Weider Nutrition International, Inc.

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Weider Nutrition International, Inc.

2002 South 5070 West
Salt Lake City, Utah 84104-4726
U.S.A.
(801) 975-5000
Fax: (801) 972-2223
Web site: http://www.weider.com

Public Subsidiary of Weider Health and Fitness Inc.
Founded: 1989
Employees: 625
Sales: $250.5 million (1998)
Stock Exchanges: New York
Ticker Symbol: WNI
NAIC: 325411 Medicinal & Botanical Manufacturing; 312111 Soft Drink Manufacturing; 312112 Bottled Water Manufacturing

One of the companies founded by Joe Weider to promote health and physical fitness, Weider Nutrition International, Inc., is a leader in the nutritional supplement and natural products industry. The company manufactures both its own branded items, such as Mega Mass powdered drink mix, Fat Burner supplements, and Tiger’s Milk energy bars, and also private-label botanical capsules and tablets and sports beverages. Such products had for years been sold mainly to bodybuilders and weight lifters, but in the 1990s Weider began making supplements for endurance athletes and the general public. Unlike many firms that use multilevel marketing, Weider sells its products in some 38,000 outlets, including mass retail/discount stores such as Wal-Mart and Costco and in health food stores such as the General Nutrition Center chain. Weider products are distributed in 42 nations. The firm enjoys a growing demand for health products in general and increased instances of research showing the usefulness of such items. However, those trends are also attracting more competitors to the supplement and herbal industry. Weider Health and Fitness, a subsidiary of Canada’s M.L.E. Holding Company Ltd., owns about 65 percent of Weider Nutrition International.

Company Origins

The history of Weider Nutrition International begins with that of founder Joe Weider. He was born in 1923 in Montreal, Canada, and dropped out of school at age 12 to support his family. He was a skinny adolescent and hated being pushed around by stronger kids. So one day Weider decided to start a work-out program, building his own weight set from junk yard parts. Weider also became interested in nutrition and even drank the cream at the top of milk bottles to ingest more calories during this time. The hard work eventually paid off, and Weider won some body building contests. By age 17 he had begun publishing his own newsletter, called Your Physique.

The newsletter was a success, and after it hit both American and Canadian newsstands, Joe Weider moved to Jersey City, New Jersey, where he continued to build his newsletter business and also started a mail-order venture to sell nutritional supplements and bodybuilding equipment.

After serving in the Canadian military in World War II, Ben Weider joined his brother’s business operations. Together they organized body building contests and soon formed the International Federation of Bodybuilders (IFBB) that eventually expanded to 137 nations.

By 1950 Joe Weider was publishing 16 magazines, including American Manhood and Fury and True Adventure, under the parentage of American News Company, and by the early 1950s he had become a millionaire. From the early days, Weider used his magazines to advertise supplements and fitness equipment.

In 1955 new owners took over American News and did not have enough resources to continue distributing Weider publications. Weider pared down his operations by cutting back his mail-order business and eliminating all but one magazine called Muscle Builder. In spite of the restructuring, Weider struggled financially for several years.

To turn things around, Weider moved to Los Angeles in the late 1960s to take advantage of the growing number of bodybuilders and health/fitness devotees in that region. However, many continued to believe misperceptions that bodybuilding caused high blood pressure and other health problems; some critics even contended that bodybuilding led to narcissism or homosexuality.

Reaching a Broader Audience in the 1970s-80s

The Weider brothers used several methods to improve the marginal image of bodybuilding and promote their related fitness and supplement business. In 1971 they established the Mr. Olympia contest through the IFBB, using experts to judge bodybuilders’ qualifications. At the same time, they discouraged such odd show tactics as demonstrations of bodybuilders biting through metal, which had helped create a bad reputation for bodybuilding.

Joe Weider in 1972 paid for Austrian bodybuilder Arnold Schwarzenegger to come to Los Angeles, where the two helped each other. Schwarzenegger wrote articles about diet and training in Muscle Builder, while Weider reportedly helped the bodybuilder pursue an acting career. Weider also emphasized that women could benefit from bodybuilding. He featured women on the cover of his glossy Muscle & Fitness and in 1981 began publishing Shape magazine for the female audience.

Meanwhile, Weider increased marketing for diet supplements, including Muscle Builder protein mix, Anabolic MegaPaks, a pancake mix called Performance Foods, and Carbo Energizer Chewables. In 1985 the Federal Trade Commission decided that some Weider nutritional products had labels with unproven claims and thus ordered Weider to reimburse unhappy customers. However, that did not slow down sales among athletes who used Weider products to build muscle tissue.

Growth in the Early 1990s

The Weider Nutrition Group, formed in 1989 as a subsidiary of Weider Health and Fitness based in Woodland Hills, California, soon moved its operations to Salt Lake City to make its own products. Weider Health and Fitness had previously put its name on products made by other companies, but opted to purchase the Salt Lake City-based Great American Foods, which made powdered supplements, in order to enter the nutrition business. The company also bought Schiff Vitamins, a New Jersey company that sold $14 million of vitamins annually. Schiff was also moved to Salt Lake City, where it eventually expanded to a $60 million business.

“The Utah environment was perfect for our expansion,” recalled Weider Chief Operating Officer Robert K. Reynolds in the August 10, 1997 DeseretNews. The supervisor of Weider’s initial manufacturing said, “We liked the work ethic, the family values, the character of the community... and we liked the fact that it was about 800 miles to Seattle, Denver, northern California and southern California—all of them trend-setter areas that consume more of our products per capita than any other.” Weider perhaps also appreciated Utah’s right-to-work law, which meant that the firm could operate without unions.

In December 1993 the Weider Nutrition Group purchased the Excel brand of herbal supplements from Las Vegas-based Key Products, Inc. Weider planned to extend Excel’s distribution from its regular health food markets into mass retail and sporting goods stores.

In early 1994 Weider acquired Exceed Sports Nutritionals from Columbus, Ohio-based Ross Laboratories, which had marketed its energy drink, liquid sports meal, high carbohydrate drink, and energy bar mainly to long-distance runners and cyclists. Weider President/CEO Richard Bizzaro said in the February 1994 Sporting Goods Business that, “Bringing in Exceed is intended to further expand our customer base” beyond Weider’s usual customers—the body builders and weight lifters. “The key for us is to switch from focused bodybuilding to the mainstream, and we plan on more acquisitions in the future which will focus on sports-related and health food brands.... When the average person starts taking a supplement, that’s when the market will pop,” said Bizarro.

In 1994 Congress passed a new law supported by Weider and other nutritional products firms. Sponsored by Utah’s Senator Orrin Hatch, the Dietary Supplement Health and Education Act was passed to prevent the Food and Drug Administration from overregulating the health products industry. Later that year, Weider Nutrition honored Senator Hatch for his work on the Dietary Supplement Health and Education Act. Arnold Schwarzenegger came to Salt Lake City to present Hatch with Weider’s first annual award for major health contributions. The Hollywood actor and Republican Party supporter joked about liberal Democrats wanting to increase regulations on supplements: “Imagine what would have happened if it [proposed tougher FDA regulations] had gone through. You take 10 milligrams too much of vitamin C, and you have the FBI knocking on your door.” As reported in the November 4, 1994 Deseret News, Schwarzenegger continued the joke: “I can imagine the conversation in prison. What are you in here for? ‘Murder.’ What about you? ‘Zinc’.”

Meanwhile, Joe Weider was receiving honors for his work in the fitness industry. The Periodical Book Association in 1983 gave him the Publisher of the Year Award. Other honors included a Distinguished Citizen Award from the Boy Scouts of America in 1991, the United States Sports Academy’s Dwight D. Eisenhower Fitness Award in 1992, and the Lifetime Achievement Award from the California governor’s Council on Physical Fitness in 1995.

The Late 1990s

To reach more of a mainstream audience, Weider Nutrition in 1996 spent about $2.5 million on an advertising campaign for its Prime Time herbal supplements. To encourage men in their forties and fifties to use the supplements for health maintenance, the company hired actor Robert Urich as the spokesman for Prime Time, and Winner Communications filmed the spots showing Urich in vigorous health. However, Urich soon found out that he had cancer, and though it kept Urich’s picture on Prime Time containers, Weider postponed using the television ads pending Urich’s remission. Without the planned TV spots, Prime Time’s initial sales were slower than expected.

In February 1997 Weider Nutrition announced its acquisition of Science Foods, Inc., a 12-year-old company based in Las Vegas, Nevada. Science Foods produced sports beverages for bodybuilders and health club members. Weider said that it would expand the Las Vegas plant to meet consumer demands and that Science Foods would continue to operate under its own name.

In preparation to go public, Weider Nutrition International, Inc. was formed in 1996 as a subsidiary of Weider Health and Fitness. The Weider Nutrition Group then became a subsidiary of Weider Nutrition International. Weider Nutrition went public on May 1, 1997, listing on the New York Stock Exchange under the ticker symbol WNI. In a press release, WNI’s President/CEO Richard Bizzaro said, “The timing of the listing is fitting as we are closing out our strongest year yet.” The IPO resulted in Weider selling 6,440,000 shares at $11 each, with about $63.9 million raised in net proceeds. The firm used those funds to reduce debt from acquisitions and to pay a dividend to Weider Publications, another subsidiary of Weider Health and Fitness.

In June 1998 Weider Nutrition International dedicated its new headquarters and manufacturing plant at 2002 South 5070 West, in Salt Lake City. To help company founder Joe Weider mark the event, actor Arnold Schwarzenegger spoke to the audience. Located on a 35-acre site, the new building was named the 1997 “Project of the Year” by the Utah Chapter of the Associated General Contractors of America. The $18 million facility built by Cameo Construction was part of Utah’s booming economy in the late 1990s.

The new 418,000-square-foot plant, which could produce one million sports bars daily and 250 million capsules and tablets monthly, effectively doubled Weider Nutrition’s manufacturing capacity, a crucial factor in the firm’s efforts to supply its mass retailers, such as Wal-Mart and American Stores. It continued to use its nearby plant at 1960 South 4250 West; the combined facilities totaled 600,000 square feet. Weider operated other plants in England, Spain, Canada, Nevada, South Carolina, and California.

In 1998 Weider’s largest customers were retailers General Nutrition Center, Wal-Mart, and Costco, with about 16 percent, 13 percent, and 12 percent, respectively, of net sales. Others selling Weider Nutrition products included Sam’s Club, Wai-greens, CVS, Thrifty/Payless, Albertsons, American Stores, REI, Kmart, Wild Oats, Sports Authority, and Bally’s Health and Fitness. Some 38,000 retail stores sold Weider products, and the firm made private-label products for such companies as Nu Skin and SlimFast.

The Weider product line included its trademarked Cold-Free lozenges introduced in 1996. Made of zinc nitrate, the lozenges were sold under the Great American Nutrition name to help relieve symptoms of the common cold. Zinc products from Weider and other firms became more popular after a study in the July 1996 Annals of Internal Medicine indicated that zinc helped prevent the spread of cold viruses. In 1997 Weider expanded its Cold-Free line to include new cherry-flavored candy lozenges and an oral spray in a two-ounce bottle. The company also made other products to fight colds, such as Vitamin C and echinacea supplements.

To help customers lose weight, Weider Nutrition offered its PhenCal 106 product made with natural amino acids. Dr. Kenneth Blum, a Texas biologist, helped Weider Nutrition with this particular product. Blum’s participation illustrated the increasing reliance on professionals and scientific standards in the supplement industry.

For the fiscal year ended May 31, 1998, Weider Nutrition recorded net sales of $250.5 million, up 14.6 percent from 1997 net sales of $218.6 million. Net income rose from $4.3 million in 1997 to $14 million in 1998.

During this time, Weider announced it would spend about $4 million on a new campaign to advertise products for those over 50 years old. In the first half of 1999 the firm would promote its Schiff Pain Free dietary supplements and also its new Schiff Joint Free and Joint Free Plus drink mixes designed to increase joint flexibility. Described in the November 30, 1998 Brand-week as “the largest dedicated product effort in the company’s history,” the ad campaign included TV spots on The Roseanne Show, Hollywood Squares, Wheel of Fortune, Judge Judy, Jeopardy, and Live with Regis and Kathie Lee, plus print ads in Shape and Men’s Fitness. The firm also announced its 1999 plans to reformulate and repackage its line of Schiff Women’s Health products.

In July 1998, the company acquired 100 percent of the outstanding shares of the Hamburg, Germany-based firm of Haleko Hanseatisches Lebensmittel Kontor GmbH. Weider borrowed $25.2 million cash from General Electric Capital Corporation (GECC) to purchase Haleko. The purchase price also included 200,000 shares of Weider’s Class A common stock and $8 million contingent upon future financial performance. In addition, Weider assumed $16 million of Haleko’s debt and estimated capital costs for the acquisition were about $5 million. Weider Nutrition planned to combine Haleko with its United Kingdom subsidiary, Weider Nutrition Group Ltd. Haleko recorded sales of about $65 million in 1998, which made it the largest sports nutrition company in Europe. The new acquisition manufactured powder, tablet, and capsule supplements—sold under such brand names as Multipower, Multaben, and Champ—to 20,000 European retail stores, and also marketed Venice Beach sportswear in European health clubs.

The 1998 major league baseball season helped boost sales of one Weider Nutrition product. St. Louis Cardinals slugger Mark McGwire in September of that year hit a new world record of 62 home runs. Some critics in the media commented on McGwire’s use of androstenedione (andro), a controversial nutritional supplement that reportedly helped build muscles by increasing the body’s production of testosterone. The Olympic games, the National Football League, professional tennis, and the National Collegiate Athletic Association had banned andró, but major league baseball had not. Still, the U.S. Food and Drug Administration had reported no harm from andró. Weider Nutrition had introduced Androstene, its brand of andró, seven months before McGuire broke the home run record. In any case, intense media coverage of McGuire helped Weider Nutrition double its andró sales in just two weeks after the andró story came out in late August 1998.

Weider Nutrition was just one of many supplement or herbal firms in Utah at this time. Some even referred to Utah’s Interstate 15 as the “herbal highway,” said Loren Israelsen, executive director of the Utah Natural Products Alliance, in the September 1998 Utah Business. “I think there are probably 40-50 companies.... It is growing dramatically here in Utah. In fact, Utah has been recognized in recent years as the (supplement) center in the United States.” Other Utah firms in this industry included Nature’s Sunshine, Nature’s Herbs, Nature’s Way, Nu Skin, USANA, and Nutraceutical.

Although press releases claimed that Weider Nutrition International was the “largest supplier of health, fitness and wellness products in the world,” other health products firms were reporting higher annual sales, including Nu Skin ($890.5 million in 1997), California-based Sunrider (estimated $700 million in 1998), and Nature’s Sunshine ($281 million in 1998). Weider also faced another large competitor with the merger of multilevel marketing firm Rexall Sundown with Twinlab. Still, with increased interest in achieving optimum health, particularly among the country’s baby-boom and older populations, Weider Nutrition seemed well-positioned to compete in the next century.