Take My Vitamins — Please!

A rumor circulating in a Pittsburgh newspaper speculates that Pittsburgh-based General Nutrition Centers (GNC) will be sold off by its Dutch parent company, Royal Numico.

The speculation is that GNC, bought just four years ago for $2.5 billion, may go for a fire-sale bargain: “somewhere north of $600 million,” according to one analyst quoted in the Pittsburgh Post Gazette.

GNC, which owns and franchises more than 5300 stores selling vitamins, dietary products, health supplements, etc., comes off a year when net sales fell 10.3 percent and the newspaper reports that its Dutch parent company seems discouraged enough to consider walking away. A spokeswoman for Royal Numico told the Post Gazette that the owners will at least begin looking at offers in May.

Talk of potential buyers ranges from soft drink giant PepsiCo to the operator of GNC competitor Vitamin World to an investment group led by former General Nutrition executives.

CEO Michael Meyers insists the worst is over and GNC is not going anywhere but up. “I am very optimistic about our growth,” he was quoted as saying in the newspaper, believing there is no reason the retailer can't expect to grow sales at 3 – 4 percent, the same level the overall supplements industry is projected to grow.

Falling sales of ephedra last year were said to hurt GNC in a big way. The former weight-loss wonder drug was blasted by a series of well-publicized reports on possible side-effects. That was followed by a Canadian recall of certain ephedra-containing products in January 2002 and the U.S. government's decision last summer to reopen a safety review on the drug.

It also didn't help when Tom Dowd, senior vp of retail, was linked with an investigation by the Florida attorney general's office involving expired products being sold in GNC stores. GNC worked out a settlement with the state regulators, admitting no wrongdoing but paying $1 million for attorneys' fees and another $43 million in refunds or exchanges for customers. According to the Post Gazette, Dowd was cited in at least two depositions of former GNC employees as having ordered, during a conference call, that all expired products were to be brought back out of the back room and sold.

Not only does GNC operate its more than 5,300 stores, it is opening more than 1000 stores within Rite Aid drugstores. (It makes Rite Aid private-label products.)