Essay: Disposal of Royal Numico

Sample Essay

Words 1,325

Dutch conglomerate and specialty foods company Royal Numico announced that it will sell Rexall Sundown, the largest supplier of vitamins and supplements to Wal-Mart stores. Numico blamed Rexall Sundown, which it acquired in 2000 for $1.8 billion, and GNC, the supplement retail operation it acquired in 1999, for the conglomerate’s $1.45 billion third-quarter loss.” (Slumping Supplement 2002) Although the analysis of the strategy presented that although there were risks the acquisition would be suceeful. This shows that even a environment analysis cannot show what the future might hold but it can be a good predictor. According to Rooji’s observations the dietary supplement posed all the challenges he predicted.

The acquisition did not accomplish any of the company’s goals and instead they ended up in a loss.According to the case study “During the presentation of the financial results for 2002 in March 2003, Numico announced that the sale of Rexall Sundown was well under way. Rexall Sundown was characterized as a low-growth/low-margin business. Given the new strategy which focused on high-growth-high-margin business, Rexall Sundown no longer fitter both the criteria. GNC was put on probation; it was a high-margin, but a low-growth business.” (Eppink 731) Along with Rexall Sundown, GNC also became stagnant. Either that or none of their current acquisitions were in line with their new strategy of high growth and high margin.

This was understandable in the case of Rexall Sundown because it posed many risky challenges to begin with. The dietary supplements were highly dependant on fads and stability was very hard. Surprisingly, “In July 2000 FTC charged Rexall Sundown with making false and unsubstantiated claims for its Cellasene product as a purported cellulite treatment. In March 2002 a Camden County jury returned a verdict in favor of New Jersey consumers in a class-action that alleged Rexall Sundown had marketed and labeled its Calcium ‘900’ and Calcium 1200 products in violation of the New Jersey Consumer Fraud Act.” (Slumping Supplement 2002) This unfortunately might have been one of the reasons Rexall Sundown was not doing well and Numico found out. Even if Numico was not aware of the infringement of the law it was best that they got rid of Rexall Sundown before they got into further debt: “The Dutch baby food maker Royal Numico sold Rexall Sundown, a vitamin supplements company in Boca Raton, Fla., for $250 million in cash yesterday. The buyer NBTY Inc., a manufacturer and marketer of nutritional supplements based in Bohemia, N.Y. Royal Numico, which owns the GNC vitamin stores, is heavily in debt after a series of poor investments and needs to raise 650 million euros ($746 million) by the end of 2004 to meet some of its obligations.” (Crouch 2003)

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