This is the whey

We are approaching March and the time of year that many people abandon New Year resolutions. A Forbes poll showed that around 30% of those surveyed had abandoned theirs after just two months. However, Global Alpha’s company fitness drive continues as a small, dedicated band keeps up regular visits to the gym! Exercising is all well and good for your health, but the importance of nutrition also needs some focus.

Nutrition plays an essential role in sports and fitness. It helps optimize training outcomes, shortens recovery periods, minimizes the risk of injuries and ensures performance consistency. Many are aware of the importance of nutrition: how it supports a healthy and active lifestyle as well as boosting mental health. Consumption of fortified foods and beverages continues to increase among people wanting to supplement their diets with nutrients that not only boost the immune system but also improve their energy levels and health.

The global sports nutrition market is estimated to be worth USD40 billion. The United States is by far the largest sports nutrition market, with USD22.3 billion in sales and expected to grow at 4.6% a year through to 2027. Sports protein powder is the largest segment at USD21.1 billion and remains one of the fastest growing segments at 5.9%. Meal replacements is the second largest category, followed by non-protein products (e.g. pre-workout and amino acid supplements). Protein bars and the ready-to-drink category are both expected to grow around 5% a year.

Glanbia plc (GLB ID) is a recent addition to the International Strategy that is exposed to these trends. The origins of Glanbia are in Irish dairy farming; producing milk, butter and cheese. After many co-operatives were combined to form a larger entity, the company changed its name to Glanbia, which means “pure food” in Irish. Glanbia has since forayed into the sports nutrition market through their production of whey protein.

Why would a dairy company be an ideal candidate for whey protein nutrition?

Whey protein production starts when whey is separated from milk during cheese production. Liquid whey is filtered to remove fats and lactose. Protein concentrates typically have 70% to 85% protein content, while isolates are 90% or above due to more extensive filtering. Whey protein isolate is created by using additional filtering to attain a higher purity level. The primary benefit of whey protein is its quick absorption rate. This means it is ideal for post-workout recovery as it contains all the essential amino acids needed for muscle repair and growth. Once the qualities of whey became more well-known, it was an obvious opportunity for Glanbia to participate.

The company comprises three divisions – Glanbia Performance Nutrition, Glanbia Nutritionals, and cheese joint venture operations. Glanbia’s expertise is in protein nutrition, and they own the Optimum Nutrition brand, the leading sports nutrition brand in the world, and there is a strong complementary thread of protein nutrition expertise across both segments.

Glanbia Performance Nutrition division

Glanbia Performance Nutrition is a portfolio of leading brands in performance and lifestyle nutrition. Optimum Nutrition is part of that portfolio and is the leading sports nutrition brand in the world by sales. It was acquired in 2008 and has a reputation for high quality, innovative products across protein and energy using the very best ingredients and manufacturing processes. Optimum Nutrition consumers are typically highly engaged in the category, working out 80% more than the average buyer in the category. They are typically more affluent and spend more on sports nutrition products, seeing it as an “essential” spend.

Growth opportunities for Optimum Nutrition still exist in the United States, despite it being the most mature market, as household penetration remains below 5%. Unlike peers that have sales skewed to the United States, Glanbia is more global. It has scaled in ten markets, is present in another thirteen countries, and is among the category-share leaders in each geography. Glanbia’s international expansion strategy is measured. The buildout leverages local market resources until scale justifies a larger expansion, at which point Glanbia typically acquires local distribution capabilities and invests in local teams.

Glanbia Nutritionals division

Glanbia Nutritionals is a leading provider of customized premix solutions and whey protein isolate. Consumer interest in supplementation is growing and this division’s ingredient solutions improve the nutritional profile of the product through protein for powders, bars or beverages, or micro-nutrients to be included in vitamin and mineral pre-mix blends, powders, gummies, capsules or tablets. In addition to the health and fitness industry, this division serves the mainstream food and beverage industry via avenues such as infant nutrition, clinical nutrition, fresh dairy and yogurts.

Alongside these two divisions, Glanbia is also the number one supplier of American-style cheddar cheese.

Ready to refocus

It’s not always been blue skies for Glanbia, though. In 2018, Glanbia acquired SlimFast to expand the portfolio’s weight management products and bring scale to the ready-to-drink format. Since then, the weight management segment as whole has been under pressure as consumers reduce their consumption or migrate to nutrition brands not overtly associated with dieting. SlimFast faced a significant headwind in the decline of keto-oriented products when compared to another mainstream lifestyle brand such as Atkins which has developed an image as a “low carb” alternative. Glanbia is attempting to refocus SlimFast on core high-protein meal replacement shakes, in ready-to-drink and ready-to-mix formats. If this proves to be unsuccessful, existing shakes capacity can be re-positioned to support growth of Optimum Nutrition in a capacity-constrained market.

To summarize, the greater focus on healthy living and the mass appeal of protein and fortified foods should mean continued structural growth of sports nutrition and, as market-share leader, Glanbia gives us the desired exposure to this industry.