WHITEFISH, MT / July 23, 2014 / The global nutraceutical industry is expected to grow at a 6.3% compound annual growth rate ("CAGR") from $142.1 billion in2011 to $204.8 billion by 2017, according to Transparency Market Research, driven by an aging population, increased disease prevalence, and a heightened focus on preventative medicine, as opposed to seeking less efficacious treatment after-the-fact.
Retailers GNC Holdings Inc. (NYSE: GNC) and Vitamin Shoppe (NYSE: VSI) have built multi-billion dollar businesses within the industry by selling directly to consumers and developing in-house brands, while others like Monster Beverage Corp. (NASDAQ: MNST) have focused on developing products and is valued at more than $10 billion after releasing its popular energy-focused drinks.
In this article, we’ll take a look at a micro-cap company called NutraFuel Inc. (OTC: NTFU) that’s targeting a fragmented niche within the nutraceutical industry that’s been ignored by many larger firms and could be starting to catch on among buyers.
SECFILINGS.COM Executive Interview | Nutrafuels, Inc. (OTC:NTFU) from TDM Financial on Vimeo.
Enhanced Efficacy
NutraFuels has focused its efforts on developing an oral nutraceutical delivery system that has higher and more rapid absorption than pills or powders. According to the Physician’s Desk Reference, an authority on FDA-approved drugs, oral absorption is up to 90% effective compared to 10% to 50% for pills while even injections can take up to 30 minutes longer to obtain the same blood saturation.
Normally, increased efficacy comes at the cost of convenience (in the case of injections, for example), but in this case, oral sprays provide greater convenience and accessibility. Those with digestive problems can avoid issues associated with pills, tablets, or capsules, while receiving a more constant distribution and proper concentration of bioavailable nutrients throughout the body.
Currently, the company has focused its efforts on targeting sleep, energy, weight loss, and immune system problems. These products contain proven ingredients such as melatonin for sleep, B-12 for energy, or raspberry ketone for weight loss, in addition to its unique fast-acting spray delivery system. Moreover, the sprays have been developed with naturally derived ingredients and a canister that involves no aerosol.
Fragmented Market
Many large nutraceutical companies have stayed away from spray delivery mechanisms due to consumer preference. Until now, many consumers have preferred to use pills, tablets, capsules, powders, or liquids when ingesting nutraceuticals. The existing market for these products is therefore quite fragmented with a variety of small players and no industry leaders.
In its market research, NutraFuels discovered that spray delivery systems have become accepted among an older female demographic. The company intends to continue to build up its product lines to target that demographic and a wider demographic, with the anticipation that consumers will eventually start to embrace the unique delivery mechanism for all of its benefits.
The company’s agreement with the popular MMA brand TapouT to create branded energy sprays represents an additional promising segment. Within this segment, brands like 5 Hour Energy are reportedly generating over $1 billion in annual sales, although the manufacturer, Living Essentials, is not publicly traded. Sprays have started to gain traction in the segment and could cannibalize some of these sales.
Atypical Small Cap
Micro-cap and small-cap stocks within the nutraceutical space have received a bad name over the past several years. In fact, FINRA issued an investor alert titled Nutraceutical Stock Scams – Don’t Supplement Your Portfolio With These Companies back in 2012 warning investors against many smaller firms in the space. These warnings were, of course, grounded in truth, but not all small firms are bad.
NutraFuels began its life as a publicly traded company through an S-1 registration – rather than a reverse merger – and is fully reporting. In 2013, the company moved to a 7,000 sq. foot facility with production capacity of one million bottles and has already partnered with the popular MMA brand TapouT to create branded energy sprays targeting the "extreme" market segment.
President & CEO Edgard Ward heads the growing company, with a background in both fitness and as a broker. Recently, the company also retained Sullivan Media Group to assist with branding as well as demographic research and analysis to ensure proper targeting. With a combination of experience and quantitative research, the company hopes to lead the market.
Looking Ahead
NutraFuels stands at a key inflection point within its corporate history. With a production facility already built and partnerships falling into place, the company could see some significant revenue over the near-term. Investors interested in the nutraceutical space may want to take a closer look given the favorable timing as well as the unique delivery system within a rapidly growing industry.
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SOURCE: Emerging Growth LLC