Yesterday I read something interesting. In the past 10 years, the market for nutritional supplement snack bars has grown ten-fold to about $1.7 billion annually.
At bodybuilding.com (the world's #1 online supplement store), MP's Combat Crunch bar has an average score of 9.7 out of 10 (after several hundred customer reviews). Bodybuilding.com sells more 10,000 products from more than 400 brands, and for years they have published a dynamic list of the top 50 best selling products. Every one of those top 50 products resides in the 99th percentile as far as sales.
With an average customer review rating of 9.7, MP's Combat Crunch bar has a higher avg rating than all but one of the top 50 best selling items. So in the elite selling top 50, MP's Combat Crunch has more favorable ratings than 48 and is lower than only 1. Why is this significant? Because it stands to reason that if MP got the Combat Crunch bar that right (as it would seem they have), they may indeed capture a significant share of the total nutritional supplement bar market (which, as pointed out previously, is about $1.7 billion annually).
Since MP currently now has retail distribution in many of the major big-box retail stores (Walmart, Costco, Sam's Club, etc), it would seem reasonable that a nutritional bar that popular would eventually be sold in all of them.
If MP continues to expand the Combat Crunch bar SKUs, I expect MP to sell 10s of millions of dollars in Combat Crunch bars in 2015, and $100 million worth of these bars annually by 2017.
So on to the elephant in the room. If MP's Combat Crunch bars are that good (and that popular), why were they recently on sale on bodybuilding.com for a BOGO (buy-one-get-one-free), and now on sale for BTGO (buy-two-get-one-free)? How can this counter-intuitive move be explained. I believe that MP is using a technique often employed by the video gaming market. The major gaming system companies are willing to sell their consoles (Xbox360/One, PS3/4, etc) at or below cost, because they understand the game licensing revenue from the large established user base will more than make up for the foregone profit from console sales. In other words, they treat the subsidizing of the gaming systems as a customer acquisition cost.
I believe that MP is so confident that they hit the mark with the Combat Crunch bar (which would seem to be supported by the overwhelmingly positive customer reviews), that they are willing to subsidize the early sales in order to establish a massive base of dedicated repeat buyers. After all, it is not easy to snatch customers away from another brand they are currently satisfied with unless you first motivate them with an attractive discount.
This strategy can work very well, as long as the discounting does not occur often enough or at regular intervals as to allow customers to plan all of their buying around the discount schedule.
As I have stated in my previous post, the level of equity compensation has been excessive by any measure, and needs to come to an end. I can only surmise that the two most recent stock awards came because Brad feels some sense of entitlement to a larger stake in MP, since most of his early stake melted away as MP found it necessary to use massive share dilution in the early years to survive.
That being said, I think it is now clear to many that not only is MP here to stay, but that they may very well be on the path to one day dominating the supplement industry, not only in the US, but globally. And it is for that reason that I remain invested here.
As always, simply my opinion.
MSLP
