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New GNC president hopes to get company into shape
Friday, January 25, 2008

Almost a decade ago, then-Rite Aid executive Beth J. Kaplan came to the Sixth Avenue offices of General Nutrition Centers to make a deal to juice up hundreds of drugstores with vitamin-packed GNC departments.

In the years since, that partnership has survived, even as the two retailers underwent management changes, ownership shifts and, in Rite Aid's case, a messy accounting scandal.

Ms. Kaplan, 49, is a survivor, too. She left the Camp Hill drugstore chain in the midst of an upheaval that eventually would see the chairman sentenced to jail time. She moved on to be a venture capitalist and then spent a few years at the Bath & Body Works chain.

Now, she's back for another dose of health supplements. Last month, she was named GNC's president and chief merchandising and marketing officer.

Ms. Kaplan and her new boss, Chief Executive Officer Joe Fortunato, sat down to talk about their plans for the health supplements chain, which has been getting back in shape for the past couple of years and was sold last year to a new set of private equity owners.

At this point, the two executives seem to view the chain as one in need of a little spa treatment. GNC needs to clear out some of the clutter and give customers, particularly women, something to look forward to.

"What is missing is that very special shopper engagement," said Ms. Kaplan, who made more than one store visit with Mr. Fortunato as they discussed the job.

It's not an entirely new vision for the vitamin retailer that has long struggled with an image of being a place for guys with well-defined muscles. Past attempts to change that reputation have met with mixed results.

But Mr. Fortunato thinks the company has a prime opportunity to expand its customer base as the baby boomers move into their golden years. "I think the timing is better than it was back then," he said.

And he thinks Ms. Kaplan's resume should help her meld GNC's strengths with a little more specialty retail finesse. He asked the executive search firm to try to persuade her to take the job, and then, after she'd said "no," sent them back a second time when he couldn't find the right person.

Ms. Kaplan began her career working for consumer packaged goods giant Procter & Gamble, handling products such as baby diapers and feminine hygiene products -- "The kind of thing you typically didn't talk about at cocktail parties," she said. She ended up in Baltimore running the company's Noxell cosmetics division.

Her house wasn't far from that of Martin Grass, then-chairman of Rite Aid, a retailer that carried Procter & Gamble products. Eventually, he recruited her to move to the drugstore chain with a directive to use advertising and marketing to differentiate Rite Aid from other pharmacies.

The first 21\u20442 years were lots of fun, she recalled. The beauty department got a makeover to make it more prominent, and Rite Aid's marketers made a splash with a cosmetics money-back guarantee.

Vitamins and health supplements looked like another profitable way to set the chain apart. The company decided bringing in the established GNC brand would give it credibility quickly. The partnership was announced in early 1999. In the meantime, Rite Aid was on a high-powered growth curve as it acquired stores around the country.

Then came rough times.

The company's numbers didn't add up. In October 1999, Mr. Grass was forced out. The next few years kept the chain in the news as government regulators alleged that Rite Aid had overstated income and that Mr. Grass sought to enrich himself at shareholders' expense. He eventually worked out a plea agreement that called for fines and jail time.

"The good news for me personally was I had nothing to do with the financial and accounting side of the business," said Ms. Kaplan.

She did end up in litigation involving the company and its insurers as they sorted out disputes over loans and her assertions Rite Aid had damaged her reputation. She said recently the litigation had been resolved, and a Rite Aid spokeswoman said confidentiality on personnel matters prevented further comment.

It was a dark period, Ms. Kaplan said, but also one that gave her an opportunity to try something different. She began working with the Internet Capital Group, a company near Philadelphia that invests in business-to-business e-commerce companies. While there, she was named to the board of Blackboard, an educational software company. She later left the board but has since been reappointed.

In 2002, she took a position with Limited Brands in Columbus, Ohio, where the goal was to take the Bath & Body Works chain beyond bath gels and make it more competitive with retailers such as Sephora, a cosmetics chain that built fun stores where shoppers could play with makeup.

In creating new flagship stores, the team looked to apothecaries for inspiration, Ms. Kaplan said, adding new skin care lines and targeting women with higher income levels than the chain had previously served.

Living in a hotel in Columbus while her family stayed in Baltimore took a toll. She went home in 2005 to work with Axcel Partners, an early stage venture capital firm she had co-founded. While there, she served on the board of a Minneapolis venture called MinuteClinic that put health clinics in pharmacies. CVS now owns the company.

The idea of bringing medical services into retail spaces was compelling enough that GNC executives even considered trying it, said Mr. Fortunato. They decided the health supplements retailer couldn't do it effectively without pharmacists to dispense medicines that the clinics might prescribe.

So Ms. Kaplan must come up with other ways to make it worth stopping at a General Nutrition store. GNC has a portfolio of private label brands that certain customers seek out. Officials said only 6 percent to 7 percent of their items overlap with mass merchants such as Wal-Mart.

Yet the assortment of products can be a little overwhelming, said Ms. Kaplan, who noted specialty vitamin retailers could edit their offerings to present a point of view in the same way specialty clothing stores do.

Another idea is to set up stations where customers scanning an item would be able to pull up information on its use. GNC has made previous attempts to offer educational resources but the technology may be better now.

Within a year, the company could be ready to try new ideas in a few hundred stores. Tests will probably come in mall stores that are company-owned and offer exposure to a broad audience. GNC also has numerous franchise locations.

Meanwhile, Ms. Kaplan will still be a bit of a commuter as her children finish high school in Baltimore. This time, though, she won't do the hotel thing. She's taken an apartment with nice views of Downtown Pittsburgh.


Correction/Clarification: (Published Jan. 26, 2008) Joe Fortunato's title was listed incorrectly in this story as originally published on Jan. 24, 2008 about Pittsburgh health supplements retailer General Nutrition Centers Inc. He is chief executive officer, not chairman.
Teresa F. Lindeman can be reached at tlindeman@post-gazette.com or at 412-263-2018.
First published on January 25, 2008 at 12:00 am
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