UK sports nutrition business Applied Nutrition finds itself at the centre of a hot category but, when it comes to growth plans, it is taking a different approach to many of its domestic peers, favouring B2B and tackling overseas markets.
With the backing of a major sports retailer – JD Sports – and US listings in the likes of Walmart, the company appears to be well positioned to take advantage of the post-Covid interest in health and wellness.
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Applied Nutrition could also benefit from recent developments in the category. Sports nutrition has started to forge its own space on supermarket shelves and grocers themselves are building product sets to tap into a consumer desire to buy bars, drinks or supplements offering a protein or carbohydrate boost.
The group, best known for brands BodyFuel and ABE – All Black Everything – is playing down recent rumours of a £1bn ($1.26bn) flotation and prefers not to talk sales targets but it has big plans in a global category CEO and co-founder Tom Ryder points out was worth $21bn in 2022 and is expected to grow to $52.5bn by 2032.
Just Food: Applied Nutrition has recently won new listings with Tesco and Costco and your products are already stocked by the likes of Asda and Walmart. Why is grocery retail so important to your growth strategy?
Tom Ryder: Everyone has become more health conscious. Covid spiked that. Grocers are growing their sets out. It shows the category is growing quickly and growing shelf space and they want a piece of it. They have carved out a space for sports nutrition. There is a category bias now for it. As in the US, a lot of consumers are migrating from the speciality stores to the grocers. It’s good for the entry-level consumer who may give it a go and then move on to more specialist areas.
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Just Food: But many of your peers focus on direct sales rather than competing with supermarket own brands?
Ryder: A lot of our competitors try to remove all intermediaries and go straight to the consumer. We’ve never been D2C-focused but, over the last few years, we’ve got a bit of a feel for it, using Amazon etc. But B2B is still 85% of our business.
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By GlobalDataJust Food: Also, unlike a lot of your peers, Applied Nutrition has a focus on exports, selling products in 65 countries and establishing a US operation. What’s your thinking there?
Ryder: We’re putting a lot of emphasis on exports and not many UK sports nutrition brands are doing that. Countries are looking to the UK as a trusted brand. Our US operation started trading in 2023. We took time to understand the import process into the US and the labour laws. It’s never been done. Lots of brands have tried to get into the US and it has not worked for them. We managed to get listings with the likes of Walmart and partnered with a national distributor. Getting the Walmart deal was huge. They don’t have any other non-US sports nutrition brands. It’s a very difficult market but it accounts for about 50% of global supplement sales.
Just Food: Why are UK sports nutrition brands trusted worldwide?
Ryder: When I started out, it was mainly US brands. They were the pioneers of sports nutrition. The EU and UK started to follow but the US brands could do what they liked whereas within the EU there was a lot more compliance. Over time, people started to shift to UK brands. Even after the UK exited the EU, the UK maintained that level of compliance on things like ingredients and dosages. Back in the early days, some of the US product claims were ludicrous.
Just Food: About muscle gain and such like?
Ryder: Yes and as a retailer I was uneasy about some of these label claims.
Just Food: You had a retail business?
Ryder: Yes. I’d been involved in supplements since leaving school. I was a gym goer. I opened a store when I was 18 and it has grown from there. I started wholesaling a bit, selling products on. Back in those days, sports nutrition products were mainly used by bodybuilders. I wasn’t really interested in that but I always thought there was a wider market for sports nutrition.
Just Food: How did you go from there to running a business that now employs 200 people?
Ryder: I started Applied Nutrition in 2014. At the time it was already a small brand I was stocking but it was in decline. Critical Mass was their main product but it was marketed wrong. I took over the brand and started fresh, knuckled down with rebranding and redevelopment, moved production to a new manufacturer in Belgium and worked with them on product development.
I had no idea about branding etc. I was learning on the job. In early 2016, we made the decision to put in our own manufacturing facility as the pound was dropping against the euro and we were being caught out on the exchange rate. We made room for manufacturing in my warehouse and these were my first employees. This taught me how to take a product to market. It gave me a lot of insight, taking it in-house. In those days it was mainly selling through the speciality stores I had a relationship with. It grew organically. We didn’t have a lot of money and everything went back into product development.
Just Food: Is that unusual in sports nutrition, doing your own manufacturing?
Ryder: It’s not the norm. Very few brands manufacture the products themselves.
Just Food: In 2021, UK leisure retailer JD Sports took a stake of just under a third in Applied Nutrition. How has that worked out?
Ryder: They are a great investment partner. The structure they have is immense. They never push but we can tap into it when we need to. It’s relevant because they are in the leisure world which is not a million miles away from us. And in terms of credibility as a partner it is huge.
Just Food: And more recently you appointed Andy Bell, founder of Manchester investment group AJ Bell as chairman. What does he bring to the party?
Ryder: He’s someone who can bring good stability to our board. He’s well-respected and an all-rounder.
Just Food: In February, Sky News reported that Applied Nutrition was planning a £1bn flotation. You didn’t comment then. Is it still a ‘no comment’ now?
Ryder: We are just looking at options. I would be very pressed to say we are leaning in any particular way.
Just Food: Obviously, given the market size numbers you have quoted, sports nutrition is a hot category at the moment. But, presumably, you have faced the same supply chain inflation pressures as mainstream food companies and have had to look at taking action on pricing?
Ryder: Some ingredients have been volatile. The protein isolate price reached a new high before coming down. But we have managed to navigate our way through. Consumer habits change but they never stop buying sports nutrition.
Just Food: Where do you see future growth coming from, moving into adjacent categories or expanding in plant-based protein perhaps?
Ryder: Categories and new product development is key for us. It’s where we see growth. We see us playing in all areas. We offer everything. Plant-based and vegan products over the last 12 months have been in decline. It’s scaling backwards but there is a market for it.
JF: And opportunities in white-label given the growth of supermarket own-brand sports nutrition products?
Ryder: We offer a little bit. We turn a lot down but we are in discussions. When we can see a meaningful relationship, we engage.
