Executive Suite: Taking a business to its next level

NBTY chief executive Jeff Nagel in company offices

NBTY chief executive Jeff Nagel in company offices in Ronkonkoma. (Feb. 27, 2013) (Credit: Heather Walsh)

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When Jeffrey Nagel was recruited from General Electric to become chief executive of Ronkonkoma-based NBTY Inc. in 2010, he was charged with taking the supplement and wellness company to the next level. He got the job after NBTY was purchased by the Carlyle Group, a Washington, D.C.-based investment fund, taking the reins from Scott Rudolph, who had grown sales from $50 million to $3 billion in his 25-year tenure.

While Nagel, 48, was new to the supplement business, he says he brought experience in "process" -- the managing and operating procedures key to the successful operation of a large company -- as well as in doing business internationally.

NBTY, with brands such as Nature's Bounty, Puritan's Pride and Balance Bar, is one of the largest manufacturers on the Island with 14 locations, including a new facility in Amityville capable of producing 1 million nutrition bars a day.

What are some of the benefits and challenges of having your headquarters on Long Island?

We own 11 of our 14 facilities, so our buildings and our base costs are really fairly well set, so I don't think I face the same hurdles as someone who's deciding, 'I might go to Jersey, I might go to Long Island.'

And we feel we've got a very loyal associate [employee] base. One of the areas that's been a challenge for us on manufacturing is the group of people who are engineers -- people who would work on new technique and improving operations, or running operations in an expanded and more complex way. If you want to go out and find an industrial engineer, and you want to interview 10 people and choose a couple, that's a tough group of people to find here.

How do you plan to grow NBTY?

When I arrived, what you had is a company that's done tremendously well for a long period of time in an industry that's doing tremendously well . . . but I think a lot of the processes that had gotten it that far were probably unlikely to get it from $3 billion to $6 billion or beyond.

So the drive has been, how do you continue that sort of growth that we've enjoyed? For us, that's going to come down to building stronger brands, driving a lot more innovation in the category, expanding on the Internet . . . and then driving international sales and driving a lot of efficiency in the business. And then making sure that you've got this focus on quality that never ends. I think when you get to this scale, the way you approach it has a lot more to do with structured communications and structured processes.

What are your plans for developing overseas markets?

We sell in 50 countries around the world. Rather than having a distributor who comes and says, "I've been your distributor for a long time, and I told you I'd do a million dollars in sales this year," [and we say] "We'll do a million dollars in sales. Here you go. Great" . . . Instead, the perspective we're taking is one of, well, how big is that market? What's a reasonable share? What does the competition look like? What does it take to win there? Now, as a distributor, there's two pieces to that: One is, I'd like to support you better maybe than you've been in the past -- with your marketing programs, maybe customize some products for your region. On the other hand, these are the targets that need to be met.

Another piece is going to be direct investments in areas that we think are really high growth. So for example, we are doing a lot more direct in Mexico than we have ever done before. In China, the business is growing quite well; we want to continue to invest there. We've got one plant . . . [there] already; we'd like to put more energy behind that market.

I'm a passionate believer that on international [sales] . . . you have to have local understanding. One of the reasons global companies don't grow as fast is they trade off the efficiency and ease of centralization for the growth and risk-taking of localization.

The market for wellness products like NBTY's is growing in the United States. How does it look elsewhere?

As incomes are growing around the world -- particularly with emerging markets -- the general correlation is, as your discretionary income rises, one of the places that you put it is in wellness expenditures.

Five years from now, where do you see your international sales?

Today, about a third of the company is international because it includes the United Kingdom. The growth rate of the non-UK international market is already in double digits. What I'd like to see over the next 12 to 24 months is for it to get into a strong and sustained double-digit territory . . . that it would be growing significantly faster -- two to three times as fast -- as the company as a whole. And over the next three years, I'd like to see us making some larger-scale investments in targeted high-growth countries. That could be on the front end in terms of people, and the back end in terms of manufacturing.

Days after you joined the company, the Federal Trade Commission announced a settlement under which NBTY agreed to stop making false statements about a line of children's vitamins. What have you done since?

The last job I had at GE was running the global services division of GE Oil & Gas. I was all on the end of the quality problems. You've got to work with government and make sure you're ahead of the curve; I took that experience with me. [At NBTY] we were upper echelon of the industry, and the team had every right to be proud . . . but the bar for the regulators [is rising], the number of enforcement actions in our industry is rising every day. We do 70 billion doses per year. A lot of the past two years has been getting everyone to realize that this is really critical. Other people are going to stumble; we don't want to.

Entrepreneurial companies associate process with bureaucracy. So you want to show them that process can give you both quality and speed . . . We invested in systems. Our priorities are quality and customer service.

What's your marketing philosophy?

We're finding that most people take products for emotional reasons that they connect with in their lives. It's one thing to market a joint product and say "Glucosamine can help you with a specific joint problem." But it's another thing to say "You may be somebody who wants to travel to exotic locations with your spouse and be able to play with your grandchildren. If you want to have that kind of lifestyle, you need to take care of yourself. And here are the top five things to do it."

It's a real difference in how you connect. It drives your messaging, but also drives your product. I'm not marketing the individual items, I'm marketing the effect.

Since you're a wellness company, how do you reflect that in your corporate culture?

The first thing is, recognizing that wellness doesn't mean the same thing to every person. But wellness should be important to all of us. And so, we asked each member of the staff for their version of wellness. So you've got someone skiing, someone doing yoga, another person cooking healthy, another fishing.

We also have a program called MET-Rx 180. It's a 90-day workout and nutritional program, and it's targeted toward something everyone can do. In addition, we started doing healthy-cooking classes at lunch once a month. We're now looking to add kickboxing and Zumba.

Are you affected by the economic uncertainty here and in Europe?

Generally speaking, so far, we've been pretty resistant. This category is recognized as quite recession-resistant. In the last 10 years, the category has never grown less than 3 percent. When you're worried about losing your job, you want to take care of your health. Relatively speaking, it's a lot less expensive than going to the doctor.


 

 

CORPORATE SNAPSHOT

NAME: Jeffrey Nagel, chief executive of NBTY Inc., in Ronkonkoma

WHAT IT DOES: Manufacture and distribute nutritional supplement products

EMPLOYEES: 2,600 full time, 53 part time on Long Island; 14,000 globally

ROLES THEY PLAY: Marketing, sales, manufacturing, retail

REVENUE: $3 billion

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