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The Problem With Private Equity Ownership of Supplement Companies

Updated: Jun 10

Most people know very little about private equity firms or what they do.

What are private equity firms?

According to Pro Publica:

Those things don’t seem that bad but do not truly explain what happens when a private equity firm takes a controlling stake in a company.   

When private equity firms buy or take a significant stake in a company, they are not doing it out of the goodness of their heart; they are doing it to make huge profits. It’s not the profit-making that is the problem; how they achieve those massive profit margins is the issue.

Some liken private equity firms to vultures picking the bones of dying companies, which you could argue is a necessary activity. But Ballou points out that many private equity firms now target healthy companies, leaving them gutted, unproductive, or even bankrupt. Whether it’s Bain, Apollo, or Sun Capital, each firm has its preferred tactics for extracting money from the businesses they buy up, too often hurting the most vulnerable people, like nursing home residents, who can’t fight back. When they buy up rental properties, watch out for evictions. When they target doctors’ offices, expect to pay more for care. They might even be cutting corners at your hospital’s emergency room (the horror stories will make you research your local ER). And they really, really want to get their hands on your 401 (k).

The New York Times has a great article on private equity; here is just one example of what happens when private equity buys a chain of nursing homes.

So not only do these companies cause untold pain, but they face no consequences.

The Atlantic detailed more of the horrors and deaths caused by private equity:

Mother Jones goes into more detail on just how destructive these companies are to our society.

“Private equity incursions into real estate have left no form of housing unscathed, driving up the costs of both owning and renting any type of house or apartment or mobile home. They’ve bought up for-profit colleges, driving down graduation rates while increasing student debt. They’ve sought gains in the obscure crevices of our mutual existence, from contact lenses to port-a-potties to ketchup. And they’ve enveloped the health care sector, including hospitals, dermatologists, ophthalmologists, veterinarians, hospice care, and nursing homes, often leading to increased medical costs for patients and a drop in the quality of care. A 2021 study from a group of business school professors found that private equity ownership of nursing homes increased their Medicare billing and upped the mortality of patients by 10 percent—about 20,000 lives across the 12-year period they studied.”

“This aversion to stricter regulation of private equity means its dominance will only grow, says Appelbaum, and so will cutting costs and corners and jobs to extract financial gain. The evidence can be seen in small inconveniences: the decision by a PE-owned hospital, for instance, to buy the cheapest, roughest paper towels for nurses who wash their hands dozens of times a day. Or in broader indignities: a PE-owned ­hospice care company that provides fewer visits to dying patients by medical assistants who are cheaper to employ, but for whom the company can bill Medicare the same amount as for a visit by a nurse. And then there is life-altering damage: medical bills that gut family finances all because private equity firms have bought up so much of the health care sector that they can charge virtually anything.

These companies make nearly every part of our lives worse and more expensive.

Private equity companies also own and have controlling stakes in a large number of supplement companies. So what happens, in most cases, when a private equity company buys a supplement company or takes a considerable stake in one?

The first thing that happens is staff are cut, wages are slashed, and benefits are reduced. A lot of institutional knowledge and workings are lost, as the most knowledgeable employees are often the first to go as they have often been there the longest and are usually paid the most, or they quit because they do not like the company's new direction. Consultants like McKinsey & Company are often hired to “justify” these cuts.

The second thing is cheaper raw materials are substituted. This lets the labels and formulas look the same while dramatically reducing costs. Check out our blog, A Tale Of Two Bottles, to learn how two labels can look the same but be very different products.

The third thing that happens is outsourcing. Many companies go from their own manufacturing and quality control departments to outsourcing them to questionable third parties, who promise to do the work for significantly less.

Next, the marketing budget goes up. Fancy new packaging, advertising, and social media strategies come on board.

This all leads to products that cost fifty to seventy percent less to produce while the company increases the prices that people pay for them.

So not only are there a ton of ethical issues with private equity, but the consumer gets products that are not nearly as good and pays far more for them.

If you want a deep and in-depth look at how damaging private equity is to the very fabric of our society, check out this book.

Does a private equity-owned company sound like a good place to get your vitamins from?

Here are some (definitely not all) well-known supplement companies that are owned by or that private equity has a significant stake in:

  • Thorne

  • Metagenics

  • Vega

  • Ultima Electrolytes

  • Muscletech

  • Swanson

  • Plant Fusion

  • Reliance Private Label Vitamins - They make the supplements many health food stores and pharmacies sell under their own label.

  • Braggs

  • Nutraceutical

    • Solaray

    • Kal

    • Zhou

    • Natures Life

    • Natural Care

    • LifeTime

    • Heritage Store

    • Life Flo

    • Emerita

    • Theraneem

    • Zand

    • Dynamic Health

    • Honey Gardens

    • Sunny Green

    • All One

    • Natural Sport

    • Thompson

    • Herbs For Kids

    • Natural Balance

    • Simplers Botanicals

  • Floragen

  • Lipoflavonoid

  • Genexa

Who owns your vitamins?

Check out this page to see more companies affected by private equity firms.

While the issues caused by private equity firms may not make the news often, they are one of the biggest drivers of problems in our society, from healthcare to housing costs, food quality, and education. 

We work very hard to avoid selling products from supplement companies owned by or primarily controlled by private equity companies (and those owned by horrible corporations like Nestle) because people and the environment should come before profits. Partnering with small family-owned companies makes it easier to verify sources of raw materials and ensure that the environment is protected and that farmers and laborers are paid a fair price for their products and labor. It also helps to keep more money in the local communities, which benefits all of us. 

It can be hard to know who owns which companies, but whenever possible, choose companies you know are independently owned and work hard to improve their communities and make the world a better place. It would make a huge difference if everyone changed even a few monthly purchases!

A dog celebrating New Year's Day


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