[center] [b] Behind the Scenes, Forum Edition [/b] [/center]
Biotest head honcho Tim Patterson recently appeared on the T-Nation forum and fielded a variety of questions about how the supplement business works. Since his posts were part of an 18 page mega-thread, we have pulled them together below.
Tim On the Hardcore Market and Wal-Mart
If the bodybuilding fans knew how mentally bereft and insane and crooked some of the industry stars and businessmen are, they'd lose all faith (in our industry).
There are some awesome people in the business. And thankfully, I know most of them. It's these guys that keep me excited and optimistic about the future of muscle building and sports supplements, as economic entities.
Here's some insider information that may surprise you. Hardcore bodybuilding has decreased by 30% in the last two years -- and, it's not getting better.
After the ban on ephedra and prohormones, it's not economically feasible for many of the smaller companies to survive. They have nothing edgy to sell, and they're not innovative enough to compete in the mass market. Even if they had a good mass product, they couldn't afford the $15-million-per-year advertising budget.
The net effect is, there are a lot of lackluster supplements on the hardcore market that aren't selling. And like it or not, supplement sales fuel our industry -- no fuel, no growth.
Regarding Wal-Mart versus T-Nation volume . . .
One week's sales in Wal-Mart is equivalent to (this is not a mistype) two years sales on T-Nation. (Comparing Fahrenheit sales in Wal-Mart versus HOT-ROX sales on T-Nation) Sounds preposterous, and it's true.
Wal-Mart is the BEST, not worst, in the industry, as far as profit margins and payments. Wal-Mart pays promptly; doesn't take inappropriate discounts; and pays a very fair price.
All in all, if you can get on their shelves, Wal-Mart is THE golden opportunity for any supplement company. In my book, Wal-Mart is awesome.
Tim On Biotest Sponsorships
Biotest just signed Georges St. Pierre [UFC]. Spike is now his exclusive sponsor
I've been watching Georges for a couple of years, and I think he's the kind of athlete we should support. His fights are always high energy and very interesting. I expect him to beat Matt Hughes in 2006.
Tim On Industry Stars and Moguls
1) Most industries don't have "stars" as a major component. Our industry makes stars; fans want them. Celebrities are at the core of our business. Our star athletes -- if that's what you want to call a bodybuilder -- spend about 50 to 100 grand per year on jack and lift weights to the point of not being able to do much else.
Why does a bodybuilder do this? So he can, once or twice a year, stand on stage and pull his bikinis up his crack, showing off that purdy wedgie to an audience of people who paid mad money to see that sort of thing.
2) A high percentage (much higher than normal) of our industry leaders either have had prison sentences, are under indictment, or plea bargained out of time inside.
3) The average income of a supplement mogul is shocking. It's on par with the Hollywood film industry and dope dealing. Even a lot of the sales staff is grossly overpaid, making more than doctors and other professionals. Billions of dollars are earned by not that many companies, which makes things a little more than crazy.
4) Without exaggeration, this industry is full of mental cases. List any mental disease, and the answer is yes; someone at the top has it.
This doesn't sound very normal or average to me.
Tim On the State of Protein Powders
If everyone on our site would simply buy their protein from us, we'd not only be profitable, but we'd allocate additional resources to T-Nation.
"Oh, but Low-Carb Grow! is too expensive for many T-Nation members," some might say.
After all the publicity about how supplement companies lie about protein content, why do the masses keep buying products that are clearly bogus -- full of poor quality protein, fat, and carbs?
Yes, carbs. Some companies water down their whey with maltodextrin; some companies use straight whey and call it "isolate." No wonder people are fatter than ever, and can't get into shape.
Think about it. Raw-protein costs have increased over the years. How then is it possible to sell five pounds of whey for 25 bucks at retail? In other words, protein that used to sell for 40 bucks is now more expensive to make and sells for $25 -- again, how's that possible?
Good quality and 25 bucks . . . it's not possible!
A supplement company sells to a distributor, who sells to a retailer, who in turn sells to a consumer. Along the way there are three markups; three entities are making a profit. And on top of that, the prices of protein ingredients have gone up!
And, for that matter, who'd want pure whey? For everything but pre-post workout, casein and milk-protein isolate are far, far superior. Eat cottage cheese or egg whites before wasting money on these junk protein products.
The hardcore market is trending toward mass-market mentality. On average, today's hardcore buyer is far less sophisticated and much more price sensitive than as few as five years ago. What motivation is there for an innovative company to deliver anything to the marketplace that costs more than 30 bucks?
Tim On Supplement Company Self-Regulation
As long as there is more than one company, it will be impossible for our industry to self-regulate. As a group, we are pathetic, that way.
Just look at the companies that got back into prohormone sales. After the ban, they are selling really bad and illegal compounds -- compounds that in addition to not working, suppress natural T and reduce sex drive.
By doing this, they are a) giving edgy supplements a bad name and thus making buyers even more skeptical of new products, and b) taunting the FDA to crack down further on our industry.
If we're not careful, as an industry, we'll be left with nothing but vitamins, protein, and desiccated-liver tablets to sell. Unfortunately, there are too many insiders who are willing to risk a prison term for big money. We are our own worst enemies.
Tim On Elastic and Inelastic Buyers
This market used to be driven by its high degree of inelastic demand. It was the economic underpinning of our entire industry. Nowadays, the market is sharply trending to the elastic side, which means innovation will be driven out of the products, and corruption into advertising (to make up for lack of innovation).
Biotest has always marketed after the inelastic buyer. Reason being, we are innovators; as such, our products are very expensive. We invent molecular structures and patent them. Heck, we even have six compounds going down the pharmaceutical route.
We spend enormous amounts of revenue on research. We spare no expense when it comes to our formulations. We have zero motivation to do it any other way. All we know is the premium/exotic category, which is supported almost exclusively by inelastic demand.
"If you drop your price by 5%, you would expect sales to increase by more than 5%, right?"
This is not true in an inelastic market. Sometimes demand goes down when price decreases. For example, we sell less Low-Carb Grow! now at 23 bucks (with micellar casein and three new flavors) than we did when it was $28 ($43, buy two, get one free).
A five-percent drop in sales price would often require at least a 10 percent increase in volume to make the same penny profit.
Case in point: using Low-Carb Grow! as an example again, to make the same profit at $23 that we did at $28, we would've had to have increased sales volume by 50 percent, even though we only lowered price by 18 percent.
Unless your pricing strategy is way off, it's almost impossible to make up in volume what you lose from dropping price.
Tim On the Top 100 Biotest Customers
Now I get to talk about the really important people -- Biotest super-fans. I think this data is going to literally SHOCK some people. Our fans, the real lovers of Biotest supplements, spend scary amounts of money on our products. It's close to not being believable.
Here is a list of our top 100 customers' total purchases:
As you can see, the top 100 customers have collectively spent over $1 million, with an average purchase of $218 per transaction. And this is just the top 100. We have -- I'm not going to be specific -- many thousands of customers. The mean average, for the avid supplement fan, is $143 per transaction.
Thank you, guys! Really, thank you!
Tim on Build-Your-Own Proteins
(My answer is not directed to those who are genuinely going through hard times. The following comments are, however, focused on individuals who elect to "make their own" in order to "save money," when they can perfectly afford to do otherwise.)
Nahhh, it's even more ridiculous than that. These are the guys who'd take a week off work to build a 100-dollar squat rack. This behavior gives them great satisfaction, like they're some kind of self-reliant Jeremiah Johnson-type.
In the case of protein, how much are they really saving? When you consider the hassle and the mess and the time, only to save a few pennies, it's not worth it. And, it's not rational.
This type of buyer is way outside of the norm and not worth worrying about. We'd never win them over.
I know I've just pissed off these folks. But what are they going to do, stop buying something they don't buy in the first place?
Tim On Buying From T-Nation vs. Other Places
There's a huge difference between buying directly from T-Nation and another retailer. I thought this would be obvious, but it's not. The people who are trained in business and economics know exactly what I'm talking about. To the rest of the folks, it's too subtle to grasp, I guess.
It's called PROFIT MARGIN.
For the most part, we make significantly more profit from the transactions on T-Nation than we do from sales to our distributor and other retailers.
Again, this is real basic stuff . . . but when we sell to our distributor, we discount our products so that he can make a profit. Typically, a distributor wants to earn 15-25 percent on every sale, so he marks up supplements 18-33% to make his margin. The retailer then marks products up again, typically 50-60 percent.
So, there are two markups between Biotest and you, going through a distributor. This means that you are paying the distributor and retailer profits that could be paid to T-Nation -- profits we could use to grow the site.
I can just hear it now:
"Oh, Tim, why don't you give us distributor prices?"
1) The distributor would never buy from us again. Distributors get furious when manufacturers do this.
2) You aren't buying 10,000 bottles each time you make a purchase.
Like it or not, that's the way it is, and that's the way it always will be -- as long as there's a traditional route of distribution.
So . . .
BUY DIRECTLY FROM T-NATION!
I wish everyone on T-Nation, who uses Biotest products, would purchase them here. If that were to happen, T-Nation would grow 10 times faster than it does now.
"I ain't using nuthin' until I see a buncha studies!"
Part of me wants to smack you and the other part, well, it wants to smack you, too . . . but I'm sincerely glad you posted. I was hoping to draw out a skeptic.
First, why in the world would you bash something you knew nothing about, or haven't tried? Secondly, why would you waste time making your own protein powder, which probably tastes like TC's gym socks?
Of course, the science behind Surge is strong. Dr. Berardi wrote about it in 2001, references included. Since then, pre/post-workout nutrition has been written about pretty much everywhere.
Research is a good thing, but it's not the most-efficient way to evaluate a product. If the science is strong and sound, why not simply try it? Why wait the two or three years it takes to conduct and publish a study? We're not talking about a cancer treatment that could kill you; we're talking about a sports supplement.
When we launch a product . . .
1) I write an article to lay out the details, which includes what we know about the science.
2) We offer a money-back guarantee, so there's no financial risk whatsoever.
3) Users post, on our forum, about their results, giving potential users a chance to ask questions and see what's being said about the effects of the supplement.
Scientific research takes a lot of time to complete. If you refused to try any supplement without first seeing bona-fide research, there'd be very few you could take.
We've actually conducted three research projects on HOT-ROX's ingredient A7-E. It's unpublished because these pilots are lead-ins to a major study that we're midway through. We're using 90 subjects, which makes this the largest study ever conducted in our industry.
Biotest has probably funded more research than any other supplement company. We use this information to determine product efficacy, fine tune our formulations, to better understand dosing parameters, to establish safety data, and to prepare for large-scale research endeavors.
Publishing HPLC data is as hokey as it gets. All that shows is purity, nothing about efficacy. We don't publish this data because it would fill up the website with unimportant information that no one would read, especially after the first time.
Just know that we run HPLC analyses on all raw materials before they are encapsulated. And we run HPLC analyses on every batch of our supplements after they're encapsulated. When manufacturing, we always shoot to beat formula sepcs. The HPLC information helps us to achieve that goal.
"What happened to the printed mag?"
The printed magazine isn't dead. On the other hand, it's not really alive, either. Here are some interesting facts:
1) The last issue (#9) had a 67% sell-through level. This means that 67% of the magazines on-stand were sold. In today's magazine world, that's like hitting a homerun 67% of the times you're at bat. Excellent is 30%; 67% in unheard of.
2) Publishing an issue is a freaking drain, and takes away from literally everything TC and I do. Really. It's the only thing that has that effect on us. So, if we were to publish it again, a) a lot of projects would suffer, or b) we'd need a lot more staff.
3) We lose $150,000 every issue we produce. Gee, isn't that smart? It sounds like we're a bunch of losers when it comes to running a business. Just remember, it's only the publishing side of our enterprise that loses money. Thank God!
TC and I knew from the start that our media outlets were never really going to be big moneymakers. They were simply ways for us to get our ideas out to the people who think like we do. We didn't know if that was going to be 10 or 10 thousand. Thankfully, it's now more than one million (on the Internet).
4) Our magazine distributor informed us that, in his opinion, Testosterone was the strongest "bodybuilding" magazine in circulation, and that we could be packed on every major stand in the US and Canada -- if we wanted that.
5) T-Nation has grown far beyond our greatest expectations. We don't really need a printed magazine.
6) But we love printed the magazine.
7) Yeah, but the printed magazine is a lot of work . . .
(You get the idea.)
Tim on Product Names and T-Nation Membership
Pseudoscientific-sounding names are passe. They're too easy to think up and common, and they're everywhere. Besides, that's just not our style. We like truly unique names, names that people can remember, names that subtly imply function.
But, Grow! is not the perfect name for that product, as it turns off most women. We have plans to fix that.
Regarding the street-team idea, I think we're all missing the main point I've been trying to make:
T-Nation has more than a million fans, 100,000 of which are registered members. At any given moment, we have as many as 200,000 online. We're twice the size of Denver, for goodness sakes. And we're getting thousands of new fans each week.
[i]We already have enough people!
The problem isn't the number of people, it's the behavior of people. [/i]
Do the math . . . take our registered readers, for example . . . what percentage would you think buys protein powders? Probably all, but let's be conservative and assume 30%. That's 30,000 people who could purchase protein from T-Nation.
And if each one would use two bottles per month, we'd sell 60,000 bottles per month, which would put us where we need to be -- T-Nation would pay for itself. But that's not happening.
It's not a matter of finding more fans; it's a matter of our current fans buying their protein, fat burners, and T-boosters from T-Nation.
We really believe that we offer the best supplements in the world, at bargain prices. And we have raving fans who love our products, which are selling off the shelves in GNC and Wal-Mart.
Why not T-Nation, our loyalist fans? We give everything we have to you guys! Just look at all the information on our site. Obviously, there's a huge disconnect somewhere. That's my point.
The real issue here is not how to better promote the site, but rather how to get the existing, one-million US fans of T-Nation to support our site with purchases.
It's not about getting more fans. And it's not about getting our brothers in different countries to make purchases. It's about US fans, period. They represent 96% of our traffic volume, and they have no problems with customs or shipping costs -- getting the best supplements in the world at bargain prices.
Our US fans are (should be) educated in the facts of quality and efficacy (of Biotest supplements) to the point this shouldn't be an issue.
"Why not give away tons of Grow! samples?"
Based on my extensive experience, the odds of this working are all but zero. When it comes to proteins, the vast majority of buyers want extremely low cost. They'd simply wolf down the samples -- beeeeeelch! -- note the excellent quality and taste; then buy something that's cheap, irrespective of quality and taste.
Tim On Hardcore Consumers
"Cheap! Cheap! Cheap!"
It's what today's average "hardcore" consumer cheeps, when asking for supplement advice.
In the "old days" of the early 1990s, all these guys wanted cutting-edge products, which usually were very expensive. They expected to pay top dollar, too. Often, when confronted with a choice, many would opt for the more-expensive brand, thinking it was the one with no corners cut. And for the most part, they were right.
Does $9.95 Tribulus actually make sense? Do you really think you're getting anything better than lawn clippings? You really do get what you pay for.
This cheap mentality is solely responsible for the ordinary displacing the extraordinary, in sports supplementation today. As such, many of the supplement companies have gutted (reformulated) their products to maximize profits.
The end result . . . on average, today's products are cheaper and junkier than ever.
The typical joe is not the consumer any hardcore, sports supplement company directs their products toward.
In fact, 100 percent of the typical hardcore consumers are the exact opposite. Muscleheads (that's the common name for the hardcore buyer, and I'm one too) love change, danger, and the avant-garde . They actually read ads to see what's new. They'll try anything that makes sense and that might give them an edge. And they certainly aren't thrifty, when it comes to supplements.
They are educated and know value. These are the guys I have in mind when I design something new. These are the guys who'll pay us what our products are worth.
In contrast, it's been my experience that all the 'splainin in the world -- even a money-back guarantee -- won't turn on a typical joe and get him to buy. It's pointless.
Tim On One-Stop Shopping
We've actually produced two creatine supplements in times past, and they didn't sell worth squat. The "one-stop shopping" idea is awesome, though; I really like it a lot. I have no problem with producing the basics, either, regardless of profitability. I do, however, demand one thing . . .
PURCHASES! Regardless of profitability (low margins or reasonable margins), I want the masses to support the product with purchases!
TC and I have wanted, for years, to produce a vitamin/ mineral/ antioxidant formulation(s) for the hardcore athlete. We have an incredible fish-oil supplement coming out in the next eight weeks. And I personally would like to take a good greens supplement that doesn't contain licorice and superfluous nonsense.
Even the basics can be (and should be) of high quality and elegant design.
For example, our fish-oil supplement (many consider fish oil a dietary staple) contains the highest quality, most-potent concentration of DHA and EPA on the market. And, we've included just enough CLA, favoring the 10,12 isomer (the one responsible for body-composition changes), to cover the common deficiency among weightlifters.
Even though all of this potency should cost $50, for a month's supply, we're delivering it to T-Nation for about 25 bucks!
High-tech, low-tech, I really enjoy designing supplements. And I'd gladly develop several staples that'd blow away anything that's currently on the market.
The question is, will T-Nation members support these products with purchases? From my experience, of all those who say "yes," only about 10% back it up with "add to cart."
"Why does Biotest get bashed by some of their competitors?"
These bashers are overwrought with freaking jealousy. They take the truth and say the exact opposite. It's one of the oldest cons in the business. And they want us to banter back insults on T-Nation, defending ourselves, so that they can get free publicity, and hopefully build their sites.
We won't bite on that transparent bait.
So, yes, any publicity (as long as you don't go to the pen), is good publicity.
Tim On Canada and FedEx
I've said this before and it's worth repeating. We love our Canadian and international fans just us much as their US brothers. We are, however, a US company, and we aren't ideally geared for shipping to international destinations.
Furthermore, it's sometimes a nightmare getting our products through customs. And when things blow up, the international customer usually gets furious with us, like it's somehow our fault.
We decided on day one to FedEx all shipments. Personally, that's the way I want it. And since 98.77% of our shipments are within the US, this makes perfect sense.
If a US customer orders by 5:00 p.m. MT, we ship the order THAT day. Oftentimes, the customer gets the shipment the very next business day. And if the order is above $99, shipping -- FedEx shipping -- is FREE!
Most of our customers get FedEx speed for FREE! All considered, I think that's awesome
Tim On International Fans and Supplement Laws
Excluding the US, almost all countries have egregiously strict dietary-supplement laws -- and customs is getting stricter by the day. Soon, I believe, it will be impossible to get most supplements into other countries.
There's no way getting around this, either. If customs seizes a package, they often have a hissy-fit and send us a threatening letter. One time, I actually thought Alberta declared war on Biotest.
TC and I barricaded the doors with pallets of Classic GROW!, as we held tightly onto our Spyderco knives -- waiting to see the whites of the RMP's eyes. We remained holed up until I reread the letter. It actually said "cease shipping to Alberta immediately, you knuckleheads, or officials will declare warrants for your arrest." I got to the "declare war-" part and headed for deep water.
Anyway, there's only so much we can do. And we certainly don't want to be the cause of an international incident. We appreciate our international fans, for sure. And we're grateful for the business. But it's completely unrealistic, in today's world, for a US supplement company to focus heavily on international business.
We're still going to do all that we can, within reason. [see below]
Tim On New Lower International Shipping Costs
We've decided to ship all international orders via US Postal Service. This is the least-expensive carrier, and I believe they ship everywhere.
(This pertains only to international customers and US military installations. We will not ship domestic orders via US mail.)
We need several weeks to get all of this worked into our system, so please be patient. There's a lot more to it than simply programming Web pages. The US Postal Service has to get involved; staff needs to be allocated to shipping tasks; transportation to the Post Office has to be arranged.
Also, here are the basic rules for international shipments -- there will be no exceptions:
(Please don't be offended with what seems like a harsh tone. I simply want you to know the harsh reality of shipping outside the United States.)
1) The burden is on you (the customer) to get your order through customs -- you must accept full responsibility. Do not ask us to fill out additional paperwork on your end, and don't ask us for help. Seriously, we cannot devote 10 man-hours to shipping an order. Take full responsibility.
2) If you can't afford to lose your package to customs seizures, don't place an order.
3) If your country informs us that we no longer are permitted to ship supplements to that country, we will honor that request. So, there will be countries that we will take off our "ship to" list. Accept it.
4) Your orders might take an extra day to process.
5) We will do our best to create the most-effective process for shipping international orders. This might require you filling out online forms that seem burdensome. Please comply fully with accurate information. Our goal is to create a system that lets you store this information, and edit it when necessary.
"Will international orders still have the option of FedEx International?"
"What happened with Myostat?"
I've actually asked TC to start an expose column, and I wanted Myostat to be the first target. It's an interesting story that should be told.
No matter what the outcome, I hope people understand that it's never my intention to mislead the public. Without my reputation, I have nothing. That being said, here are some insights to the Myostat project:
1) CSP-3 really does bind myostatin in vitro. We proved this and another major university proved it. In fact, this university conducted the study without our permission or knowledge.
2) No one has ever proved it binds myostatin in vivo. The project was killed before that study was launched.
3) This next point is very serious and Biotest has not validated the authenticity of certain claims made by third parties. Furthermore, Biotest doesn't make these claims. The following information, however, is true:
We have had several unrelated reports from consumers who insist that CSP-3 has stopped the progression of muscular dystrophy. In fact, even though we discourage people, desperate parents have threatened to sue us if we didn't continue to sell it to them, for use with their children.
Researchers have been trying to inhibit myostatin in MD patients, not to cure the disease, but to slow it down. And these folks had been searching the Web on myostatin binders and stumbled onto my article.
We strongly warned people from using the product to ameliorate the symptoms of any medical condition.
4) Many consumers loved the muscle-building effects of Myostat. In fact, last week, I had a physician beg me for my last two remaining bottles. He said, "it's the only thing that seems to help me make gains."
5) We partnered with two other companies, delivering CSP-3 to the marketplace. One partner was a greedy buffoon whose actions contributed to 50 percent of the reason why we discontinued Myostat. This man claimed in ads that you'd "gain muscle overnight," which is a boldfaced lie. You won't gain muscle overnight, and I clearly stated this in everything I've written on the matter. He even begged me to change my article.
6) The other 50 percent of the reason we pulled Myostat off the market is, a major competitor spent millions of dollars in a negative ad campaign, basically saying our myostatin binders were scams. By the time our lawyers kicked this company's nuts up into its lungs, the damage was too extensive to recover. Myostat was damaged goods in the minds of consumers.
(As a result of this company's actions, we now employ three highly skilled litigators who vigorously move into action the very moment we see anything libelous about our products. So, this will never happen again. I'm sorry to say, we keep them quite busy.)
Now you know most of what I know about the subject. You be the judge about Myostat. And, you be the judge of me.
[Concerning one company slamming another in ads] Here's a tactic some use:
Supplement company A gets freaked out because supplement company B has a newer and better product. Company A sets out to destroy company B so they won't lose market share. Company A knows that most businesses can't afford to sue them and it's hoping company B doesn't have the dough.
A lawsuit (of this nature) costs $300,000 to $500,000 per year, and takes three to five years to get to trial.
Company A made a fatal error -- company B (Biotest) had plenty of resources to take them to the federal-court mat.
"Are supplements even necessary?"
I believe certain supplements will give most of us a clear advantage, depending upon the goals.
Clearly, in the areas of fat loss and muscle building, there are supplements that increase the rate of results. And in some cases, supplements make things possible that otherwise would be completely out of grasp.
I am convinced -- and I've been in the bodybuilding business for quite a few years -- that no bodybuilder can achieve their best-sustainable condition without the use of protein powders, post-workout super foods, hormone manipulation, and fat burners.
Your body is a stubborn beast. It doesn't want to lose fat, and it certainly doesn't want to pay the metabolic cost of additional muscle. On the other hand, you can create a metabolic and biochemical environment that manipulates these processes to your advantage. And, in addition to hard work in the gym, good nutritious foods, and ample nighttime sleep, designer supplements play an important role in hitting your fitness goals.
You need ALL of these elements to maximize and keep big gains. And, the bigger the gains desired, the more advanced the tools required.