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Posted: September 01, 2012

Vitamin Cottage takes on ‘extended family’ of investors with IPO

Mike Taylor

Vitamin Cottage Natural Food Markets boasts 57 stores in 11 states, and the Lakewood-based chain now has the capital to expand much more after an initial public offering in July that raised $100 million.

Founded as a door-to-door business in Golden in 1955 by Margaret Isely, Vitamin Cottage has been one of Colorado’s most enduring and successful family enterprises. And despite going public it will continue to be family-operated, as family members still control 60 percent of the company.

Fittingly, 10 family members were on hand on the New York Stock Exchange trading floor on July 25 for Vitamin Cottage’s IPO. Margaret Isley’s son Kemper Isley, his daughter Raquel and his sister Heather rang the opening bell together, signaling a new era for the company that now trades under the ticker symbol NGVC.

It also signaled the end of a grueling two-week "road show" for Kemper Isley, who shares the title co-vice president with his brother, Zephyr.

"You go from one city to another city, and essentially you have meetings starting at 7 o’clock in the morning and you end at about 7 o’clock at night," Kemper Isely said. "You have a meeting almost every hour. You meet mainly with fund investors and wealth advisers and explain the business to them. You do that nine to 10 times a day."

The most frequent questions had to do with the Vitamin Cottage shopping experience and sizing up the threat posed by the much bigger – and pricier – Whole Foods Market, which has 329 stores in the U.S., Canada and the United Kingdom.

Vitamin Cottage plans to add 10 stores this year and sees an ultimate potential for 1,100 locations, though Kemper Isely said they plan to limit expansion to the west side of the Mississippi River for the next five years.

"There isn’t really a concept like ours on a national level," Kemper Isely said, "so you were always describing what a shopping experience is like at our stores. Then of course everybody was concerned that Whole Foods was going to trample us. So just getting people to understand what we are about was probably the hardest thing."

Vitamin Cottage’s sales breakdown is about 60 percent grocery, 27-29 percent supplements and 13 percent non-food items. While some investment analysts see Whole Foods as a direct competitor – citing reports that the Austin-based chain is considering introducing smaller stores in smaller markets – Isely describes Whole Foods as "complementary and synergistic" to Vitamin Cottage. Indeed, three years ago in a ColoradoBiz interview, executive vice president Heather Isely noted that the busiest Whole Foods store in the state and busiest Vitamin Cottage in Colorado were located in the same Boulder shopping complex, suggesting more synergy than competition at work.

Vitamin Cottage has perennially ranked among this magazine’s top family-owned companies and is a past Top Company winner. Kemper Isely, who has assumed the title chairman of the board, doesn’t see a lot changing with the public offering.

"We’re adding some outside directors," he said. "I think that’s a positive, because getting other people’s perspective is a good thing. Adding outside people to the company who are smart will help our collective intelligence. There’s a few more compliance issues you have to deal with, being a public company compared to a private company, but you hire smart people to help you deal with that."

Kemper Isley was asked what he thinks his mother, Vitamin Cottage’s founder, would have thought about the company’s debut on the New York Stock Exhange if she had been alive to see it.

"I think she would have been really amazed that it happened," he said. In fact, at a breakfast meeting the morning of Vitamin Cottage’s IPO, Isely was asked to say a few words. He recalled the company’s start, about seven years before he was born, when Margaret Isely would go door-to-door in Golden loaning out nutrition books and returning later to discuss the subject matter and take orders for supplements.

"The one thing I said was this really was a tribute to our mother more than anything else," Kemper Isely said. "It was kind of an emotional moment. Everybody in the room teared up. That was kind of a fun moment."

Mike Taylor is the managing editor of ColoradoBiz. He writes about small-business money issues and how startups are launched. Email him at mtaylor@cobizmag.com.

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