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One Big Idea: Rebranding GNC, A Recipe for Gains?

January 25, 2017

Reeling from struggling earnings and loss of market share, GNC announced a “One New GNC” rebranding initiative, will it be enough to pull the brand out of its slump? If you like our podcast, please subscribe and leave us a rating!

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Bill Gullan: Greetings one and all. This is Real-World Branding. I’m Bill Gullan, your host an President of Finch Brands, a premier boutique branding agency. We were very happy to have you, and this is a fun time of year in our industry. There’s a lot happening in terms of new initiatives that clients and others are launching in advance of what they hope is a great year, and also one of the major rituals that brings about a lot of focus on brands and on marketing is the Super Bowl.

Word came down a couple weeks ago, I think, and actually the meat of this was happening between the Christmas and New Year holidays, was GNC, the major, I think they have 9000 stores worldwide or something big like that, maybe 4000 in the US, was going through and really put together an initiative geared toward a rebirth, bringing that chain out of the graveyard, and that may be an overstatement, a little bit reductive, but they’d had some trouble.

GNC’s been in financial trouble, perceptual trouble, and everything else for really 18 months or more, so it was long overdue for management and others to think about what GNC means in today’s commercial landscape, and how the company and the brand can regain some of the momentum that it had for many years before. So, they launched this new initiative. I think it was called “One New GNC” and it included a major store redesign. In fact, I think the entire, at least US store base, closed for a 24 hour period at the end of December to change over from old look to new look.

It also included a revamped loyalty program, and thankfully, an end to the practice of having different prices online and in store. A lot of changes and we know that these will be heralded, we hear at least, through a Super Bowl ad, the first in the company’s history that will design to bring to that huge audience word of the fact that their GNC experience is new and that folks ought to come back and give it a shot. I remember when Domino’s did that a couple of years ago. That’s worked, and we’ll get to that in a minute, but here we are with GNC and there’s a couple of questions that this raises from my perspective.

First of all, every couple years, it seems like a major brand – and Domino’s was one example, J.C. Penney is another example – goes through a spurt of big thinking that is designed to really transform a company in a category. Sometimes they work and sometimes they don’t, but the questions I have related to what GNC is doing is first of all, are they focusing on the right things?

There’s no question that the areas that GNC is addressing are areas in which it has fallen behind. The loyalty program previously was this weird thing – you get triple points on this day and double points on this day, and there were different levels. It was very hard to understand, particularly for a consumer that has been educated to expect, at least at mass interest retail, you get a loyalty card, you get a discount on certain products, you amass points that you can then spend or whatever the case may be.

GNC’s was very complicated. They’re focusing on bringing more technology to the store experience, so that’s good. They want to win back consumers that the company lost to other channels, but the question is does the world need a 9000 unit specialty vitamin supplement store? Its highest interest categories are widely available – they faced and one of the factors most seem to credit to their decline is tremendous competition – online and off, across food, drug and mass, including Amazon, of the basic categories, the vitamins and other things, whey protein that GNC made its name on.

I mean, GNC does have a vibrant private label program with I think it’s Mega Man and other brands that you can only get there, but the sense of their proprietary product excellence, I think it waned considerably. The fact that you could get good or better deals on what the marketplace thinks are very similar items in a variety of different channels. So, the question really is are they focusing on the right things and are they doing enough here that’ll really reverse the marketplace’s … I don’t think there’s hatred for GNC in the marketplace, but there’s a, ‘Meh, this brand isn’t current, relevant, necessary,’ and I’m not sure whether at least these first initiatives are really enough to address the downward trajectory that the brand has been on.

Secondly, and J. C. Penney certainly brings this up is will there be unintended consequences? We remember a few years back when Ron Johnson I think, the new CEO that came from Apple, at J. C. Penney, had a major initiative to really reinvigorate the retailer, and there were a lot of really interesting things. It was going to move more into a bazaar, a store within a store concept. It was going to be really interesting on the store design perspective, etc. But one of the things that led to this really flaming out quickly and the board having to respond, and to what the plan was, was that the company changed without much warning to its couponing structure. The company at J. C. Penney at least had really convinced and educated their marketplace to respond to a particular promotional approach.

While the vitamin/supplement category is large and mature, GNC’s position is volatile given this competitive dynamic, so the previous loyalty program was a strange concoction. It was, as noted, based on discounts, certain days, etc. The new iteration is much simpler, it makes much more sense, but there are some consumers, their core market, who are still big GNC customers who have been educated by GNC to shop a certain way, and now that’s changing, and how are they going to react when their patience or discipline or just basically the rituals that they’ve created around that loyalty program, when those are gone or rewarded differently?

J. C. Penney’s coupon clippers rebelled several years ago and it led to overthrow of the CEO and the company basically in a scared way saying, ‘Okay, okay, okay, we’re going to back to where we were.’ I’m not sure whether these unintended consequences will also befall GNC. I think there’s a strong likelihood that they will, because this is a struggling brand, but a big brand nonetheless and there’s millions of people who’ve been educated to shop a certain way and now they’re being told to shop differently, and we’ll see whether that takes hold.

Thirdly, just the fundamental question, is GNC a brand for this moment in our culture and in our commercial life? We noted that the category that they serve is large and mature. They may not be growing very fast, but there’s billions of dollars of business to be won and to be expanded upon in vitamins and supplements, but GNC is facing competitive pressures like never before, so in addition to the food, drug, and mass, there’s a ton of direct businesses that have proprietary approaches and really unique, or at least marketed as unique kind of product offerings.

The company, GNC, has stood for engineered nutrition, yet the data suggests that many consumers are heavily scrutinizing ingredient panels. They’re very skeptical of synthetic processes. So, in short, GNC’s still selling the power of science while the consumer culture seems to be all about the simplicity of nature. There’s a real question as to whether or not those eccentric rhythms of what consumers define as healthy accommodate GNC’s historic brand definition of what it means. Now, a ton of vitamins and supplements are always going to be bought, so it isn’t about the industry or the category going away. It’s about whether or not GNC can grow within it.

My three questions here, and they’re critical questions, is one, is GNC focusing on the right things? Is it a big enough change to right the ship? Two, are there unintended consequences that will compromise their efforts? Then three is, is GNC really just a brand for now? 9000 stores worldwide, 4000 in the US, and is that the right size of a business here that is facing crosswinds both of their making and not of their making? As noted, every so often this major company shifts direction. Sometimes the changes are too big, too fast, like J. C. Penney. Sometimes they get it right.

We mentioned at the beginning that Domino’s offered a multifaceted initiative that touched the product, it touched the promotion, and it touched the marketing, and Domino’s has had a tremendous resurgence. Sometimes the changes aren’t big or deep enough, and Sears and their many false starts is an example of this.

My fear is that GNC might at least at present, and it’s very early, my fear is that they may be falling into that category of changes that are welcome but not fundamental enough to reorient the trajectory of the brand and the business. As always, it’s very easy for me to sit here and sound off without either the dataset to illuminate these opinions, nor the responsibility to execute.

The management team in Pittsburgh is there, they’ve had their heads down, studying the business, talking to consumers, and so they deserve a chance to see what happens here. Yet, my sense is that GNC plan is more cosmetic and the issues are more fundamental. The CEO of GNC admits that the model is ‘badly broken.’ I’m not sure this ultimately is a big enough fix for a retailer with fundamental problems.

So, we’ll leave it right there. That’s One Big Idea for this week. We’re so glad that you’re with us, and we’ll sign off from the Cradle of Liberty.

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