GNC 2011 Annual Report Download - page 17

Table of Contents
States, one in Greenville, South Carolina and one in Anderson, South Carolina. We utilize our plants primarily for the production of proprietary products. Our
manufacturing operations are designed to allow low-cost production of a variety of products of different quantities, sizes and packaging configurations while
maintaining strict levels of quality control. Our manufacturing procedures are designed to promote consistency and quality in our finished goods. We conduct
sample testing on raw materials and finished products, including weight, purity and micro bacterial testing. Our manufacturing facilities also service our
wholesale operations, including the manufacture and supply of Rite Aid private label products for distribution to Rite Aid locations and proprietary products
for distribution to PetSmart locations. We use our available capacity at these facilities to produce products for sale to third-party customers.
The principal raw materials used in the manufacturing process are natural and synthetic vitamins, herbs, minerals and gelatin. We maintain multiple
sources for the majority of our raw materials, with the remaining being single-sourced due to the uniqueness of the material. During 2010, no one vendor
supplied more than 10% of our raw materials. Our distribution fleet delivers raw materials and components to our manufacturing facilities and also delivers
our finished goods and third-party products to our distribution centers.
Wholesale
Franchise 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 franchise store-within-a-store locations. As of December 31, 2010, we had 2,003 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 May 2007, we extended our alliance with Rite Aid through 2014 with a five year option. At
December 31, 2010, Rite Aid had opened 848 of an additional 1,125 stores that Rite Aid has committed to open by December 31, 2014.
Distribution Agreement with drugstore.com. Our current internet distribution agreement with drugstore.com, inc. was recently renewed through June
2013. Through this strategic alliance, www.drugstore.com was the exclusive internet retailer of our proprietary products and certain other nutritional
supplements until June 2005, when this exclusive relationship was terminated. This continued 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 GNC.com. We generate
revenues from the distribution agreement with drugstore.com, inc. through sales of third-party products on a wholesale basis and through retail sales of our
proprietary products on a consignment basis.
Employees
As of December 31, 2010, we had a total of 5,308 full-time and 7,778 part-time employees, of whom approximately 10,484 were employed in the
domestic portion of our Retail segment; 39 were employed in our Franchise segment; 1,343 were employed in our Manufacturing/Wholesale segment; 487
were employed in corporate support functions; and 733 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.
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