Global Direct Selling Industry in 2015

Few weeks ago the WFDSA (World Federation of Direct Selling Associations) announced 2015 figures it had gathered from local organizations. Before that, we had Direct Selling News magazine’s company-specific sales volumes.

Both reports contain interesting statistics, especially from a comparative point of view. Let’s take a look at these numbers.

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Cost Structures and Profitabilities, Q1 2016

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It has always been interesting to see how direct selling companies compare on various grounds. Where they spend their money and at the end of the day, how much money they generate for their investors absolutely rank among the most interesting ones.

In this article, we will be briefly reviewing 11 direct sellers with varying sizes of business and with different product portfolios. These are Avon, Herbalife, Mannatech, Natura, Nature’s Sunshine Products, NHT Global, Nu Skin, Oriflame, Tupperware, USANA and Youngevity. This review will be based on their 2016 first quarter figures.

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Depending on who you are talking to, you can get various responses to this question. Some would say a fortune is possible, while some others would tell that one can make a pocket money at most.

There are also others who take their stands on extremes, of course. Those on one end claim that a fortune is guaranteed and people on the other extreme say it is not possible to earn literally anything with network marketing.

But we have data from companies disclosing how much they pay to their representatives. Let’s check a few of them.

The First Quarter in Giants’ Figures

1st Qt Numbers Are In For Public Direct Selling Companies

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Following the end of the first quarter, the time has come to briefly review the performances of the largest direct sellers. Normally, this analysis has been covering Avon, Herbalife, Natura, Nu Skin, Oriflame and Tupperware. However, Oriflame’s report would come after mid-May so I have decided skip it this time.

Again, the focus in this review will be on these companies’ revenue growth performances. As you see below, Herbalife and Natura posted positive figures whereas Avon, Nu Skin and Tupperware’s growth figures were negative.

MLM Attorney, Kevin Thompson, on Bloomberg TV Responding To Herbalife Questions

This article first appeared on The MLM Attorney Blog! KT_portrait-300x289

I had the privilege of being on Bloomberg for a small segment talking about Bill Ackman’s latest presentation. The 7-minute segment can be viewed above. Ackman’s presentation today, if you can spare 3+ hours, can be found here. Before summarizing his argument, it needs to be said that he heavily promoted this presentation yesterday across the news. He was like Muhammad Ali talking about the Thrilla in Manila, saying that this was “the most important presentation of his life.” He further said that this would be the “death blow” to Herbalife. He successfully spooked the market, causing it to drop 11%. Instead of “conclusively proving fraud,” which was his intent, he ignited confidence in the market due to the lack of substance, causing the stock to go up 25% in one day. I’m not making this up. Up 25% the day of the death blow. Only on Wall Street. I’ll summarize his thesis:

World of Direct Selling Perspective: Now, It’s Herbalife’s Turn

herbalife.logoThe long-awaited happened and the U.S. Federal Trade Commission (FTC) announced few weeks ago that it had opened an investigation on Herbalife. The details have not been publicized but looking to all what has been happening in the last two years, it’s not hard to guess: FTC wants to find out if Herbalife is a pyramid scheme.

Let’s go back a little to see how we ended up here…

Pershing Square is a “hedge fund”.  A hedge fund is an aggressively managed fund  that uses advanced investment strategies like leveraged, long, short and derivative positions, that are not very familiar to many of us. Bill Ackman is the founder and CEO of Pershing Square. In December 2012, Bill Ackman gave a presentation. What he said in essence was that, believing Herbalife was nothing but a pyramid, Herbalife’s share value would soon be “zero”. So, he had “short-sold” Herbalife shares. Later, he also said he had invested in his bet an amount between $400-500 million.

However, things did not evolved as Bill Ackman would have expected. First of all, Herbalife continued its impressive growth, globally. The company’s net sales increase was 18% in 2010, 26% in 2011, 18% in 2012 and most recently, 19% in 2013. Moreover, Herbalife’s profitability has been problem-free as well. Consequently, company’s share that was valued $20 at the end of 2009, was being traded at $79 at the end of 2013. This means Herbalife investors quadrupled their investments in four years!

In the meanwhile, another prominent investor, 77-year-old Carl Icahn entered the scene. Contrary to what Bill Ackman had been advocating, he said Herbalife’s was a solid business so its shares would gain further value. Carl Icahn bought 16.5% of Herbalife’s shares. Another publicly-known figure, George Soros joined Icahn in buying Herbalife shares.

While all these were happening, Bill Ackman did not choose to wait and see. Rather, he continued his attacks through various presentations, statements to reporters and appearances on TV channels. Obviously, he would only make a profit if he would be able to take Herbalife share’s value to lower than what he had bought.

The U.S. Federal Trade Commission did what it had to do after all this fuss and announced it had opened an investigation. Some people think this will damage the industry severly. I tend to think the opposite.

This investigation is not expected to end before one or two years. Naturally, Herbalife will continue to operate and looking at its past performances, will continue to grow. In the end, I expect nothing but a relief for Herbalife. Just like the infamous FTC vs. Amway decision made in 1979, this will way the pave for all other legitimate direct selling companies, too.

As a response to all these, Herbalife has made several attempts to prove Bill Ackman’s accusations were groundless and has recently unveiled a “public awareness website”. The website intends to feature success stories from Herbalife members and their customers, and addresses misinformation about its business model. If Herbalife had been more transparent before, would that stop Bill Ackman’s move? I think this is not a relevant question at this point as we just don’t know that. However, the key take-away from this whole thing for all of the players in this industry is that we all need more transparency to preempt unfair attacks.

In a memo sent to Herbalife employees, company’s CEO Michael O. Johnson said FTC’s inquiry was a “positive development”. I agree with him!

 

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MLM Weekly News Report: New Co-CEO at Nerium, Herbalife, CVSL, And The Financials

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Amway is the new title sponsor of the USA Today Coaches Poll, which establishes the ranking of the top 25 teams in college football. The poll will now be called the Amway Coaches Poll. The American Football Coaches Association Coaches Trophy, the Waterford Crystal football awarded to the national championship team, will also be presented by Amway.

CUTCO/Vector Marketing Corporation has partnered with Purdue University to support the Wounded Warrior Project, a veterans’ service organization that provides programs and services to severely injured service members during the time between active duty and transition to civilian life, and the Riley Hospital for Children at Indiana University Health in Indianapolis. Students in Dr. Scott Downey’s advanced sales and marketing class raised $6,000 as a result of CUTCO in the Classroom, a program that allows students to expand the theoretical knowledge of sales learned in the classroom and gain real-world sales experience by selling CUTCO.

CVSL, parent company of AgelLongabergerPaperly and Tomboy Tools, has been approved to trade on Open, Transparent and Connected financial marketplaces (OTCQX®).

Herbalife reported fourth-quarter net sales of $1.3 billion, reflecting an increase of 20 percent compared to the same period in 2012. Net income for the quarter was $123.5 million. On an adjusted basis, adjusted net income for the quarter was $137.2 million, as compared to 2012 fourth-quarter net income of $112.2 million. For the 12 months ended Dec. 31, 2013, the company reported record net sales of $4.8 billion, an 18 percent increase on 13 percent growth in volume compared to 2012. For the same period, the company reported net income of $527.5 million. View the full press release online.

Mary Kay and members of its independent salesforce joined Georgia’s Coalition Against Domestic Violence (GCADV) in Atlanta recently to advocate for laws that enhance safety and promote justice for domestic violence survivors with Georgia’s lawmakers. This event is part of Mary Kay’s national initiative “Lobbying for Good” and part of the company’s longstanding commitment to prevent and end domestic violence.

WFDSA member Natura Cosmeticos reported its financial results for the year ending on Dec. 31, 2013. The company provided related consolidated statements of income, of comprehensive income, shareholders’ equity and cash flows for the year 2013, including the summary of main accounting practices and explanatory notes. View the full earnings release online.

Global member Oriflame recently reported its year-end and fourth-quarter 2013 financial results. For the three months ending on Dec. 31, 2013, local currency sales decreased by one percent and Euro sales decreased by 10 percent to €371.2 million. The number of active consultants increased by one percent to 3.5 million. For the 12 months ending on Dec. 31, 2013, local currency sales decreased by one percent and Euro sales decreased by six percent to €1.4 billion. View the full press release online.

In additional company news, Oriflame has partnered with the Women’s Tennis Association (WTA) to create a line of products geared toward sportswomen. The new line will be called the WTA Strong is Beautiful Range.

SimplyFun was recently awarded with three Tillywig Toy and Media Awards and a Family Choice Award.

Pending member ViSalus recently announced it has expanded operations to Germany and Austria through its subsidiaries, Vi Germany GmbH and Vi Austria GmbH.