GNC 2012 Annual Report Download - page 14

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Table of Contents
remaining being single-sourced due to the uniqueness of the material. In 2011, 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 in December 1998 to open GNC franchise store-within-a-store locations. As of December 31, 2011,
we had 2,125 Rite Aid 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, 2011, Rite Aid had opened 975 of an additional 1,125 stores that Rite Aid has committed to open by December 31, 2014.
Products
We offer a wide range of high-quality nutritional supplements sold under our GNC proprietary brand names, including Mega Men®, Ultra Mega®, GNC
Total Lean, Pro Performance® and Pro Performance® AMP and under nationally recognized third-party brand names. We report our sales in four major
nutritional supplement categories: VMHS, sports nutrition, diet and other wellness. In addition, our retail sales offer an extensive mix of brands, including
over 1,800 SKUs across multiple categories and products. Through our online channels, GNC.com and LuckyVitamin.com, we offer additional SKUs to
online customers. This variety is designed to provide our customers with a vast selection of products to fit their specific needs and to generate a high number
of transactions with purchases from multiple product categories. Sales of our proprietary brands at our company-owned stores represented approximately 56%
of our net retail product revenues for the years ended 2011, 2010 and 2009. We have arrangements with our vendors to provide third-party products on an as
needed basis. We are not dependent on any one vendor for a material amount of our third-party products.
Consumers may purchase a GNC Gold Card in any U.S. GNC store or at GNC.com for $15.00. A Gold Card allows a consumer to save 20% on all store
and online purchases on the day the card is purchased and during the first seven days of every month for a year. Gold Card members also receive personalized
mailings and e-mails with product news, nutritional information, and exclusive offers.
Products are delivered to our retail stores through our distribution centers located in Leetsdale, Pennsylvania, Anderson, South Carolina and Phoenix,
Arizona. Our distribution centers support our company-owned stores as well as franchise stores and Rite Aid locations. Our distribution fleet delivers our
finished goods and third-party products through our distribution centers to our company-owned and domestic franchise stores on a weekly or biweekly basis
depending on the sales volume of the store. LuckyVitamin.com is supported by a new, separate distribution center in Leetsdale, Pennsylvania that began
operating in December 2011. Each of our distribution centers has a quality control department that monitors products received from our vendors to ensure
they meet our quality standards.
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