In Flex Mode at MusclePharm

When MusclePharm Corp. Chief Executive Ryan Drexler assumed the job three years ago after serving on its board of directors, the sports nutrition company was a mess. Despite spending millions of dollars on endorsement agreements to have celebrity athletes like Arnold Schwarzenegger, Tiger Woods and NFL star quarterback Colin Kaepernick pitch its massive line of products, the company still was not profitable. “MusclePharm was doing things in a different way in terms of distributing and marketing the company,” Drexler told the Business Journal. “I realized that the way they were marketing and distributing was successful in the short-term, but in the long-term the amount of money they were spending on marketing would have hurt the business model.” MusclePharm sells a range of supplements, protein powders and bars under its MP Essentials and Fitmiss brands. A 12-pack of the company’s chocolate cake-flavored Combat Crunch protein bars retails online for $19.94, while a four-pound tub of its Combat Protein sells for $29.46. Its core demographic is athletes, with the bulk of them being males between the ages of 25 and 34. Since taking control, Drexler has turned the firm into a lean, mean fighting machine. He slashed its celebrity endorsements, cut its headcount by 50 percent and dropped hundreds of products. The company closed out 2017 with $6.2 million in cash compared to $4.9 million in 2016, largely due to cost-saving measures. “The way we were spending money was like we were a billion-dollar company, but we weren’t,” Drexler said. “I don’t know how relatable Tiger Woods was to people who were buying MusclePharm.” Now, he has turned his attention to a new kind of marketing strategy – one that involves bringing athletes, celebrity trainers and fitness gurus to the company’s Burbank headquarters. Cutting costs MusclePharm is the first company Drexler has run since selling his family’s supplement business, Country Life Vitamins, in 2005 to Japanese food company Kikkoman. One of his first objectives as chief executive was to cut down on expenses. “When I got in there, the expenses were really, really high in marketing the company,” Drexler said. “We had multiple contracts with very big celebrity endorsements.” The return on investment did not make sense, he said. On top of that, the product lines were stacked with flavor options, but just a few of them were responsible for the bulk of sales. “A very big percentage of our SKUs weren’t moving sales but were taking up a lot of cash flow,” Drexler said. “We were spending money on building inventory, money that otherwise would have been used to run the company.” Almost overnight, the company downsized its products from 400 SKUs to 125, Drexler remembered. He also laid off roughly half of MusclePharm’s employees, many of whom had been performing similar jobs. To revamp the firm’s marketing, he pulled executives from companies like Activision, Lyft Inc. and General Mills Inc., focusing on individuals with experience at targeting the company’s core audience. At the same time, he took a hard look at celebrity endorsements. “Yes, they got our name out there, but they were costing us an excessive amount of money,” Drexler said. “We figured they weren’t a good return of investment.” Some of the funds that were previously being spent on celebrity endorsements were funneled to partnerships with bigger retailers, like Costco Wholesale Corp., Bodybuilding.com, Amazon.com Inc. and iHerb.com. “Amazon has been a great partner, as has Costco,” Drexler noted. New strategy The company’s new marketing strategy is to spend money on building relationships with fitness influencers, including celebrity trainers. But rather than following standard social media marketing protocol – sending samples to influencers and paying them to review the products for their audiences – MusclePharm is bringing them in to try the supplements and work out in the company’s headquarters at 4400 Vanowen St. in Burbank. The headquarters includes a state-of-the-art gym and a mixed martial arts ring where the firm also hosts tournaments. Part of the decision to move its headquarters from Denver to Burbank last summer was to make it more convenient for influencers in the wellness space – many of whom are based in Los Angeles and Hollywood – to experience MusclePharm’s products in an optimal setting. “That’s how our best word of mouth is starting to happen,” Drexler explained. “They’re getting knowledge on nutrition and how to use products.” The facilities are not done yet, Drexler added. He wants the company’s brand to be known as a source of products both for boosting workouts and recovering afterward. To build the latter idea, he is bringing in equipment like a cryotherapy machine. “We’re trying to show athletes how they can become better athletes, not only through showing them better cardio but also the rehab part of it,” Drexler said. “It’s not just about getting stronger in the gym – it’s also about not getting injured.” Building a full gym cost MusclePharm less than $50,000, according to Drexler. It was able to do so through partnerships with other wellness brands. Erica Gatlan, director of influencer marketing at Boston-based marketing firm Agency 451, said Drexler’s marketing is in line with larger trends among retailers. While there is still a place for celebrity endorsements, they are becoming less popular with retailers overall. Online “influencers” – defined as individuals with followings of between 50,000 and 200,000 people on social media websites – can provide greater value at a lower cost, she said. “The relationship with celebrities is not as close as it could be with a digital influencer, especially if (an influencer has) a very niche audience or demographic they reach,” Gatlan said. For a company that sells fitness supplements, it might make more sense to put product in the hands of a health and wellness influencer with a dedicated audience than to try to attract wider attention by making a celebrity the face of the brand, she said. “If you’re looking for a broader audience, celebrities could work, but the audience for supplements is more specific,” Gatlan said. Lindsey Carnett, chief executive of Marketing Maven in Camarillo, agreed. “There are a lot of barriers to entry with working with celebrities, like contractual rules and appearance fees,” Carnett said. Besides, social media stars are the new celebrities for millennials and younger, she added. Transformation MusclePharm has only been bringing in fitness influencers for the past six weeks, so it is too soon to say whether the strategy is paying off. While influencers are not required to craft social media posts in exchange for using the facility, they often do. “This is really to get a different set of eyes on the company,” Drexler said. “Our name is getting out there. … People are calling up to ask if they can train here.” Drexler is confident that cutting costs and moving to Burbank were correct decisions for the company’s turnaround. “All of our departments are now very strong,” Drexler said. “In Denver, the way we were trying to get people on board and market the company wasn’t very successful. … Now we’re ready to grow our business.”