Growing “Organically” in the Vitamins Industry
How a West Palm Beach start up disrupted the $35 billion vitamins industry
“As the leader in Certified Organic and Non-GMO nutrition, Garden of Life’s mission to empower extraordinary health goes beyond offering some of the most effective nutritional supplements in the world. Garden of Life is also committed to transparency with one of the most traceable supply chains in the world, and is making significant investments in independent third-party testing and verification of its raw materials and innovative formulas.” – Garden of Life
The natural and organic movement has been the most significant game changer in the food and beverage industry over the past decade. In vitamins, minerals and supplements (“VMS”), the focus on ingredient traceability and “whole food” products has shifted consumers away from some of the larger incumbent players (Herbalife, GNC, Amway, and Nature’s Bounty) to differentiated brands that emphasize product certifications such as Non-GMO Project Verified and Certified USDA Organic.
Garden of Life, a leading brand sold in the health food channel in the U.S., has built a business model that effectively supports consumers’ desire to supplement their diets with vitamins, meal replacements, and protein powders which are potent, high quality, and organic. The success of the model speaks for itself: Garden of Life is now the #1 VMS brand at Whole Foods, Sprouts, and Amazon.com with total company revenue of nearly $250 million growing at a 30% CAGR over the past 5 years.
Playing in an overall nutritional supplements category that grows 4-6% per annum, Garden of Life’s consolidation of its position has been a product of its superior operating model and capabilities compared to its competition. Below are strategic imperatives that drove me to select Garden of Life for this post as I have been impressed by how these operating objectives have propelled the Company to grow ~5x faster than the market on a sustainable basis.
- Ideation and new product development: the Company’s rigorous process around new product introductions has been focused on bringing consumers novel formulations such as plant based proteins or dual certified Non-GMO / Certified USDA Organic multivitamins. Garden of Life launches products with the intent of being category killers and quickly works towards 30%+ share in that category. New products are always consistent with the brand’s DNA of using “raw” fruit and vegetable ingredients
- In line with the Company’s business model, Garden of Life cannot use typical flavors, sweeteners, colorings and preservatives in formulating products. This ingredient constraint on the ideation funnel has led to some of the Company’s greatest marketplace innovations relative to the competition who do not follow these principles
- Garden of Life has launched 23 #1 products in its 15 year existence (e.g. probiotics, multivitamins, protein powder)
- Sales force and consumer education: New product launches have been overwhelmingly successful due to Garden of Life’s sales force and in-store product specialists who educate retailers and consumers on ingredient benefits. Telling the story to consumers about an ingredient’s origins and quality drives the brand’s premium and differentiated position in the marketplace. Garden of Life will only sell to a retailer who has an in-store specialist available to consumers. The Company has therefore stayed away from conventional retail channels such as Wal-Mart and Target due to the inability to communicate product attributes to consumers
- Many brands in the industry have failed in trying to move from specialty channels (e.g. independent health food stores, Whole Foods) to food, drug and mass retailers in pursuit of larger volumes
- Supply chain: At the core of Garden of Life’s strategy is their differentiated supply chain. Access to raw materials that are Certified USDA Organic/Non-GMO Project Verified is becoming increasingly challenging as demand for produce from these growers increases. Garden of Life has established multi-year agreements with vendors and farms to lock in supply at prices well below the competition due to the company’s scale in the specialty channel. Furthermore, Garden of Life is vertically integrated from a manufacturing standpoint (whereas most of the competition relies on contract manufacturers for blending and tableting) which further solidifies the brand’s cost advantage and formulation expertise
- Consumer engagement: Garden of Life has invested heavily in social media platforms such as Facebook, Twitter, and Instagram to create a community for its consumers to discuss everything from protein shake recipes to marathon training regimens. Consumer engagement and brand advocacy is best in class for the industry (ranked by net promoter scores)
- Channel partnership: Garden of Life has become the category captain of vitamins and nutritional supplements at national retailers such as Whole Foods. By granting channel exclusivity to specialty grocers such as Whole Foods and Sprouts, the company receives optimal shelf placements and strong receptivity on new product launches
In evaluating the success of Garden of Life, I believe it’s the combination of all the above operating strategies that has enabled the brand to capture its dominant position in a highly competitive and commoditized consumer category.
- Garden of Life, company documents.
- Nutrition Business Journal, 2014.
- A.T. Kearney market study, 2014.
- SPINS data, 2015.
- Conversations with company management over period from 2013 – 2015.
Student comments on Growing “Organically” in the Vitamins Industry
Fascinating, thank you Daniel. The non-GMO and organic labels hold a lot of weight with consumers today. How does the company think about the cost of maintaining these labels and the benefit in additional purchases from consumers?