but most of the “innovation” will come in the targeted communication marketing strategies. Finally, even though it didn’t officially count in this quarter's Simply Good Foods results, OWYN had quarterly retail takeaway growth of 117.5% YoY. If the OWYN acquisition happened at the beginning of fiscal Q3, Simply Good Foods total retail takeaway growth in measured and unmeasured channels would have been bumped up several percentage points each.

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Consumers have already begun re-evaluating their relationship with alcohol, which has me contemplating if another mainstream euphoric is next. Caffeine consumption has deeply integrated into our daily lives. Caffeine is cited as the most widely used psychoactive drug in the world…becoming such a socially accepted ingrained practice that we seldom question its long-term effects on our health. I don’t believe caffeine itself is inherently good or bad…rather a person’s relationship with it determines its impact. But just like any addictive substance, we develop a tolerance to caffeine over time. What starts as a morning cup of coffee or energy drink can easily transform into many to feel the same stimulating effect. The dependence on caffeine creates an ever-increasing cycle of consumption, with justifications ranging from needing it to wake up to increasing concentration at work. But what happens when more people start reconsidering how and why they use caffeine? Right now, consumer surveys seem to signal the marketplace could be in the very early stage of searching to find a healthier relationship with caffeine. This is not unlike what was happening in the early 2010s with alcohol. That first year (2013), Dry January had a few thousand people sign up…but it has now grown into an international cultural phenomenon where millions annually explore temporary alcohol abstinence as a healthy way to start the new year. And the popularity of Dry January is cited as a key contributor to the broader consumer trend of cutting back on alcohol. From what I’ve seen, there has been two broader consumer behaviors that evolved from Dry January; mindful drinking and sober curious. Dry January has also fed into my thesis that “demand breeds commercialization activity," as there's now a huge variety of alcohol-free beverage options to choose from that are great tasting, wellness-focused, and widely available. But in my newest deep dive content...I'll explore if there could be a pattern in consumer behavior emerging that helps us establish a data-informed prediction regarding caffeine. From my understanding, there hasn’t been that “event-based catalyst” like Dry January for caffeine yet. Regardless, I have noticed an uptick in both social media chatter around reduction and self-motivated abstinence challenges around caffeine. Let’s then assume the same types of general consumer behavior trends sprout from it. Instead of mindful drinking…maybe its dubbed mindful stimulation, where it’s about being present and intentional with caffeine consumption. And as a replacement to the sober curious movement, we have decaf curious individuals consciously exploring a life without caffeine consumption. Since this consumer behavior shift hasn’t even crossed the chasm towards early majority adoption yet, this idea of caffeine reduction might seem silly. But reflecting on the history of humanity, we can see how certain practices once normalized are now seen as harmful or strange. I believe the heightened wellness consumer mindset opens a whole caffeine reduction “remixed” world of “energy everything.” Since we live in the “Age of the Endless Aisle,” there will naturally be more options in every CPG category than during any other point in our history...including various caffeine alternatives. And I'll explore both the trending options such as functional mushrooms, nootropics, tea-based energy drinks, usage of caffeine metabolites like Enfinity (branded ingredient known scientifically as paraxanthine).

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What historical significance does Ohio’s 55th-largest city hold within the CPG industry? The small town of Troy was the location where the first UPC was scanned at checkout. But the Final Jeopardy level question surrounds which product was the first to be scanned 50 years ago? Legend has it that Wrigley’s Juicy Fruit chewing gum was selected because nobody had been sure that a bar code could be printed on something that small. But the theorical conceptualization of this grocery technology might be credited to another Ohio company. In a 1966 document, Kroger stated “just dreaming a little, but could an optical scanner read the price and total the sale…thus creating more productive service.” Beyond speeding up checkouts, UPC’s greatest value might be that it has provided hard, statistical evidence for what sells…thus transforming market research.

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Sometimes if your patient enough, the world’s largest (and most diversified) food, beverage, and nutritional supplements company, will eventually “remix” one of your worst predictions into a real possibility again! If you’ve followed my content for long enough, you’ve seen me publicly take countless “victory laps” that essentially patted myself proudly on the back for making correct marketplace predictions. At this point, the strategy and M&A leadership at many mega CPG companies are just following my prediction playbooks at this point. But since no one has built a “tracker app” to reconcile my endless stream of predictions yet, I must stay honest and call myself out when I flat out miss judge marketplace movements. So, what was this bold prediction that I got wrong? Just over three years ago, within a piece of content analyzing the almost $6 billion acquisition of The Bountiful Company, I laid out this vision for what Nestle Health Science could look like in the 2030s. It began with explaining my base case around how Nestle CEO Mark Schneider, having professional experience in healthcare, realized that “we are a sick society” and there’s a ton of opportunity for Nestle to diversify away from slower-growing food and beverage products, and become “a health and nutrition powerhouse.”And that part has become 100% true, as Nestle has made market moves to prioritize better nutrition, improved its already market-leading positioning for today’s current “made to stock” product consumption reality, but also aligned itself for tomorrow’s consumer demand focused on personalization. Yet, this is where that personalized nutrition prediction starts going wrong...as Nestle decided to shutter (Freshly) an important piece of its personalized nutrition equation that will define the CPG industry of the future. But less than a year later, and right after Wonder Group acquired another meal delivery kit company Blue Apron, Nestle creates a strategic partnership with Wonder Group that included a $100 million investment. So, Nestle is technically back in the meal kit delivery business again, but this time with a hands-off approach that potentially has much wider potential. This strategic partnership obviously begins with Nestle earning another important foodservice revenue stream. But a $100 billion plus company doesn’t get excited over some immaterial short-term foodservice revenue…I think Nestle learned some expensive lessons from Freshly and sees a much bigger long-term opportunity with Wonder Group’s super app multichannel business model. Nestle might have the upper hand right now by owning a portion of the personalized nutrition equation that will define the CPG industry of the future, that’s only one component of the larger interconnected health personalization trend that can’t be wholly owned and will instead require strategic partnerships to unlock value. But in the meantime, Nestle is playing the moves that are available on the proverbial chess board as it hopes to play an important role in severally limit nutritional diseases in the future. It was announced a few weeks ago that Nestle would launch its first major U.S. brand in nearly three decades. Vital Pursuit is a frozen product line that looks to meet the needs of consumers taking GLP-1 medications and other individuals focusing on weight management.

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Nookie-flavored cookies that you stuck up your YEAH…to my knowledge never became a thing, but that doesn’t mean the late-90s/early-00s alternative metal band Limp Bizkit wasn’t still destined to be a CPG product inventor. Fred Durst and the guys were visionaries, but they needed a big-time partner to make it a reality…and those types of sales cycles take a long time. What am I talking about? 7-Eleven recently unveiled Big Bite Hot Dog Sparkling Water…about 24 years after Limp Bizkit launched its biggest album called “Chocolate Starfish and the Hot Dog Flavored Water.” But just like the album title was intended to sound fictional…the 7-Eleven product launch was just a marketing joke. Although popularity of the stunt has led to the c-store to rethink its availability…no word on if that will coincide with the upcoming Limp Bizkit concert tour.

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If you needed to grab something fast at the convenience store, to help energize you through a busy day, what is your energy beverage selection? Since we live in the “Age of the Endless Aisle,” there are more options in every CPG category than during any other point in our history. Even within the smallest retail channel (in terms of average square footage), convenience stores will undoubtedly have coolers filled with RTD coffee beverages and energy drinks, hot or frozen foodservice varieties of the same, powdered stick pack energy supplements for you to add into a bottled water, and even various pill or capsule supplements. And it’s that proliferation of caffeine-containing beverages, along with them being well-entrenched into our daily lives, that's causing “energy everything” to become a certified consumer movement. But if “energy everything” is that rising tide (as I just described), why isn’t it lifting all boats…or in this case all energy beverage subcategories? While U.S. energy drink sales have swelled to over $22 billion, essentially doubling over the last five years, the smaller format subcategory of energy shots hasn’t quite lived up to that robust growth trajectory. In fact, U.S. energy shot sales have continued to hover just under $1 billion and consumption has been slightly down over that same five-year period. So, it begs the question…what the heck is going on? Well…I have a number of theories that I'll explore in this content with many of them centering around the detrimental effects of a decadelong energy shots market domination by 5-Hour Energy. While Red Bull, Monster Energy, and even the energy drink platforms of PepsiCo and Coca-Cola Company tried small format energy shots, those big beverage brands were more focused on larger format energy drinks and that ultimately caused internal strategic conflicts. With 5-Hour Energy being the only sizable business that focused solely on that smaller format, the energy shots brand became stagnant as the energy drinks market saw huge competition that forced lots of product innovation...becoming the superpower of energy drinks to successfully reposition itself within the broader beverage market, appealing to a wide range of consumers. Moreover, energy shots are marketed directly and specifically as an energy source, while energy drinks are marketed as a lifestyle beverage that offers the functional benefit of energy. And in today’s world, there are as many energy drinks as there are personalities, and your choice can say a lot about you and your personality. To go one step further…drinks have become status symbols or basically aspirational mixtures, representing flavor taste, lifestyle taste, and identity by association. Additionally, it’s my belief that energy shots lack the refreshment qualities that carbonated energy drinks provide. And more consumers every day are looking for the total package. So, with all that extra liquid…it gives brands the ability to be thoughtful with ingredient innovation that won’t override taste, which has been a challenge to keep up with in recent years for energy shot manufacturers. But where does the energy shots subcategory go from here? I think the energy need state is massive…and that gives the format a chance to evolve into something that offers more than functionality. And this might be the perfect time to attempt a categorical transformation, as the 800lb gorilla of 5-Hour Energy is fed up being 90% of a struggling subcategory and finally launched large format energy drinks.

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What’s the biggest risk to the insane growth trajectory of GLP-1 pharmaceutical weight loss solutions? Explosive demand in the U.S. market has outstripped supply…causing prolonged shortages of these medications. GLP-1 market leaders, Novo Nordisk and Eli Lilly, have warned supply constraints would likely extend into late-2024. That has unfortunately increased the circulation of counterfeit versions through unregulated outlets that can carry serious health risks. But good news could be on the horizon…at least for the maker of Ozempic and Wegovy. Last month, Novo Nordisk announced intentions to acquire its primary contract manufacturer responsible for filling and packaging its GLP-1 injection pens…Catalent for $16.5 billion. While the move won’t solve everything, it provides strategic flexibility to an existing supply network that includes another $8 billion spent on expanding manufacturing sites in France and Denmark.

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Is the “often imitated, never duplicated” influential epicenter of all ingestible CPG categories ready to disrupt its next market? And while the “best and brightest sports nutrition brands are now (or will soon start) competing against large CPG incumbents in every functional food and beverage subcategory over time…this isn’t another content piece about the competitive landscape “changing of the guard” happening within mega functional CPG markets like energy, hydration, or protein. Instead, I want to provide further support for another one of my ongoing sports/active nutrition predictions…which is more brands will begin disrupting the global stock markets. The inspiration for this content came from reading last week’s UK financial news piece that confirmed earlier speculations around UK-based sports nutrition brand Applied Nutrition moving forward with plans for a potential late-2024 IPO on the London Stock Exchange…seeking to value the company at more than $1.25 billion. For those that are unfamiliar with the sports nutrition brand, it began in 2014 when Thomas Ryder acquired one of the small struggling supplement lines he stocked in his specialty supplement store…believing its main product Critical Mass was being marketed incorrectly. Applied Nutrition would then go through an extensive strategic overhaul of every element from redeveloping products to rebranding and even shifting production away from Canada and into Belgium before deciding to build a manufacturing facility a year later. In 2021, JD Sports (the British sports-fashion retailer) made a significant minority investment that valued the company at about $100 million. The following calendar year, Applied Nutrition sustained the momentum by landing its first major grocery listings in the UK at ASDA, launching its Body Fuel line extension that started with an RTD hydration drink to take advantage of the “PRIME Effect,” and creating its first overseas subsidiary in the United States. But about 9ish months after entering the U.S. market, “All Black Everything” became (from what I know) the first sports nutrition brand headquartered outside of North America to land on all 4600 or so Walmart locations across the country. With successful large retail expansion also happening in the UK market, the beginning of 2024 saw the Applied Nutrition IPO rumor mill start up. And this was further supported when the company brought in Andy Bell to be Chairman, a seasoned entrepreneur that had taken his own company public six years ago…and hired an investment bank to advise on the process. I'll explain that despite respecting the asset-heavy build model, consistent top- and bottom-line growth, and overall ethics of the founder/company...I believe the reported valuation sought is more inflated than the Michelin Man! Also, the final section will breakdown arguably the most important market for Applied Nutrition, which is also the largest in terms of global supplement sales...as big changes have happened recently (or will begin happening soon) within the U.S. subsidiary of Applied Nutrition.

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