A burst of acquisitions in the fast-growing nutritional supplement sector highlights the strength of a niche where entrepreneurs are capitalizing on an aging population and increased consumer spending on health-care products.
“There are a lot of nutritional supplement companies in B.C. and we're all going to keep growing and growing and growing,” said Lorna Vanderhaeghe, whose Burnaby-based nutritional supplement company Lorna Vanderhaeghe Health Solutions Inc. (LVHS) was bought June 19 by Ontario vitamin-seller Jamieson Laboratories.
Jamieson was able to finance its transaction, which took place on the same day that New Jersey's International Vitamin Corp. bought California-based Adam Nutrition Inc., in part because it has new deep-pocketed owners. CCMP Capital Advisors LLC bought Jamieson in January for what was estimated to be more than $300 million.
“We needed to partner with somebody who had more resources – someone who was bigger,” Vanderhaeghe said. “So our acquisition was all about growth and getting to more people and expanding our market reach.”
All of LVHS's 27 employees will keep their jobs and manufacturing will continue to be done in Burnaby. The company ranked No. 43 on Profit magazine's list of the fastest-growing companies in Canada between 2008 and 2013, with a 1,427% increase in revenue.
That's more than twice the revenue growth that took place at Burnaby's nutritional supplement maker, Vega, whose sales jumped by 711% during the same time period, and which ranked No. 95 on the same list of fast-growing companies.
“I'm surprised that Vanderhaeghe sold,” Vega president Charles Chang told BIV. “She sold really early. She's not that big yet.”
Indeed, Vega's $100 million in 2013 revenue is more than 12 times that of LVHS. Chang's success stems largely from expansion in the U.S., where sales last year eclipsed those in Canada for the first time.
Chang is not the only one profiting from strong demand for protein powder, antioxidant shakes and other vitamin products in the U.S.
Research firm Packaged Facts estimated that Americans spent US$11.5 billion on those products in 2012 and that sales would top US$15.5 billion by 2017.
Expansion has been so brisk at Vega that Chang sold a 30% stake in the company three years ago to private equity firm VMG Partners, partly to diversify his holdings and partly to have some cash on hand if he needed to invest it in the business.
“Eventually we'll be several times bigger in the U.S. than we are in Canada,” said Chang, who is a former BIV Forty under 40 winner.
Other B.C. nutritional supplement sellers include two in Coquitlam, Prairie Naturals and Natural Factors, as well as Purica in Duncan.
Prairie Naturals generates about $32 million per year in sales and has been growing at a 10% clip annually.
“My revenue growth would be at such a rapid rate that I wouldn't be able to keep up with it if I went into mass stores,” said Prairie Naturals owner Robert Pierce. “I do a little bit with Thrifty Foods and with Pharmasave, but other than that I only sell to health food stores.”
Purica's sales are rising by about 6% per year and are now in the millions of dollars, according to its vice-president of business operations, Rod Sidoroff.
Last year, the company bought a 12,000-square-foot headquarters and moved out of 9,000 square feet of rented space, he added.
