GNC 2011 Annual Report Download - page 18

Table of Contents
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. We believe that the market is highly sensitive to the introduction of new products. In the United
States, many of our competitors have national brands that are heavily advertised and are 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, herbs and popular third-
party diet products. Our international competitors also include large international pharmacy chains and major international supermarket chains as well as other
large U.S.-based companies with international operations. Our wholesale and manufacturing operations also compete with other wholesalers and
manufacturers of third-party nutritional supplements.
Trademarks and Other Intellectual Property
We believe trademark protection is particularly important to the maintenance of the recognized brand names under which we market our products. We
own or have rights to material trademarks or trade names that we use in conjunction with the sale of our products, including the GNC brand name. We also
rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We
protect our intellectual property rights through a variety of methods, including trademark, patent and trade secret laws, as well as confidentiality agreements
and proprietary information agreements with vendors, employees, consultants and others who have access to our proprietary information. Protection of our
intellectual property often affords us the opportunity to enhance our position in the marketplace by precluding our competitors from using or otherwise
exploiting our technology and brands. We are also a party to several intellectual property license agreements relating to certain of our products. For example,
we are a party to license agreements entered into in connection with the Numico acquisition pursuant to which we license certain patent rights to Numico and
Numico licenses to us specific patent rights and proprietary information. These license agreements generally continue until the expiration of the licensed
patent, if applicable, or we elect to terminate the agreement, or upon the mutual consent of the parties. The patents we own generally have a term of 20 years
from their filing date, although none of our owned or licensed patents are currently associated with a material portion of our business. The duration of our
trademark registrations is generally 10, 15 or 20 years, depending on the country in which the marks are registered, and the registrations can be renewed by
us. The scope and duration of our intellectual property protection varies throughout the world by jurisdiction and by individual product.
Insurance and Risk Management
We purchase insurance to cover standard risks in the nutritional supplements industry, including policies to cover general products liability, workers'
compensation, auto liability and other casualty and property risks. Our insurance rates are dependent upon our safety record as well as trends in the insurance
industry. We also maintain workers' compensation insurance and auto insurance policies that are retrospective in that the cost per year will vary depending on
the frequency and severity of claims in the policy year. Prior to the Numico acquisition, we were
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