GNC 2012 Annual Report Download - page 16

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 brand products suitable for different diet and weight management approaches, including 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 2011, company-owned retail sales from diet
products accounted for approximately 10% of sales, down significantly from 27% of sales in 2001. Overall, we estimate that GNC-branded proprietary
products constituted approximately 31% of our diet product sales in 2011.
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, DVDs and equipment.
Product Development
We 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 for proprietary GNC-branded products. Average
development time for products is four to seven months, or six to 18 months when development involves clinical trials. 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. In 2011, 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 Total LeanTM, Sport Vitapaks and Beyond Raw®. In 2011, we estimate that GNC-branded products generated more than $975 million of retail sales
across company-owned retail, domestic franchise locations, GNC.com and Rite Aid store-within-a-store locations.
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.
Employees
As of December 31, 2011, we had approximately 5,800 full-time and 8,000 part-time employees, of whom approximately 11,000 were employed in the
domestic portion of our Retail segment, 40 were employed in our Franchise segment, 1,550 were employed in our Manufacturing/Wholesale segment, 525
were employed in corporate support functions, 750 were employed in Canada and 75 were employed at
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