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Rapid Nutrition’s deal with major US nutrition supplement retailer GNC is a harbinger of greater things to come

Rapid Nutrition is tapping into a potentially huge market

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A selection from Rapid Nutrition's product range

“We have a five year exclusive deal with GNC,” says Simon St Ledger of Rapid Nutrition PLC (SIX:RAP).

For those not in the know, GNC, otherwise known as General Nutrition Corporation Holdings (NYSE:GNC), is one of the world’s leading retailers of nutritional supplements.

WATCH: Rapid Nutrition is moving from licensing model to a distribution model

It’s almost 30 times the size of Rapid Nutrition in terms of market capitalisation, and boasts a significant footprint of stores across the US.

But both companies recognise that as far as global markets are concerned, they are only beginning to scratch the surface.

Nutritional supplements can serve a variety of purposes, but one of them is what is euphemistically termed by analysts as “weight management.”

Rapid’s house broker Hybridan notes that Grand View Research, Inc expects the global weight management market to have more than doubled its 2016 value to over US$442bn by the end of 2025.

This growth is what underpins high double digit price/earnings multiples in the sector, and private deals involving Rapid’s peers have seen take out multiples of over 5x. The company continues to explore the possibility of also listing its ordinary shares on a UK stock exchange.

The US will be key to this growth, and trends towards combatting obesity across the western world will also play a part. But another crucial area of growth will be in East Asia and China in particular.

“It’s a massive market,” say St Ledger.

GNC deal ideal platform

And Rapid Nutrition aims to address it in as broad a manner as possible. It has a suite of products based around its proprietary brand Leisa’s Secret. These include System LS, which St Ledger describes as the company’s flagship, and which is sold under a marketing message that involves healthy nutrition for people with busy active lives.

“We target the mass market,” says St Ledger. “The everyday mum and dad.”

The GNC deal is the latest step on a path to growth that will involve Rapid Nutrition expanding its distribution, developing more products, and increasing brand penetration.

The GNC deal is an ideal platform on which to base this growth. Under the terms of the deal, Rapid Nutrition will gain access for its products to GNC’s network of 7,000-plus stores in the USA. It will also have the rights to distribute and market GNC products in Australia, while in the UK, market penetration will be directly undertaken by Rapid itself.

And, although it’s early days, the numbers are already reflecting this growth potential. In 2017, Rapid Nutrition’s revenues grew by 30%.

And for 2018, St Ledger says the company’s revenues are “tracking well.”

There should be a further significant boost when the effects of the GNC deal start flowing through, and the penetration into China starts to gain real traction.

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