World Of Direct Selling Reports: Oriflame’s Choices

oriflame.logoRegular readers would know that here, we take a brief look at the performances of the largest public direct selling companies every quarter. This used to include Oriflame until mid-2013 when Oriflame’s figures started coming significantly later than all others. So, our last two reviews did not cover Oriflame.

This company though, being one of the leading direct sellers in the world and the largest European, deserved a deeper look in my opinion. This is especially so given its performances in the last few years. So, this week’s review will cover Oriflame only.

When we look at Oriflame’s yearly sales figures below, we see a steady growth until 2009. After that, leaving a spike in 2010 aside, obviously Oriflame has been stumbling since then. In 2010, Oriflame had a big success in its largest region, CIS & Baltics that it could not match afterwards. Company’s profitability generally follows the trend in sales.


Moreover, you will see at the below chart that the negative trend continues in 2013. It seems, 2013 will be worse than 2012 for Oriflame. For this not to happen, Oriflame should achieve a sales figure of Euro 458m in the last quarter, a quarterly figure that the company could not reach in any quarter in the last four years.


Oriflame divides its operating world into four regions, namely CIS & Baltics, EMEA, Asia and Latin America, in the order of their shares in Oriflame’s global business. CIS & Baltics region represents more than half of the company’s volume. Under this, Oriflame has Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia, Russia, and Ukraine. Oriflame has been suffering a lot in this CIS & Baltics region for quite some time and this has a strong negative impact on the whole picture. This region’s last quarter growth performance was -11% and was -10% in the last three quarters all together.

Oriflame has traditionally been strong in post-Eastern Bloc countries but now, apparently, Oriflame is hurt by being so dependent on this region. It has been obvious by now that the management could not make the necessary turnaround there. So, should Oriflame expand into other regions such as the US, Western Europe where it is either not present or weakly-represented? And should it also consider emphasizing and investing more in Asia and Latin America? I would think so.

Oriflame implements an “Avon-like” strategy with frequent regular catalogues, together with frequent, short-term price promotions and cross-sell campaigns. On the other hand, the company uses a typical, “Amway-like” stairstep-breakaway compensation plan on the field. Can it be that leaders are tired of trying to cope with both? Maybe.

Not so many are aware of it but this company has a food supplements line, too. First launched in a few oriflame.wellnessmarkets towards the end of 2008, this line was extensively introduced in 2009. In 2010, this category accounted for 3% of Oriflame’s business and it has not grown much since then. The category still represents only 5% of Oriflame’s global sales. For a cosmetics-only company since its inception in 1967, obviously, such an entirely different category introduction is much more complicated than it might seem. Looking at the business it generates after four years, maybe this category was not really necessary or maybe Oriflame should put more efforts behind it in terms of marketing activities.

Looking from outside, Oriflame definitely has some important choices to make. Investors might already have raised their voices looking at their shares’ value at the stock exchange as below:


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