GNC 2008 Annual Report Download - page 15

Table of Contents
Wholesale
Store-Within-a-Store Locations
To increase brand awareness and promote access to customers who may not frequent specialty nutrition stores, we entered into a
strategic alliance with Rite Aid to open GNC store-within-a-store locations. As of December 31, 2007, we had 1,358 store-within-a-store
locations. Through this strategic alliance, we generate revenues from sales to Rite Aid of our products at wholesale prices, the manufacture of
Rite Aid private label products, retail sales of certain consigned inventory and license fees. We are Rite Aid's sole supplier for the
PharmAssure® vitamin brand and a number of Rite Aid private label supplements. In the third quarter of 2007, we extended our alliance with
Rite Aid through 2014 with a five year option. At December 31, 2007, Rite Aid had opened 140 stores of 1,125 additional stores that Rite Aid
has committed to open by December 31, 2014.
Distribution Agreement with drugstore.com
We have an internet distribution agreement with drugstore.com, inc. with an initial term through June 2009. Through this strategic
alliance, drugstore.com was the exclusive internet retailer of our proprietary products, the PharmAssure vitamin brand, and certain other
nutritional supplements until June 2005, when this exclusive relationship terminated. This alliance allows us to access a larger base of
customers, who may not otherwise live close to, or have the time to visit, a GNC store and provides an internet distribution channel in addition
to www.gnc.com. We generate revenues from the distribution agreement with drugstore.com through sales of our proprietary and third-party
products on a wholesale basis and through retail sales of certain other products on a consignment basis.
Employees
As of December 31, 2007, we had a total of 5,158 full-time and 8,081 part-time employees, of whom approximately 10,753 were
employed in our Retail segment; 33 were employed in our Franchise segment; 1,307 were employed in our Manufacturing/Wholesale segment;
475 were employed in corporate support functions; and 671 were employed in Canada. None of our employees belongs to a union or is a party
to any collective bargaining or similar agreement. We consider our relationships with our employees to be good.
Competition
The U.S. nutritional supplements retail industry is a large, highly fragmented, and growing industry, with no single industry participant
accounting for a majority of total industry retail sales. Competition is based primarily on price, quality, and assortment of products, customer
service, marketing support, and availability of new products. In addition, the market is highly sensitive to the introduction of new products.
We compete with publicly owned and privately owned companies, which are highly fragmented in terms of geographical market coverage
and product categories. We compete with other specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing
organizations, mail-order companies, other internet sites, and a variety of other smaller participants. In addition, we believe that the market is
highly sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of the
market. In the United States, we compete with supermarkets, drugstores, and mass merchants with heavily advertised national brands
manufactured by large pharmaceutical and food companies and other retailers. Most supermarkets, drugstores, and mass merchants have
narrow product offerings limited primarily to simple vitamins and herbs and popular third-party
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