Feb 20 2025 9 mins
Applied Nutrition might be growing above its previous IPO expectations, but can the company derive enough freshness from strategic partnerships to generate the type of consistent returns needed to win the hearts of external market stakeholders? Applied Nutrition Plc (LSE: APN) is a leading sports nutrition, health and wellness brand, which formulates and creates nutrition products targeted at a wide range of consumers and sold in over 80 countries worldwide. There are several product ranges under the Applied Nutrition Group, including the namesake Applied Nutrition, All Black Everything (ABE), Body Fuel, and Endurance. Additionally, because of a trademark issue, the U.S. division sells its products under the AN Supps company name. Over the first six months of fiscal 2025, Applied Nutrition reported generating revenue just shy of $60 million, which I believe would be an increase of around 19% YoY. It was also noted in the statement that the adjusted EBITDA margin was in line with expectations. And while no actual numbers were provided, we can assume an adjusted EDITDA margin around the company’s historical average of about 29%. But I'll use that last point around strong net profitability as my transition towards analyzing the “significant progress towards its growth strategy” delivered by Applied Nutrition recently...and that starts with an existing capital allocation pattern reinvested profits back into the company’s manufacturing capabilities and operational facilities. From previous financial documents, we know that about 80% of all Applied Nutrition products are self-manufactured, which allows the company to quickly evolve its product strategy to access emerging trends and fill opportunity gaps across the marketplace (positively impacting growth of distribution points and shelf space with existing and new customers). But that vertical integration element can also be leveraged by Applied Nutrition for geographical expansion…with about 60% of its total revenue currently being captured from commercial activities outside its home market of the UK. But arguably the most important geographical expansion progress has been happening within the United States. And the most notable news would be the launch of “AN Performance” products across The Vitamin Shoppe stores nationwide. Additionally, and this is partly in reference to that “freshness” introductory comment, but the company partnered with global fruit brand Chiquita to launch “officially licensed flavors” of several AN Performance products. And while I’m just a single peanut in the gallery of many…I’ve tried each of those AN Performance Chiquita products and I’d rate them very high in terms of flavor matching, flavor likeability, and formulation approach. Now…does that mean anything? I’ve certainly (let’s call it “knighted” because of the company’s British roots) many of the functional CPG products well before they went on to outsized mainstream commercial success, but most of my early conviction built around certain new products is directly tied to the “freshness” (aka appealing distinctiveness) of its brand strategy. So, while having those great (glocalized) Applied Nutrition products is a foundational element to unlocking any chance of U.S. marketplace success…I’ll breakdown why I'm still hesitant to make louder and more confident declarations on the company's long-term success within the U.S. market.