America's bend toward healthier living sparks two big nutrition M&A deals

 

 

There were two big deals in the nutrition space this week - Kroger bought one of the most successful VMS e-commerce sites in Vitacost.com and Hormel bought a dominant nutritional/supplement brand in Muscle Milk. 

 

With Vitacost.com, Kroger will offer customers the convenience to order online and ship to their door with an expanded assortment online. Vitacost.com fields about 45,000 SKUs, and there's a roughly 10,000 SKU overlap when Kroger's mix is factored in. 

 

Before the deal was announced, Vitacost.com was growing its active customer list - up 8% to 2.3 million according to Jeffery Horowitz during that company's last quarterly conference call. And if the name Horowitz rings a bell, it's because he's no stranger to the brick-and-mortar space - he founded Vitamin Shoppe and subsequently one of the pioneering online vitamin outlets VitaminShoppe.com. 

 

And Vitacost.com had been successfully moving into the natural and organic food business prior to the Kroger acquisition, so its customers are primed to shop natural and organic foods on top of their vitamins. "Our natural and organic food business continues to be our fastest growing category with first quarter sales up 42% year-over-year at our Vitacost Website," Horowitz told analysts in May. "We added nearly 900 food SKUs during this quarter and now carry close to 11,000 healthy food items on our site."

 

Sales of food accounted for 50% of sales, up 3 percentage points from the first quarter of 2013. Sales of sports products increased 16% year-over-year, beauty was up 12%, and Vitacost.com's smaller categories, primarily pet, baby and household, increased 4% year-over-year. Collectively, sales of non-VMHS products accounted for 42% of the sales the company's Website, Horowitz reported, up 4 percentage points year-over-year due to successful product diversification efforts.

 

And Hormel is buying the No. 4 brand in liquid weight control and nutritionals with its acquisition of Cytosport. For the 52 weeks ended May 18, Cytosport generated sales of $144.4 million across total U.S. multi-outlet channels, according to IRI. Sales were relatively flat with 0.6% growth and a 5.5% dollar share of the $2.6 billion category that includes nutritionals like Ensure, Boost and weight loss products Slim Fast. 

 

Within sports nutrition protein drinks specifically, sales of Muscle Milk are second only to NBTY's Body Fortress Super Advanced Whey Protein.

 

While Muscle Milk started out as a protein powder, it has expanded into other categories, such as protein bars, oatmeal and ready-to-drink products. Hormel's Century Foods division supplies ingredients for such products, according to a Wall Street Journal report. Overall, Cytosport expects to take in $370 million in total sales, including $20 million in international sales, the Journal reported.