Rite Aid and GNC Earmark $9 Million to Sell Nutrition Online

Rite Aid (NYSE, PSE: RAD) and General Nutrition Companies (Nasdaq: GNCI) announced plans Thursday to develop a co-branded online store, selling nutrition and dietary supplements. With a full $9 million (US) earmarked for advertising and marketing the site, the companies clearly hope to compete with the new online drugstore announced earlier this week by AOL in partnership with PlanetRx, and other pharmacies like CVS that already offer online ordering for prescription refills.

While GNC currently offers online shopping for vitamins and other nutritional supplements, the new co-branded store appears to be Rite Aid’s first venture into the world of e-commerce.

The new site (www.gnc.riteaid.com), which is slated to open in October, will enable consumers to purchase over-the-counter drugs, personal care products, and the complete range of vitamins and nutritional supplements that are currently available in GNC and Rite Aid retail outlets. Customers will also be able to use the site to fill existing prescriptions.

The companies will share fulfillment costs for online orders, and expect to leverage their existing warehouse infrastructure to make distribution highly cost effective.

Plans for the new e-commerce site were announced by Rite Aid and GNC on Thursday, as part of a larger announcement regarding their new strategic alliance. Wall Street responded favorably to the news, with Rite Aid’s stock achieving a 52-week high of 50.68, when the announcement was made yesterday.

Leveraging a Growing Market

Rite Aid and GNC hope to continue to cash in on the market for nutritional supplements, which they say is significant and growing. According to their estimates, Americans spent more than $8 billion in 1998 on vitamins and nutritional supplements. That amount has been growing at approximately 12% per year.

“Self care is an information driven category,” explains Greg Horn, GNC’s chief operating officer and executive vice president of marketing. “Consumers who want to take responsibility for their own health needs tend to do their own research. These proactive customers love the convenience of researching information on the Internet.”

The GNC/Rite Aid online store will feature a ‘Natural Pharmacy’ database of vitamin, mineral and herbal information, plus consultative information from Rite Aid pharmacists. Consumers will be able to use this information to take immediate action by purchasing the products they want online.

Company Backgrounds

Rite Aid is one of the largest drugstore chains in the U.S., with annual revenues of more than $12 billion and approximately 3,900 stores in 30 states. Based in Camp Hill, Pennsylvania, the company fills more than 225 million prescriptions each year, accounting for more than $6 billion in drug expenditures.

Based in Pittsburgh, Pennsylvania, General Nutrition Companies, Inc. (GNC) is a leading retailer of vitamin and mineral supplements, sports nutrition and herbal products. The company’s products are sold through nearly 4,000 retail stores across the U.S., and in 23 countries worldwide.

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