The Bountiful Company IPO (BTFL)
The Bountiful Company has filed its S-1 and is seeking an IPO. The Bountiful Company is a “pure-play branded leader in the desirable and growing global nutrition category.” The Bountiful Company was formerly known as Nature’s Bounty (a leading vitamin manufacturer and retailer), which went private in 2010. When it was private, the Bountiful Company was carved out from private, retail, and contract manufacturing businesses. The company’s main brands include Nature’s Bounty, Solgar, Osteo Bi-Flex, Pure Protein, and Puritan’s Pride. Revenue grew 10% to $2.07B last year. The company is seeking a $6B valuation.
- The North American nutrition market has grown at a 6% CAGR since 2006 and is expected to continue at a 6% growth rate through 2024.
- China is the low-cost producer for the majority of ingredients used in vitamins.
- The manufacturing of vitamins is complex and requires technical skills, much like pharmaceuticals.
- The vitamin business is “hit-driven.” There are frequent trend changes in vitamins where consumers purchase a particular vitamin for a couple of years. There are also frequent “bad press” events where consumers hear of a negative connotation about a vitamin, and demand drops suddenly.
- Vitamins are a competitive industry with 25% of retail sales through the mass channel. 32% of retail sales are through natural and specialty stores that have the channel power.
- Niche/private brands still represent 34% of sales and 19% of gross profit.
Our initial reaction to the filing is that while we are attracted to the vitamin category’s steady growth, having too much leverage would make us wary of recommending the shares. We would look to be more positive if there was an upcoming “hit product” in the wings.
March CPI is driven by food and energy increases (KR)
The CPI increased 2.6% in the year ended March, a steep acceleration from 1.7% in February. The CPI rose a seasonally adjusted 0.6% from February. The March CPI for food and beverages increased 3.4%, a 10bps deceleration from February. Food at home CPI increased 3.3% but decelerated 30bps from February. Food away from home CPI increased 3.7%, flat from February. The differential between food at home and away from home widened an additional 20bps to -0.4%, as seen in the chart below. The increase for alcoholic beverages remained flat sequentially at 2.0% in March. Inflationary pressures from higher row crop prices will increase this year. In the near term, the CPI for food is decelerating against large comparisons last year. Stimulus checks could have an insulating effect on consumers’ food budgets.
Amazon’s CPG private-label growth (HNST)
Amazon (covered by Brian McGough) is expanding its own-brand grocery line-up with Aplenty. The grocery and snacking brand will be sold online and in Amazon Fresh stores. Aplenty is set to roll out hundreds of more products across the center store over the next year, focusing on natural ingredients and flavors. Aplenty will join Amazon’s growing stable of private label brands, including Happy Belly, Wag, Amazon Basics, and Wickedly Prime. In 2017 Amazon had 30 private label brands and now has over 100. Amazon has stated that private label sales represent about 1% of total sales. According to Jeff Bezos’ July 29th hearing with Congress in the consumables category, private label represented 2% of sales while in home and kitchen it represented 4% of sales. Amazon has had notable success with some private label product categories like batteries. 90% of the batteries sold on Amazon.com are AmazonBasics, according to 1010data. In baby wipes, Amazon’s Elements brand is third (notable for Honest Company that just filed to go public). Amazon's success in batteries and baby wipes could be a bad omen for the other categories it is entering.
