Hi! I’m Taiki!
Do you know Myprotein.com, that is making waves all over the world in the sports nutrition industry?
They make unbelievably reasonable proteins and supplements.
The other day, my supplements got out of stock. Then I decided to buy their products on a trial basis and started my study of reasons for the low prices.
I pursued the secret of the low price based on my purchase experience as a consumer, company’s public information and internet rumors.
Contents
- 1 Analysis from my purchase experience
- 2 Analysis from the compay public information
- 3 My guess on the reasons why Myprotein is reasonable
- 4 The truth of the contamination problem by a foreign substance (mouse)
- 5 Conclusion: I recognize the Myprotein.com as not doubtful but serious company.
- 6 Incidentally…
Analysis from my purchase experience
Price
$84.99 per 11 lbs ($7.72/lbs)
They often have a sale, so you can get it cheaper then.
Compared to this, the product of Well Wisdom, is $70.36 per 2.5 lbs ($28.14/lbs).
The difference is almost 3 or 4 times per lbs, too big to argue against even considering that we cannot compare them simply.
Note: Myprotein.com is a British company. Therefore, the price depends on the exchange rate.
Delivery speed
I ordered on 9/13 and received the supplement on 9/23. It came from overseas, so It took a while.
If you are used to using Amazon and its speed, you may forget to have bought before receiving the product. Ordering after the last bottle of protein means that you have to survive 10 days without protein supplement. Please make your plan carefully.
I realized that I shouldn’t regard Amazon speed as a standard then.
Taste
I can’t give you enough information. I don’t like artificial sweeteners, so purchase only plain protein.
Plain protein with fruit juice is super delicious and healthy. You can choose the juice taste depending on your feeling then.
Sale
Once you use Myprotein.com, a lot of advertising emails are sent to you! You receive a few mails every day, and they almost always run some promotion. A little overwhelming!
Analysis from the compay public information
First have a look at the profile of the company which runs Myprotein.
Company profile
The parent company of Myprotein is The Hut Group, which is called THG, a British company founded in 2004.
Wikipedia
The Hut Group website
Their business segments and services are as follows:
- Health department
- Beauty department
- Fashion department
- Lifestyle department
- Marketplace department
They run a online shopping business mainly for supplements, makeups, foods and clothes.
Like amazon focus in supplement and cosmetic sectors.
Once we check each Web site, we can make guestimation using same backend system and products easily.
And HUT Group provide the same system for other companies as a service, global company like Honda and Nintendo.
The whole sale of HUT Group in 2016 was 5.01 million pounds (1 pound=150 yen→75 billion yen). EBITDA was 5 million pounds (7.5 billion yen).
Note1: EBITDA stands for earnings before interest, taxes, depreciation, and amortization. Amount of money the company make from core business.
Note2: The information stated here is from the annual report.
The surprising history of corporate acquisition
THG bought out 12 companies for 8 years from 2009. The list of the companies is below.
| Company's name | season | Public comment |
|---|---|---|
| Zavvi | 2009 | The Hut Group's first acquisition was of Zavvi, an online entertainment business that had gone into Administration in 2008. |
| IWOOT - I Want One of Those | 2010 | The Hut Group bought IWOOT (IWantOneOfThose.com) from Findel Group as well as Confetti, a wedding accessories retailer. |
| Lookfantastic.com | 2010 | The Hut Group bought Lookfantastic group from the Crown family in November 2010. The business sells premium beauty skincare and haircare and operates beauty salons across the United Kingdom. |
| Mankind Direct | 2010 | The Hut Group bought Mankind Direct weeks after purchasing Lookfantastic Group. Mankind is a male-focused online grooming retailer. At the time, it reported £5M annual sales. |
| HQHair | 2011 | The Hut Group bought HQ Hair out of administration in 2011. |
| Myprotein | 2011 | The Hut Group bought Myprotein in 2011 in its first Health-focused acquisition. The acquisition was also notable in its size, with the deal estimated at £60M at the time of the announcement. |
| Coggles | 2013 | The Hut Group picked up luxury fashion retailer Coggles from Administration. Originally a predominantly physical retailer based in York, it is now operated solely online as part of The Hut Group's e-commerce platform. |
| Preloved | 2014 | The Hut Group acquired online secondhand marketplace, Preloved from its founder Ian Buzer in 2004. The marketplace and community was started in 1998 and is one of the largest in the UK with over 6 million members. |
| Skinstore | 2016 | The Hut Group acquired US and Australian Beauty Retailer, Skinstore, from Walgreens Boots Alliance in 2016. The retailer is one of the leading online-only beauty retailers in USA (Skinstore.com) and Australia (Skincarestore.com). |
| IdealShape | 2016 | The Hut Group acquired IdealShape, a US-based dieting and nutrition brand based out of American Fork, Utah. The female-focused dieting brand complements The Hut Group's previous acquisition of ExanteDiet and Myprotein. |
| Glossybox | 2017 | The Hut Group acquired the biggest European provider of beauty box subscription services, GLOSSYBOX, from fellow investment companies Rocket Internet and Kinnevik Online. |
| ESPA | 2017 | The Hut Group acquired ESPA, which is based in the UK. ESPA has a presence in more than 700 spas in 60 countries. ESPA products are also are sold in retailers such as John Lewis (Department Store) and Harvey Nichols as well as top hotel chains including Ritz Carlton, Peninsula and One&Only. |
Who is the owner? Why does THG have so much money?
Why does THG have so much money that they can buy 12 companies in short time? I understand the reason when I found out its stockholders.
Major stockholders are as follows:
- KKR
- Balderton Capital
- BlackRock
- Sofia
From Wikipedia
They are all funds, especially we call them private equity funds. They are professionals to buy the company, improve performance and then sell to others at higher price.
Private equity fund:
A private equity fund is a collective investment scheme used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity. Private equity funds are typically limited partnerships with a fixed term of 10 years (often with annual extensions).
Especially, KKR is very famous investor. Every professionals know as legendary private equity fund.
If I compare the investment field to jiu-jitsu, KKR is the Gracie family. As the Gracie family train themselves very hard to protect their honor, KKR never works irresponsibly.
Myprotein.com is run by them seriously to make money with rich resources.
My guess on the reasons why Myprotein is reasonable
Myprotein.com and its parent company, THG take a lot of business strategies to keep reasonable but profitable price.
What they do is so simple and classic that they are all written on a business textbook. However, with their rich resource and amazing speed, the classic strategies are very effective. I can find in their work the professional pride in the management for benefit.
Economies of scale
The best way to make products in low price is to make them on big scales. As the production scale gets bigger, the fixed cost, for example maintenance cost of their factories, per product gets smaller.
In fact, you need much money to maintain factories regardless of their operating rates, so you want to produce and sell your product on a large scale. Myprotein.com can do it.
We call this effect economies of scale in business terms.
economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation (typically measured by amount of output produced), with cost per unit of output decreasing with increasing scale.
Wikipedia: Economies of scale
Myprotein.com uses this effect thoroughly. The difference of domestic protein company, which makes products mainly for Japanese people, and global company, like Myprotein.com, is like this.
I cannot get the detail data of the companies’ sale, the image is based on my guess.
Moreover, THG has another supplement company, My Vitamins. Probably, they produce both companies’ supplement at the same factory. Of course, the production efficiency increases and fixed cost per product decreases.
Buying power
When you purchase something a lot, you can get them cheaper per product. In a broad sense, economies of scale includes this effect.
We can find this effect in everyday life. Actually buying 5kg protein supplements is far more reasonable than 1kg 5 times.
Myprotein do the same thing on a millions times large scale.
I found on a foreign BBS the information that Myprotein use Alibaba route, very very big Chinese company, for purchasing the raw material in super low price. There is no knowing how accurate this information is, but I guess that’s true.
The reason they are so cheap is because they purchase the protein and other supplements from mass manufacturers in China using Alibaba/Aliexpress. Purchasing from these suppliers is ultra cheap especially when you ship by boat it cuts your costs by more than half so then they take these powders and repackage them with a nice design to make it look fancy and all that and sell it on their page. I work with alibaba all the time because of my job so that’s why I know about this.
Economies of scope
HUT Group has various group companies such as a e-commerce company of apparel and one of supplement. Backyard system must share goods and systems. In a cool word, “Economies of scope” in business terms.
Economies of scope are “efficiencies formed by variety, not volume” (the latter concept is “economies of scale”).For example, many corporate diversification plans assume that economies of scope will be achieved.
Wikipedia
For example, one of the biggest e-commerce site, Amazon, increases the different kinds of commodities such as Book, DVD, and so on, sell on the same system. In the example of Myprotein.com, they deal with not only protein but also sweat suits in same system.
Actually, I bought a jogger pants in Myprotein.
the cost reduction of the package design
Packages of Myprotein.com goods are very simple and all the same design. The difference is only the words of product name. Even if new employees make design a new product package, they can do it cause of only putting the words on the template, which cuts all design costs.
Anyway, not expending money on design, but using the same design many times, they never change the package design forever.
Incidentally, look at the package of one of the same Hut Group comapnies, My Vitamins. Don’t you feel something similar to Myprotein one? All of the useless charge for design is cut off!
On the other hand, the DNS package is simple, too. But DNS uses a muscular man picture on the package, and changes the models by the production. It seems that DNS expends more money on designing package than Myprotein.
If DNS’s design were proposed in the conference in Myprotein, they would talk as below.
New employee
Putting a image of muscular man on the package makes customers imagine their ideal body and buy more products, doesn’t it?
Though you may buy goods judging from the package, customers of our company choose goods for the low price. Low price is justice.
Boss
New employee
Is it true?
If you want to do like that, move to another company. What we put emphasis on is reasonability and rationalization of management. Do you understand you’ve wasted our time in this discussion? I forgive you since it’s the first time, but if you stick to that point, I’ll make you quit this job.
Boss
New employee
Maybe, this job isn’t for me.
This rational concept is uniqueness of powerful cost leadership company.
Cutting the transportation cost
We can see their cost leadership strategy in the transportation cost.
They carry their productions very slowly!
Though they are sent from abroad, it take almost 10 days to arrive in our home. Other cross boarder e-commerce services usually use air transportation. It seems that they make an effort to make goods reasonable using ship transportation effectively.
This idea is the opposite side of one of Amazon prime.
Like a jiu-jitsu competitor not practicing double guard pull in belimbolo jiu-jitsu, but practicing guard pass decently without following the trend easily.
Extraordinary mail and promotion
Once you buy something in Myprotein.com, you can see their power play promotion.
Myprotein.com send you a number of e-mails and they are never worn out. They send you e-mails like a precision machinery. Rather than, they are a precision machinery itself
It seems that something becomes cheaper every day.
I was overwhelmed by the number of their mails, so I changed my mail setting to stop.
I cannot drink protein one after another!
The truth of the contamination problem by a foreign substance (mouse)
Speaking to Myprotein.com, we have to refer to the contamination problem by foreign substances.
Do you remember the impulsive news that a corpse of mouse was mixed into protein?
After hearing of the news, I’ve hesitated to buy Myprotein.com products, but I heard that the truth is that the mouse got into the protein in the customer’s house.
If you want to know more about it, please refer to this site.
Company officers of the Myprotein.com researched and claimed that that had not been their fault. Their way of serious searching, not trying to cover up the fact, made a favorable impression to me.
I’ve thought that I can trust them since they responded to the case seriously.
Conclusion: I recognize the Myprotein.com as not doubtful but serious company.
I referred to some reasons. In short, “A professional manager like Elon Musk enters into the online supplement and protein shopping sites field, and he manages seriously on an extraordinary scale”.
Though there are some differences in business model, it seems that such energy for the business runs THG, including Myprotein.
KKR, which is famous in the field of investment fund, is trying hard to make big and global company of protein.
And in the future, KKR and other shareholders will sell this company to other company. They manage their company so seriously that they make their company steady enough to survive after resale.
These are my opinions.
In conclusion, the low price is realized not because of something doubtful, but because of their simple and honest way of making their goods reasonable.
Of course, I don’t say that other protein companies are managed irresponsibly. I think they are managed seriously.
HUT Group is something like UFC champion practices jiu-jitsu with his super potential and tries to get the champion of Mundial.
Please remember that the opinion I write here is only my hypothesis accumulating with my experience of shopping, public information and what I read on internet. So, judge this article by yourself, and make your decision on your own.
Anyway, I continue to buy Myprotein.com products.
From laboratory, that’s it!
Incidentally…
Incidentally, if you want to buy Myprotein.com products, please input the code “YQ23-R1”, and you’ll get discount. Moreover, if you enter the code, I will receive some money and be happy. Don’t forget to input this code.
Please click here to access to the official site of Myprotein.