GNC Brand Reorganisation & Distribution Channel

Expansion – 12 July 2019

Disclaimer

The information, material and content contained in this transcript (“Content”) is for information purposes only and
does not constitute advice of any type or a trade recommendation and should not form the basis of any investment
decision. This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its
affiliates (together “Third Bridge”) make no representation and accept no liability for the Content or for any errors,
omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the
specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all
copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying,
distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is
strictly prohibited.

Specialist: Adam Burke (AB)

Title: Former Senior Director, Transportation at GNC Holdings Inc
Moderator: Breana Roberts (BR), Third Bridge Discussions Analyst

Agenda:

1. GNC's (NYSE: GNC) operating environment, the broader health and wellness market and consumer
preferences
2. Competitive landscape – market share dynamics, e-commerce retailers and mass grocery
3. Supply-chain optimisation efforts and GNC's ability to increase omnichannel revenues
4. H2 2019 outlook – GNC's restructuring efforts and best- and worst-case scenarios

Contents
Q: Could you begin with an overview of the operating environment in the broader health and wellness market,
highlighting trends or drivers pertaining to GNC and evolving consumer preferences? 3

Q: GNC mentioned it is removing some items from Amazon because it is losing money there. What is your take
on this strategy and the differences between its sales on GNC.com and Amazon? 4

Q: What are your thoughts on the newly created leadership roles particularly for e-commerce and international
segments and potential for further turnover? Are the right talents in the right roles? 5
Q: How would you compare GNC’s distribution strategy online vs competitors such as Walmart’s and Kroger’s?
Do you think GNC is at a disadvantage to them in e-commerce as well as in bricks-and-mortar, and how capable
do you think it is of improving in those other channels? 6
Q: How would you assess GNC’s potential online penetration vs in-store sales, and what would you say is the
size of the Amazon opportunity? Could you estimate this sales split between online and in-store retail in the
next 3-5 years? 6
Q: You mentioned GNC’s store rationalisation plan is to reduce 900 stores in three years. In the next 3-5 years,
how many more stores do you think it would be necessary for them to close? What metrics would you imagine
are involved in the evaluation process for which stores to close, or does it come down to foot traffic and same-
store sales? 7
Q: What are your thoughts on remodelling GNC’s existing store base? Do you think that, given the same-store
sale declines for the stores closer to Kroger or Whole Foods, it would make more strategic sense to close those
stores or to remodel and improve them? 7
Q: Do you think the the store of the future will be a significantly smaller model in size? How does this correlate
to the types of locations where GNC might want to open the new stores? 7
Q: How do you think the channel shift to wholesale vs resale relates to GNC’s relationship with Rite Aid and
its potential evolution? 8

Q: How do you think GNC logistically supports international franchises? Do they source 100% from GNC or is
there local sourcing as well? 8

Q: You mentioned the need for IT infrastructure in GNC’s distribution centres. Is it possible to use the existing
stores as mini distribution centres, using the back room to store inventory? 9

Q: Do you have any further comments on GNC’s potential to sell the manufacturing plant? 10
Q: How do you think the consumer brand loyalty to GNC compares to the broader category and to historic
customer perceptions of the GNC products? 10

Q: What do you think drives GNC’s pricing strategy and its promotional cadence? What seasonal or product-
specific factors affect the input costs for its products? 10

Q: Do you think the sale of the Nutra Manufacturing plant was a good or a bad deal? 11

Q: What potential scenarios for other divestitures or even potential partnerships could you foresee? 11

Q: Do you have any further comments on GNC’s supply chain and logistics or its optimisation efforts? 11
GNC Brand Reorganisation & Distribution Channel
Expansion

Transcription begins at 00:05:51 of the recorded material

BR: Welcome to Third Bridge Forum’s Interview on GNC’s brand reorganisation and distribution channel
expansion. I’m Breana Roberts, I’ll be facilitating today’s Interview. We are pleased to have with us today
Adam Burke, a former Senior Director of Transportation at GNC.

Adam, before we start today’s Interview, please state I agree or I disagree to the following statement: You
understand the definition of material non-public information and agree not to disclose any such information,
or any other information which is confidential, during this Interview.

AB: I agree.

BR: Thank you. Clients, should you have any questions, you can submit questions anonymously by e-mail to
questions@thirdbridge.com. Clients, as previously advised this Interview is being audio-recorded. Should you
have any concerns with this please e-mail questions@thirdbridge.com.

I will now turn over to our specialist. Adam, if you could please begin with a brief introduction to your
background?

AB: My name is Adam Burke, I was formerly Senior Director of Transportation at GNC. I held that role for
two years. In that role, my primary responsibilities were leading the transportation operations of GNC’s entire
global footprint. That would include North American operations as well as our expansion into international
markets. My focus was primarily on the transportation channels specifically, the e-commerce channels, the
international and wholesale channels that GNC supports as well as the retail bricks-and-mortar. Prior to GNC,
I held several positions, similar capacities with other retailers, director- managerial-type roles, mostly focusing
in transportation and supply chain. In my role at GNC, I reported into Eddie Burt, who was the former Chief
Supply Chain Officer at GNC. A lot of my comments too will be specific to supply chain as I understand it at
GNC.

[00:07:47]

Q: Could you begin with an overview of the operating environment in the broader health and wellness market,
highlighting trends or drivers pertaining to GNC and evolving consumer preferences?

AB: I would say that over the two years that I was with GNC and how I keep up with them today, GNC, for the
two-year period I was there, was definitely adapting to the changing competitive landscape in the market,
specifically to the market pressures they were experiencing through a different channel. The retail bricks-and-
mortar space, that market was certainly getting crowded with competitors that traditionally were not direct
competitors to GNC so as time went on, GNC saw other bricks-and-mortars that your traditional competition
came from Vitamin Shoppe and online from Bodybuilding.com. That was the competitive landscape years ago.
Really, the focus the years I was there was defending the bricks-and-mortar space. We were very overcrowded
with GNC stores, recognising that there was a lot of cannibalisation of our own brand through how we grew
domestically with our store footprint. The conversations inside GNC were really more about Whole Foods,
Kroger, Albertsons, a lot of the mass-market retailers, Walmart, that were really starting to crowd our space.
You probably have heard some of the Q&A or commentary on the last few calls on competition in that space
about how GNC had started to really notice that we saw same-store sales drop more precipitously in markets
where we were within 20 miles of a Whole Foods or 10 miles of a Kroger market. Really, there was a lot more
focus on the mass-merchant retail space and you rarely, or we did not hear much or talk much about Vitamin
Shoppe.

Private and confidential 3

What you might think are our direct competitors really were not what was keeping GNC leadership up at
night. It was really the fact that we were being encroached on by other non-traditional competitors. That’s
more specific to what we were seeing and experiencing in the physical space. Online, certainly it was becoming
more crowded as a lot more competition, but also, two years ago, GNC started selling on the Amazon
Marketplace. A lot of focus, a lot of attention was given to growing that channel. That was really where GNC
saw the growth of the future, the double-digit increases quarterly over vs what we’re seeing in the physical
retail space. I would say that, we can get into it later, but we had a lot of challenges, operational challenges as
well as systemic challenges to support that growth, and we were really struggling to keep up with that channel,
specifically the Amazon channel. We looked at it internally as Amazon and GNC.com as one e-comm channel
but two distinct ways to sell to our customers, so we measured each individually. The focus really was on
growing that GNC.com and being competitive with Amazon while I was there. Just in general, there was a very
focused approach to growing our own brand, driving channel growth in wholesale, which we can talk a little bit
more as well, wholesale and e-comm international, and then rightsizing that retail bricks-and-mortar footprint
and optimising that store channel.

[00:13:45]

Q: GNC mentioned it is removing some items from Amazon because it is losing money there. What is your
take on this strategy and the differences between its sales on GNC.com and Amazon?

AB: My initial thought on that was, I think with GNC early on, when we started with Amazon, it was only a
couple of years ago. It was really shortly after I started that we really, we had for a year or two sold through the
FBA channel, the Fulfilled by Amazon channel, but through the actual Seller Fulfilled Prime channel where we
distributed from our own DCs, we started that about, what would have been about two-and-a-half years ago
now. I think that there was a lot of learning there in terms of what products that we wanted to select to be
placed as Amazon Seller Fulfilled Prime eligible. Just from my learnings with the last year, selecting which
wholesale accounts to distribute through and which products to supply to those wholesale accounts, one
observation I would have is that we weren’t really good at figuring out which products would sell on those
channels, and there were a lot of lessons learned. I think we went into some of that not truly understanding
our cost structure to support Seller Fulfilled Prime model, so there were some products that we put on early
and kept on that we never really rightsized. Because there was such a focus on sales growth and keeping that
product, that extended aisle, on the Amazon Seller Fulfilled Prime channel, nobody wanted to take off a
product even if that meant we had products that we were not generating the margin we planned or potentially
even losing by putting those products on.

I think it was a little bit of lessons learned, not knowing what we didn’t know when we entered into the
Amazon agreement, combined with probably just the lack of real analysis on what products should go on. I
think a lot of times we chase sales. I certainly saw that when we jumped through hoops to get into Dick’s stores
on the wholesale side. We went into it not knowing exactly… we’re doing our due diligence, but a lot of “aha”s
as we got into it with how we would have to ship through Dick’s. Where in our DCs these products would have
to be picked from, whether it’s case pick or unit pick, which drove a lot of our costs. We had a lot of
uncertainty with that going into it and I think we assumed the best case but we ended up with some worst-case
scenarios with costs, so I think that’s a little bit of what happened with Amazon, too. We didn’t properly
understand our distribution costs and our costs to serve, and that factored into it as well as time went on.

BR: On what timeline would you expect GNC to resolve these issues? Do you think it will better understand
the distribution costs involved under this strategy? Which products did better on Amazon?

AB: The other challenge we had that I know was a huge challenge was because of, and I’m sure any company
that’s going through pain with where they are in the marketplace and their debt structure and a lot of the other
challenges they were experiencing as a company, we had challenges keeping good talent. There were about, I
know that my peer who was the senior director of e-comm, whose team helped drive some of these strategies,
and we had a really challenging time keeping those seats filled. There were times where five of the 10 seats on
his team were open, so it’s a revolving door. I think that lack of continuity and the lack of skillsets on that team
contributed to some decisions that were probably not as good as they probably should have been, or not as
much analysis. We had just to move forwards with the best info we had at the time to make decisions, so I’m

Private and confidential 4

sure that contributed to some of the challenges over the past couple of years with the products that we’ve
placed on Amazon and keeping our Seller Fulfilled Prime badge and supporting that channel. The focus really,
we as a company struggled with the speed of our commitment to our customer base with the GNC.com vs the
Amazon channel. If you’re a Prime member, the challenge we faced was if you’re a Prime member, obviously
you can go on Amazon and buy a product and it’ll be there in two days or less, and then you go on our
GNC.com channel and you can buy it there as well as a GNC.com customer, but the SLA commitment for
GNC.com was 5-7 days.

Our average order time with Amazon was, as you can imagine, a little below two days because that’s where we
had to keep it in order to maintain our badging, but on our dotcom channel we were around 4.5-5 days. The
focus was really on how do we develop a competitive advantage on the GNC.com channel and close that gap
from four-and-a-half down to two, and the cost to do that, it just was not a feasible cost to be able to compete
with what Amazon could do on their channel. We were able to close that gap, but I can tell you that we
collectively had a goal to get under four days by the end of last year, which we did not achieve. It’s not that we
didn’t have the services to achieve that, it’s that we could not get the internal alignment on the cost that it
would take to achieve that. The cost to replicate the Amazon experience was really I think the biggest
challenge. It’s not that we couldn’t operationally execute on that, it’s that the cost to do that was just not
something that we as a company wanted to take on, nor that we felt was profitable to do. I think that’s
probably the biggest barrier that GNC has right now to replicating what we’re able to do with Amazon. The
relationship with FedEx and their e-comm shipping partners is fairly large, so it’s well in excess of USD 50m a
year relationship with the parcel carriers. They’ve got some fairly good spender leverage but nothing like
Amazon can leverage with their transportation providers.

[00:22:36]

Q: What are your thoughts on the newly created leadership roles particularly for e-commerce and
international segments and potential for further turnover? Are the right talents in the right roles?

AB: Yes, I saw the leadership changes. That happened after I left. My only thoughts on that, again, that’s
something I’m not as close to, but my thought on with Carl Seletz and Rachel Jones, who are mentioned in
that promotional activity on the international side, they’re both excellent. They definitely have great teams.
They definitely have good depth, and what I can tell you is that I lived through two restructurings at GNC over
the past two years where we had several headcount eliminations at corporate office, meaningful headcount
elimination. I had a team of about 15 when I started, and when I left I had a team of about 10. My team was
affected, every area was affected, but what I could tell you, the point I’m trying to make is on the international
side and on the e-comm side, we actually added headcount. Although there was a net reduction overall in our
corporate headcount, really it was trying to repurpose those resources and build out that capability to support
our international and our e-comm channels but rationalise the other areas, the sport areas of the corporate
office. The company was definitely focused, and the leadership was focused on putting the right talent where it
made sense and where the growth was.

That international team, GNC has been adding capabilities, talent and skillsets there. I would assume that
under those promotional activities that were mentioned, again, that happened after I left but I’m assuming
that those teams were also being built out and rightsized, or the resources realigned to those teams to support
GNC’s strategic objectives there. They did a good job of that, and I think they have a lot of good skillsets. I
think they do have a hard time keeping people because of challenges with the company, but I think they’re
doing the right things when it comes to growing that international, the competency and leadership skillset
there.

BR: Do you expect more significant headcount elimination as part of the company’s cost-cutting efforts, and
are there any other focuses or initiatives in the restructuring that you would expect?

AB: I do think that, as long as the pressure is there to reduce the debt, improve the capital structure and
rightsize the company to support their future growth initiatives, I think they’ll continue to have some sort of
corporate restructuring. The last two years, it happened at Q4. They have a typical calendar year so I would
expect that, but it typically isn’t. The last two years it’s been around 5-10% net reduction in their home office

Private and confidential 5

workforce, so I would think that they might end up continuing on that trend, but I don’t have any insight to
suggest that it’s imminent. I would say, based on what I’ve seen, I would expect it.

BR: What other significant cost-cutting initiatives do you think could be the next priority?

AB: I’m not really sure where else they would look to manage their costs. I’ll tell you that I think a lot of it has
already been… they’re aggressively pursuing several… there is a focus on cost cutting I guess is a better way to
say it. I don’t think there are any meaningful targets that they haven’t already tried to go after. I don’t think
you’ll see anything different than what you’ve seen the past few years. There’s only so much left to go after
now. I think really, now, the focus is more on just making sure where they are spending money, they’re
investing it correctly and they’re investing in the right resources to support the strategy they’ve set forth with
the international growth in the wholesale channel expansion and really just brand promotion there.

[00:28:43]

Q: How would you compare GNC’s distribution strategy online vs competitors such as Walmart’s and
Kroger’s? Do you think GNC is at a disadvantage to them in e-commerce as well as in bricks-and-mortar, and
how capable do you think it is of improving in those other channels?

AB: I’m not overly familiar with Vitamin Shoppe. I know that they offer the subscription the way that GNC
came out with. I would tell you that I think GNC has a few challenges in order to catch up to any of the other
competitors online outside of Amazon. When you think about Walmart or Target or even some of the grocers
out there like the Krogers and the Albertsons of the world and Whole Foods and you go down the list. GNC’s
biggest challenge, which they’re addressing, I believe they addressed because it was still being considered
when I left, is that their systems are so antiquated that systemically and technically, they’re going to have a
hard time catching up just from an IT perspective. There was no order management system in place. When I
left we were in the final stages of selection decision. I believe I saw that they announced that they made a
selection decision on that but they’re still a good year out from having that entirely stood up. From that
perspective, from an order management perspective, they are at least a year out from being able to do some
basic omni-channel capabilities such as buy online, pick up in store. They can’t even do that today, mostly
because of systemic limitations. I think they’re just really far behind and it’s going to be difficult to catch up,
and add to that that three of GNC’s four DCs are legacy DCs, they call them in GNC speak. In layman’s terms,
they’re very antiquated, so they don’t really have the infrastructure to support the e-comm volumes they get
today in an efficient way.

There are costs to serve compared to any of the other mentioned retailers. GNC’s cost to serve is extremely
high because it’s a very manual environment. The only DC they have that’s fully automated and probably could
replicate the efficiencies the other retailers get is their Indianapolis DC, which is a fairly modern DC they
invested in, at this point it’d be about 4-5 years ago, but it does have high output throughput capabilities and
it’s very automated and it was definitely built for e-comm, but it’s just one DC out of four. I think they’re going
to have a hard time catching up. I know they’re working on a catching up, but I think they’re going to have a
hard time because of their lack of infrastructure and technology to support where they need to go to catch up
to all those other retailers. I just think their costs are so much higher. Their capabilities just aren’t there yet, so
it’s going to be a while before they truly catch up, if they can.

[00:33:07]

Q: How would you assess GNC’s potential online penetration vs in-store sales, and what would you say is the
size of the Amazon opportunity? Could you estimate this sales split between online and in-store retail in the
next 3-5 years?

AB: How that might change? Yes, I would say, I don’t even have the number off the top of my head today of
what the online vs retail split is, but it definitely will grow. GNC is pretty much on record saying that they have
a three-year plan to reduce 900 stores, and I think they’ll have to get a little more aggressive than that, so just
by pure virtue of their retail footprint shrinking, and their focus on growing that e-comm channel, I certainly

Private and confidential 6

see that obviously shifting more in the e-comm bucket but I don’t know the exact percentage to give you. It’ll
definitely grow vs the retail sales, that’s for sure.

[00:35:09]

Q: You mentioned GNC’s store rationalisation plan is to reduce 900 stores in three years. In the next 3-5
years, how many more stores do you think it would be necessary for them to close? What metrics would you
imagine are involved in the evaluation process for which stores to close, or does it come down to foot traffic
and same-store sales?

AB: I think that I don’t have more context on that other than what’s publicly available and they say on their
earnings calls. I had meetings with the real estate team and I was obviously in meetings with, we had a few big
consulting projects where the supply chain consulting, where you looked to add our supply chain network and
how our future store footprint would impact that. When we had the real estate team in, other than what
they’ve already stated publicly, they didn’t really have it seemed like a whole lot more to offer. That’s really
that they look at, obviously comps are important, but they also look at the lease renewals and the costs to lease
a space in the property comes into play, so they definitely focus on the stores that are coming up for renewal,
where they have an opportunity to either renegotiate with the landlord or to get out of the lease. They have
more leverage to negotiate there. I think that that’s where they lead is on where the leases are renewing and
then they layer in the comps and the profitability of the store and so on. They certainly look at how close the
surrounding stores are, they factor in, if they close the store, what they feel the sales lift will be with the
surrounding stores and what the sensitivity of that is from the store closures.

I don’t have a whole lot more on the store closure outlook. I don’t think it’s going to change dramatically from
what they publicly stated. I think what they have already stated is fairly aggressive but I also think there are
folks at the company who believe that it should be more aggressive, but I don’t have a lot more context other
than what’s on public record there on store closures.

[00:38:09]

Q: What are your thoughts on remodelling GNC’s existing store base? Do you think that, given the same-store
sale declines for the stores closer to Kroger or Whole Foods, it would make more strategic sense to close those
stores or to remodel and improve them?

AB: I think that certainly goes into their decision making for closing stores, the proximity to who they believe
are their primary competitors. I think it’s really a case-by-case basis. There are stores that are within proximity
of those major competitors that I think there’s not a whole lot of interest. I think the budget for remodelling
and the capital that the company wants to set aside for that is not very aggressive. I think it’s a pretty modest, I
think that’s probably where they want to put their money into, they are opening new stores. There are a few
stores, not all store closures. The 900-ish number is a net number over the next three years, although they’re
not opening many. I think the investment, the capital that they want to invest in remodels, they’d prefer to
invest that into the new store concepts that they’re opening across the United States, which are very limited
but there are a few models they’re trying out that are a little different, with less inventory and more store
experience. Just the customer interaction, the stores of the future. One that they demoed and that they have in
Pittsburgh, they opened the first one seven or eight months ago, so I think that’s really the focus of where to
put the dollars, not to remodel existing stores. I don’t know how much the proximity to the competitors weighs
into the decision to close or remain opened. I didn’t have a whole lot of exposure to that so I don’t necessarily
feel like I can comment on that.

[00:41:05]

Q: Do you think the the store of the future will be a significantly smaller model in size? How does this
correlate to the types of locations where GNC might want to open the new stores?

Private and confidential 7

AB: You say smaller, it’s all relative. I don’t remember the exact average size of the GNC store, but one thing is
the GNC stores, there is quite a disparity in the size of the store, so the new one that they did open, I didn’t
hear a lot about what that footprint will be going forwards because there was only one of those that they
opened. I also understand that the store that they opened was in a mall that basically, it wasn’t a type-A type
mall. We got a good deal, GNC got a good deal to get in the space, so I’m not sure it was necessarily, if they
could have built it from the ground up, I don’t know if it was the square footage of what they would have done.
I think it worked out that the space was available and it was available and we basically got pretty big incentives
to be part of that mall, to help anchor that new mall. It’s an old mall they’re trying to revive so the new look of
the mall. I’m not necessarily sure what the new model footprint is, whether it’s going to be smaller or larger
than the average GNC store. The one they opened, I did go to it and I’ll tell you, it seemed fairly average as
compared to the existing stores.

We had a couple of flagship stores in the area of Pittsburgh that were fairly large and deep in a couple of malls,
and then the stores that were downtown were very small, as you can imagine. This one seemed to be fairly
average. Not huge, not noticeably smaller. It’s big enough because it has a smoothie bar area, a lounge area
where you can hang out and then it has a lot less inventory. The inventory is clean and tucked away and it’s set
up more so that the associate can engage and demonstrate and interact with the customer. It wasn’t smaller
because of less inventory. It was probably very similar in size because they were trying to keep the experience
fairly engaging with the customer, but I don’t have square footage type of info to give you on it. I don’t know
off the top of my head.

[00:44:24]

Q: How do you think the channel shift to wholesale vs resale relates to GNC’s relationship with Rite Aid and
its potential evolution?

AB: I know that Rite Aid’s our legacy wholesale customer and they’re still one of their largest wholesale
customers when I left. I know that there’s interest in retaining that long-term, but obviously with Rite Aid’s
own challenges, there’s a lot of talk and focus on reducing the reliance on Rite Aid as their primary wholesale
customer. I don’t see any changes, and I know they announced recently that they’re going to continue and
grow that partnership. I don’t see any changes to the long term. What I can tell you is that there was
significant focus on diversifying the wholesale customer base and really growing that channel so my time,
especially the last six months I spent there, was very focused on growing our wholesale channels and
developing new customers and new wholesale partners. Very little time was spent on Rite Aid. It was very
much focused on new ventures and the big ones that we were really working on were with Dick’s Sporting
Goods. Albertsons was a big one that they were trying to break into. I believe they did get some traction with a
pilot with Albertsons, and then there was a midwest grocer that escapes me. I can’t remember the name off the
top of my head, but definitely less focus on, “Let’s build this Rite Aid relationship,” and more focus on, “Let’s
grow into other wholesale channels.”

A lot of focus on building out the partnership with Sam’s Club, more so that Rite Aid, so putting more products
in Sam’s Club because right now it’s very limited, less than 10 SKUs. I forgot the exact number but it’s a very
small amount of SKUs. I’d say that the Rite Aid relationship will continue but the focus was on growing and
diversifying with the other customers, not with Rite Aid particularly.

[00:47:28]

Q: How do you think GNC logistically supports international franchises? Do they source 100% from GNC or is
there local sourcing as well?

AB: If you take China out of it, the international franchisees do source 100% from GNC USA, so almost all of
that, all of the international products are made at Nutra Manufacturing and distributed from the distribution
centre that’s basically attached to Nutra in Anderson, South Carolina. Essentially today, the way the
international channel works is the international franchisees handle all of and assume all of the cost of

Private and confidential 8

transportation from that DC to the subsidiaries. Everything is shipped ex works as the Incoterms, and those
franchisees assume total ownership of it once it’s shipped from GNC in South Carolina. There was work going
on, although it wasn’t getting a lot of traction, to re-evaluate the international supply chain distribution
channels and the way we distribute today. The type of work that was going on was mostly focused around
trying to really leverage a lot of those international volumes for the company and rationalise the volumes with
very specific freight forwarders and to be able to put volumes together and to be able to leverage on that
through the international supply chain. In the current state today, there are 60-70-plus foreign subsidiary
franchisees that all do their own thing. They all ship, and we ship according to their terms. There’s a lot of
inventory inefficiency, and we hold a lot of inventory, or GNC holds a lot of inventory in South Carolina
because of the way they’ve allowed the foreign subsidiaries to place their orders.

There are a lot of carrying costs associated with that and inventory obsolescence at the DC in South Carolina,
because of the way that the ordering takes place, and then, like I said, there are transportation inefficiencies,
which we’re trying to tackle. There is a lot of opportunity there in that international channel to rightsize the
supply chain, but I guess it never really becomes a priority, or it hadn’t become a priority. We knew it was
something we could go after and we should go after, we just didn’t have the resourcing or the prioritisation to
go after it at the time. I think with some of the recent changes, with the focus on building out that team and
the focus on the international expansion, and then with the Harbin deal, there certainly was a lot more
momentum to start working on improving the efficiencies there in that supply chain.

BR: You mentioned the focus in management within that segment and the transportation inefficiencies and
inventory issues. Do you think this international segment can stand on its own and is there potential
opportunity for GNC to sell this segment?

AB: Yes, absolutely. I think it could. Whether or not strategically that’s what they opt to pursue, that’s a
different subject, but I think it certainly could stand on its own, absolutely, if they wanted to spin it off.

BR: Who do you think could be a potential buyer for this segment or how you would value it?

AB: I would not, I have no way to comment on that.

[00:52:32]

Q: You mentioned the need for IT infrastructure in GNC’s distribution centres. Is it possible to use the existing
stores as mini distribution centres, using the back room to store inventory?

AB: I would say that that would be very challenging. We did talk about trying to identify hub stores and look
at local distribution out of these stores as a strategy when I was there. The real challenge is that a majority of
GNC stores, I would probably guess over 80%, have no more than one person in the store at any given time.
The concern and the challenge has always been, you take the systemic limitation out of it because from a
technology perspective, they have limitations to be able to do it even if they wanted to, which they’re tackling.
Let’s say they can solve for that, then the challenge becomes how do you add labour to the store to be able to
do that, to the stores that do have the physical space to be able to accommodate that. Only a very small
number of their stores even have the space to even physically support being a hub or final spoke store to
deliver to customer same day from store, or whatever capability they might want to develop out of that store
for delivery. I think the biggest challenge is cost because they’d have to add labour at the store just to support
that, if they do have the technology and the physical space.

The big pushback always is that that sales associate who’s in the store or maybe two, max, at any given time,
they should be upfront selling. The last thing you want them to do is be by themselves in a back room trying to
ship orders when you have customers in the front of house that need attention. You really would have to
devote labour to just doing that in a GNC store because it’s not like a medium or a large box retailer where you
have five, 10, 20 associates in the store that can devote some time to back-of-house activities. GNC, you’re
talking one associate a majority of the time is running the store.

Private and confidential 9

[00:55:42]

Q: Do you have any further comments on GNC’s potential to sell the manufacturing plant?

AB: My thoughts are probably consistent with maybe what a lot of folks think about the GNC brand. GNC’s
got a very strong brand and awareness that, I think that’s potentially where a future growth opportunity for
GNC is to, if I understand your question correctly, it could be another channel for GNC to, as they diversify out
of traditional bricks-and-mortar, they certainly could extend through other channels. That’s certainly one
viable option.

[00:56:43]

Q: How do you think the consumer brand loyalty to GNC compares to the broader category and to historic
customer perceptions of the GNC products?

AB: I think my perception, and it’s changed, not in a bad way, probably in good ways, since I started working
there, and I know GNC is working hard. It’s always had strong brand recognition, but I think what they’re
working hard to do is change how consumers view the brand in terms of how they connect with it and what
GNC stands for and provides. I think one area that they struggle in, and they’re addressing it, but I think
there’s a lot more work to be done, is that they’re having a hard time moving away from giving shelf space to
some of their traditional products like the powders that are typically associated more with bodybuilders
working out. I think they’re really trying to diversify more into that wellness space and health space, and I
think they’re getting traction, getting the consumer to associate wellness and health with GNC.

The challenge I believe they have and I think where they need to do some work to catch up is more in the
organic space. They lack a lot of the organic offerings that I think the consumers are looking for and a lot of the
products they offer even today are still very much in the legacy products that have served them well for ages,
but I’m not sure they’re as quick to get out of them as they probably should be. Even if you look at their new
Earth Genius line, which is GNC’s attempt to break into the organic space, it occupies fairly little shelf space in
a GNC store. I think some of the negative feedback so far has been there are still a lot of additives and things
that aren’t truly whole or organic. I think that they’re missing a part of the consumer segment that they need
to devote more attention to. There’s just a gap in where they need to go from a consumer awareness
perspective.

[00:59:51]

Q: What do you think drives GNC’s pricing strategy and its promotional cadence? What seasonal or product-
specific factors affect the input costs for its products?

AB: That’s probably an area I’m not as close to as others. I think it’s pretty fairly well-known that GNC is
trying to get out of the promotional game, but there was a little concern when I was there that although we had
publicly stated we wanted to get out of promos and buy one get one free, that’s not what we were willing to
offer, that everyday low price. We did have to resort to that more than what we wanted to, so we would have or
come up with quite a few, and last-minute decisions too, decisions to promote products over holiday weekends
or at any given time to boost sales. I think that that created a lot of internal discussion about, is that what we
want to do because we said we wanted to get out of that game but then we had to go back to a promotional
strategy to make our sales numbers or to move product. I know that it generated a lot of healthy dialogue
internally of whether or not that’s what we wanted to continue to do, but going forward, I don’t know enough
about what GNC’s strategy is when it comes to promotional or discounting or promos to move the product. I’m
just not close enough to that part of the business, or wasn’t.

Private and confidential 10

[01:02:04]

Q: Do you think the sale of the Nutra Manufacturing plant was a good or a bad deal?

AB: From where I look at it, I do think it was a bad deal. I know that the amount of USD 100m for Nutra plus
potentially another USD 75m. I think that GNC has historically strategically stated that their competitive
advantage was their ability to control manufacturing and be vertically integrated with Nutra, and now they’re
changing, Ken Martindale’s changing the historic talking point there and saying that they want to spin it off
because they want to focus on their core competency and let the manufacturing experts do their thing. It just
seems like spin to me. I was more aligned with having Nutra, and owning our own manufacturing capabilities
helped us control our destiny more, and it created a competitive advantage when you compare GNC to their
competitors in the marketplace. It just didn’t seem like, for what they got, it’s like the LuckyVitamin deal, what
they got with Nutra, but what they got for it probably, it just doesn’t seem like it was worth spinning it off, but
that’s my perception on it or my perspective.

[01:04:01]

Q: What potential scenarios for other divestitures or even potential partnerships could you foresee?

AB: You’re asking about are there any other potential partnerships out there or changes to the strategy that I
see potentially down the road in the future here for GNC? I don’t think you’ll see anything come out in the
near future with the change in approach to joint ventures or who they are partnering with. They have very
little left to sell in terms of their two assets were LuckyVitamin and Nutra. I don’t think there’s anything
material left for them to sell, to spin off to generate cash to pay down debt. Any future partnerships, I think
they’ve got their hands full already with this Harbin deal and trying to figure out how to do that internationally
to do this right and to expand internationally quick enough that they can capitalise on it, but at the same time
do it correctly. I think they got their plate full right now with what they’ve already decided they’re going to go
after. I don’t see a whole lot changing in the next year with that.

[01:06:00]

Q: Do you have any further comments on GNC’s supply chain and logistics or its optimisation efforts?

AB: The only other comment I’d have it that, like I think I said earlier, the one positive thing GNC was doing
was they are investing in technology, albeit probably later than they needed to, but there was a commitment
there to both make that investment in the order management system. About six months before I left, I got a
commitment to invest in a new TMS system which they had not had historically, and that was ongoing as I left,
so that was in the final stages of the implementation. I know there’s a commitment from the leadership team
to invest in the right tools and to do the right things and get the right resources and skillsets in place. There
are a lot of positive things going on there, I just get concerned that it might be too little too late, but hopefully
that’ll help them close the gap here on some of their competitors. I think long term I think they’ll be okay, it’s
just they’ll look a lot different 3-5 years from now. I guess those are my only closing thoughts or comments.

[01:07:44]

BR: Understood, thank you very much. At this case, we’re over the hour, so we’ll end the Interview, but let me
close by saying thank you, Adam, for your input. Clients, if you would like to speak to Adam in a private call or
meeting, please let your relationship manager know. Thank you again for joining Third Bridge Forum’s
Interview today. Thank you very much, Adam, we truly appreciate your time.

AB: Yes, thank you. Bye.

BR: You have a good day, bye-bye.

Private and confidential 11

Transcription ends at 01:08:04 of the recorded material

Private and confidential 12