GNC 2011 Annual Report Download - page 13

Table of Contents
Diet Products
Our wide variety of diet products consist of various formulas designed to supplement the diet and exercise plans of weight conscious consumers. We
typically offer a variety of diet products, including pills, meal replacements, shakes, diet bars, energy tablets and cleansing products. Our retail stores offer our
proprietary and third-party products suitable for different diet and weight management approaches, and products designed to increase thermogenesis (a change
in the body's metabolic rate measured in terms of calories) and metabolism.
The diet category is cyclical with new products generating short-term sales growth before generally declining over time, making sales trends within this
category less predictable than in our other product categories. We derive the majority of our diet sales from third-party products. Our GNC proprietary line,
Total Lean, is more focused on meal replacement and represents a more stable line of business. Over time, we have reduced our exposure to the diet category.
In 2010, company-owned retail sales from diet products accounted for 10% of sales, down significantly from 27% of sales in 2001.
Other Wellness Products
Other wellness products represent a comprehensive category that consists of sales of our Gold Card preferred membership and sales of other
nonsupplement products, including cosmetics, food items, health management products, books and DVDs.
Product Development
We strongly believe that introduction of innovative, high quality, clinically proven, superior performing products is a key driver of our business.
Customers widely credit us as being a leader in offering premium health products and rate the availability of a wide variety of products as one of our biggest
strengths. We identify shifting consumer trends through market research and through interactions with our customers and leading industry vendors to assist in
the development, manufacturing and marketing of our new products. Our dedicated innovation team independently drives the development of proprietary
products by collaborating with vendors to provide raw materials, clinical and product development support for proprietary GNC-branded products. We also
work with our vendors to ensure a steady flow of third-party products with preferred distribution rights are made available to us for a limited period of time.
During 2010 and 2009, we targeted our product development efforts on specialty vitamins, women's nutrition, sports nutrition and condition specific products,
resulting in the introduction of the GNC WELLbeING®, Pro Performance® AMP and Longevity Factors lines.
Research and Development
We have an internal research and development group that performs scientific research on potential new products and enhancements to existing products,
in part to assist our product development team in creating new products, and in part to support claims that may be made as to the purpose and function of the
product. See Note 2, "Basis of Presentation and Summary of Significant Accounting Policies," to our consolidated financial statements included in this report.
Segments
We generate revenues from our three segments, Retail, Franchise, and Manufacturing/Wholesale. The following chart outlines our segments and the
historical contribution to our consolidated revenues by those segments, after intercompany eliminations. For a description of operating income (loss) by
segment, our total assets by segment, total revenues by geographic
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