Can Supplements Help Your Club Increase Its Revenues?

Photo by Thinkstock
<p><em>Photo by Thinkstock.</em></p>

Dr. Kenneth Cooper knows a thing or two about branding. It’s no wonder that the man who coined the term “aerobics” also branded his own line of nutritional supplements. In 1998, the Cooper Aerobics Center, which Cooper founded in 1970, launched a line of nutritional supplements called Cooper Complete. Just a few years later, two club companies with recognizable names of their own—Life Time Fitness and Bally Total Fitness—also launched supplement lines under their club brands. Other club companies, such as Curves, soon followed.

Sales of supplements—club branded supplements or not—continue to grow. During the past 13 years, sports nutrition and weight loss (SNWL) supplements have had a compound growth rate of 10.2 percent, according to research by the Nutrition Business Journal. Sales in SNWL were $22.7 billion in 2010. With such a large market, it’s no wonder that of the 703 health clubs that responded to a survey by the International Health, Racquet and Sportsclub Association, 89 percent sell some type of dietary supplement. And it’s no wonder that some better-known club brands have taken to branding their own supplements to capture a larger piece of this pie.

“Private labels are big everywhere, from big-bucks grocery stores to mom-and-pop stores,” says Dan Fabricant, vice president of global government and scientific affairs for the Washington, DC-based Natural Products Association. “It’s a trend that’s here to stay.”

Bally and Life Time would not share specifics about their supplement revenue, but Todd Whitthorne, president and CEO of Cooper Concepts, the division of Cooper Aerobics Center, Dallas, that markets the company’s supplements, says they constitute 5 percent to 10 percent of Cooper’s business, and supplement revenue has grown each year, usually by double digits. “It’s a profitable business for us,” Whitthorne says.

“It’s a growing business. But it’s not the biggest revenue generator for our operation.”

Pete Marino, spokesman for Bally Total Fitness, Chicago, says, “Clearly, there is a relevant ROI (return on investment), otherwise we wouldn’t be selling supplements. More than that, though, we offer products more to provide a total fitness experience versus being a core part of our business plan. Our sales data indicates our members purchase Bally products at the same rate they choose other brands.”

Life Time Fitness, Chanhassen, MN, reported that in 2010, total center revenue grew $70.5 million to $894.1 million. Of that increase, 47.5 percent was from in-center revenue, which increased $33.6 million. That growth was primarily from increased sales of LifeSpa and LifeCafé products and services and personal training, according to the company. Life Time sells its nutritional products through its LifeCafés as well as through its website.

At Life Time, the ROI has everything to do with the clientele.

“Our greatest return comes from ensuring our members can achieve optimal levels of health,” says Tom Nikkola, the company’s nutrition program manager. “We believe that includes proper exercise and nutrition, along with the appropriate use of dietary supplements. The more lives we change for the better, the more significant our ROI is.”

Life Time’s line of nutritional products focuses on daily health, weight management, energy and athletic performance. Its line includes men’s and women’s multivitamins, omega-3 fish oil, joint maintenance tablets, whey protein isolate and a meal replacement product. Life Time recently released multivitamins for children and a protein powder for vegans and vegetarians.

The Cooper Complete line was created to address the weaknesses of supplements, including poor absorption rates and purity concerns, Whitthorne says. The line includes multivitamins for elite athletes, adults, teenagers and children, as well as supplements to improve brain health, skin and eye health, prostate health and joint function.

Whitthorne categorizes Cooper’s nutritional products as dietary supplements rather than SNWL.

“When you talk about trying to sell somebody on a fat burner, that’s pretty well validated that that’s not the longterm solution,” Whitthorne says. “Most everybody who loses weight is going to gain it back within a year. So losing weight is not the issue. Losing weight and keeping it off is the issue. We know what works there, and that’s lifestyle modification. That’s changing your lifestyle, not taking a pill.”

Bally moved into the supplement market with a private label meal-replacement protein drink called B-Trim Shakes after a survey of 1,200 members revealed that two-thirds of them shunned breakfast and often lunch.

“Bally believes that supplementation is an important part of any fitness regimen,” Marino says. “We have developed a comprehensive and high-quality line of Bally-branded supplements to offer our members at an affordable price.”

Name Recognition

When a well-known club brands its own supplements, its name recognition can help the company reach beyond its members either through sales in retail shops or online.

Although the primary customer base for Cooper’s supplements is the company’s clinic patients, distribution via the Internet and retail shops, such as Whole Foods, has attracted customers in all 50 states, Whitthorne says.

Some doctors and independent health clubs also carry the Cooper supplements, but they are not sold in big club chains. Whitthorne says that is because so many supplement manufacturers are willing to brand a product for chains, which allows the chains to achieve sales margins of 60 percent to 80 percent.

For the smaller independent clubs that carry the Cooper products, supplements generally are not their core specialty, which means it’s important to educate employees about supplements if those clubs want to make money selling supplements, Whitthorne says.

Cooper formulates its own products through its scientific advisory board, which includes doctors from Harvard and Tufts universities. Most of Cooper’s products are manufactured by Douglas Labs in Pittsburgh; its omega-3 products are made by Ocean Nutrition in Canada.

Life Time develops its products inhouse with its registered dietitian team consulting with its manufacturer’s staff doctors on formulations, Nikkola says. The company also partners with LaValle Metabolic Institute, Cincinnati, to formulate its line.

“Once designed, we use a best-in-class manufacturer following good manufacturing practices to ensure that applicable formulations and manufacturing regulations are being adhered to in the manufacturing of products,” Nikkola says, “and we feel that these measures greatly reduce the liability inherent in branding a product with our name on the label.”

Bally has an internal team that works closely with food scientists and registered dietitians at its manufacturers to continue to develop and test new products based on the latest scientific information and consumer trends, Marino says.

“All of our products are developed to offer our members the best products with the highest quality ingredients at an affordable price,” he says.

Supplement Worries

Despite the precautions taken by these three organizations, Fabio Comana, an exercise physiologist at the American Council on Exercise, San Diego, worries about supplement safety.

“I can understand why clubs sell and brand supplements,” Comana says. “It is a huge revenue-generating opportunity, considering how people will typically buy supplements regardless. The club mentality, therefore, is why lose a revenue stream by allowing other businesses to capitalize on selling our customers products when you can do it yourself? The issue is safety. Where are the assurances that the supplement will not harm me?”

Concern about consumer safety was discussed in October 2010 at the Council for Responsible Nutrition’s (CRN) Annual Symposium for the Dietary Supplement Industry in Austin, TX. The council’s biggest worry is product contamination, something that would be difficult for consumers to forgive.

“My fear is that we have this great consumer trust, and that one event can change that forever,” Jim Hamilton, president of DSM Nutritional Products USA Inc., Nutley, NJ, said in a statement on the CRN website. “I think trust is the No. 1 issue.”

Andrew Shao, Ph.D, and senior vice president of scientific and regulatory affairs for CRN, says, “When a place like Bally decides to have its own line, it becomes responsible. They’re a retailer, just like any other retailer. Their brand is on the line, and I hope they take it very seriously to deliver what they promise to the consumer.”

Marino says that Bally is indemnified by its product manufacturer should any problems occur.

Supplements are not tested or approved by the U.S. Food and Drug Administration (FDA), but the administration requires that supplements, which are under the umbrella of “foods,” be labeled with accurate information, including the name and amount of each ingredient.

Still, enforcement can be lax, Whitthorne says.

“It’s not like the FDA has a SWAT team that goes out, picks a product off the shelf and takes it back to the lab and analyzes it,” he says. “The DSHEA—the Dietary Supplement Health and Education Act—really puts the responsibility on the manufacturer to do the right thing.”

DSHEA, which was signed into law in 1994, defines dietary supplements as a separate regulatory category of food. Still, supplements can be sold before being proven safe, and the FDA typically only investigates a supplement if it receives a report of an adverse reaction or of a claim being made that has no scientific validation, Whitthorne says.

“That’s where most companies get into trouble trying to overhype a particular product, what a product will do for you,” he says. Supplement manufacturers and retailers can say that a supplement might help support healthy eyes, but they cannot say that that supplement cures macular degeneration, for example.

Health Club Attention

In addition to concerns about supplement safety, Jasmine Jafferali, health and well-being director for Proactive Partners, a division of TCA Holdings, Chicago, also is concerned that branded supplements divert club companies’ attention from their primary business.

“[Health clubs] need to focus on exercise, personal training, post-rehab fitness, not getting into branding their own supplements,” says Jafferali, who has led seminars about supplements at Club Industry conferences. “If they want to purchase other supplements, sell them in their shop, that’s fine. But they shouldn’t be making our supplements and protein shakes. They’re getting out of the scope of their practice. They’re going to spend money on their own supplements when they should be creating better fitness and exercise programs for their club.”

That’s why management at The Rush Fitness Complex, Knoxville, TN, leaves supplements to those with expertise in the area. The Rush partners with an Internet-based weight loss and dietary supplement company so its members can buy products online. The partner ensures that members get everything that they need from a multivitamin and meal replacement perspective, says Don Bertsch, a spokesperson for The Rush.

“Our goal is not to compete with all of the other health food and supplement stores,” Bertsch says. “Instead, we want to be excellent at providing the best workout environment with all of the services needed to have our members see success.”

Matt Terry, personal training department head for Life Time, has no doubt the company offers legitimate, worthy products that are top-notch.

“For some clubs, [selling supplements and weight loss products] is a sheer profit thing, and they are producing an inferior product,” says Terry. “With Life Time, [our employees] have a voice in what we want. We want what offers the best value and the best quality. People want supplements, and we arm our members with the best.”

Still, some unnecessary supplements are being sold, Whitthorne says, noting, in particular, protein supplements.

“By and large, there are a lot of people spending a lot of money on things that aren’t generating that much benefit,” Whitthorne says.

Considering only three in 10 adults in America get the recommended weekly physical activity, according to the President’s Council on Physical Fitness and Sports, the majority of people taking SNWL aren’t athletes— they are people looking for a shortcut, Whitthorne says.

“Most people think this: ‘I’m going to do this—whatever this is—for a prescribed period of time. I’m going to get down to my ideal weight or where I want to be. Then, I’m going to change my lifestyle. Once I get there, I’m going to start doing everything right,’” Whitthorne says. “It never works that way. Ever.”

In the end, supplements should be just one part of the health equation, he says.

“For us, ‘supplements’ is a perfect name,” Whitthorne says. “They need to supplement your diet. There’s no weight loss fat burner or post-exercise nutrient that will suddenly make you a better athlete.”

Still, the market for supplements— both good and bad—is out there, and club companies are increasing their revenues by retailing these products. And, for those that have recognizable names and the finances needed in order to get into supplement development and manufacturing, a private label brand of supplements can add even further to that bottom line.

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