Royal Numico To Sell Rexall Sundown 30079

Royal Numico To Sell Rexall Sundown

ZOETERMEER, The Netherlands--Royal Numico, parent company toGeneral Nutrition Centers (GNCs) and sundry nutritional companies, reported itwould be divesting Rexall Sundown while exploring strategic options for Unicity,its direct-marketing dietary supplement division. Numico made this decision at asupervisory board meeting held Nov. 7, and expects to sell by the end of 2003.The company reported a $1.41 billion write-down, most of which was the areflection of the two weak divisions.

This announcement came on the heels of the company releasing results from itsthird quarter (3Q02), ended Sept. 30 and reported Nov. 8. Revenues were down to$937.3 million compared to $1.07 billion reported in the same period last year.Because of the huge write-down the company took, net loss was $1.45 billioncompared to 3Q01's net profit of $19.2 million.

Numico's president and chief executive officer, Jan Bennink, reported thatwhile the underlying market of vitamins is strong, "We just have to cut ourlosses and make sure that we run with the ones we know are going to bewinners."

The company's "losers" included Rexall (with a 24.6-percent declinein sales) and Unicity (with a 29.5-percent decline).

The company will instead be focusing on its Infant and Clinical Nutritionsectors, which experienced sales increases of 4.8 percent and 12.3 percent,respectively. Numico reported that it will strengthen its position in the infantmilk formula segment and build a brand presence in toddler nutrition. Inclinical nutrition, the company will be expanding its foothold indisease-specific products and home care.

In a more gray area, Numico will continue to stand behind GNC, even thoughthe chain is experiencing less-than-stellar times. Presently, Numico is focusingon making prices and product assortment more competitive. "I think when yougo into a GNC store and you find your vitamin C at a price that is about doublethe price you find it either in a mass merchandiser or even at my nearestcompetitor, I think there's something wrong," Bennink said.

He added that the revamp of the GNC chain that began earlier this year hasgiven the company more of a headache than anticipated. "We thought it[would take] 24 hours to reset the whole store. It hasn't been 24 hours, and ittook normally two to three days for a store," Bennink said. "So we'velost some sales and that's also why the 3Q02 results are not completely in linewith what we expected." As of the end of October, approximately 80 percentof the stores had been revamped.

He added that GNC is on "probation" for the next 12 to 18 months tosee if the company-wide changes will prove beneficial--or will act to push GNCon its continued downward spiral. Even though the chain already holds a10-percent share of the market, Bennink said, "I want to grow the GNCbusiness by carving out a special niche that it needs to have."

He also addressed how a worldwide ban on ephedra would affect the company. Hesaid Canada, which banned ephedra in January, has served as a model for how aban would affect the company. When Canada's ban took effect, GNC's sales droppedto about one-third of the prior month's, but after six months of impacted sales,the company rose to pre-banned levels. "So what we did is we took the modelof Canada [and compared it to] the United States," he explained. "Ephedraproducts would [decrease to] about $110 million against an estimated $80million. [To address this issue], we've put a new product in place calledTrulean, which we'll launch in January 2003." Numico did not respond bypress time as to whether Trulean was an ephedra-free product.

For the quarter, GNC had a 7-percent decrease in sales to $336.3 million, 5percent of which was due to the hit on ephedra sales in Canada and another 2percent reflecting the delays in re-opening stores after renovations.

More on Numico's plans can be found at www.numico.com.