As we now have their Q4 reports, it is the time for us to take a brief look at how the giants did last year. The group we will cover this week will consist of five of the six largest publicly-owned direct selling companies, plus Amway. Herbalife announced it would report towards the end of this month. We will cover Herbalife in a separate review. As you will see, each of these companies came with very interesting figures, to say the least.
Let’s have a look at them one by one…
Avon’s Q4 sales was down 12% as compared to the same period of 2013, and its yearly revenue was down 11% as well. So, Avon has been recording a worse year one after the other since 2010 (please see above chart).
Total units sold decreased by 5%, and active representatives were down 5%, too, in 2014.
Regional performances in 2014 were as follows: North America -17%; Latin America -12%; Europe, Middle East & Africa -7%; and Asia Pacific -7%. Not even one growing region!
Avon’s top four markets are Brazil, Mexico, Russia, and the US. They represent about half of Avon’s revenue. The management points out active representative trend as the area where Avon’s US business remains challenged. The company is not happy with the retention rates of new representatives. Avon said the expectation is to achieve a profitable operation in the US in 2015.
Looking back, CEO Sheri McCoy said during the earnings call, “As I acknowledged previously, the degree of difficulty has been greater than when we set the goals in late 2012, and we remain behind where we thought we would be, particularly in terms of revenue growth. And in terms of prioritizing the issues now, she adds, “Improving representative engagement is my #1 global concern.”
Going into the digital world, McCoy emphasizes the role of “mobile”. She explains the tool they will be providing to their representatives as: “It will allow our representative to take an order when she’s face-to-face with a customer. Ideally, she can also have her customer put that into her phone and text it to the representative or come directly to Avon, and she gets credit for that. So I think that’s actually going to change the whole approach of direct selling.”
Avon’s budget for 2015 anticipates delivering a modest revenue growth globally.
Natura closes 2014 with a solid 5.7% increase in revenue. That said, we should bear in mind that its pace of growth has slowed down recent years (13.5% in 2012, 10.5% in 2013, and 5.7% in 2014).
The management was especially not happy with the results in Brazil, saying, “The 2014 results reflect this scenario of transition. It is important to recognize that the results in Brazil were well below our expectations, where sales grew by 1.9%, while the overall target market regained strength to post growth of around 10%.”
In 2014, 81% of Natura’s sales originated from Brazil; 10% from Argentina, Chile and Peru; 6% from Mexico and Colombia; and 3% from “Other” that includes the operations is France. Natura’s markets outside Brazil increased their total share by 3 points last year. Natura has 1.3 million consultants of which 1.3 million are in Brazil.
The management says, “In the International Operations, we will accelerate the transfer of innovations and lessons learned, particularly in countries where the brand is already more consolidated, such as Argentina, Chile and Peru, and continue to expand our sales channel and knowledge of the Natura brand, particularly in Colombia and Mexico.” Having seen this, we can conclude Natura does not have any agressive international expansion plans, at least in the near future.
The company has introduced digital channel at the service of its consultants, named “Natura Network”. It was meant “to monitor changes in the ways and habits of interpersonal relationships”. With the help of this, Natura announces over 98% of its orders are now being placed via the Internet.
Late last year, Natura had a leadership change. After 25 years of service at Natura, ten of which as CEO, Alessandro Carlucci (also was the Chairman of the WFDSA between 2011-2014) left the company. As his successor, the Board of Directors appointed Roberto Lima, who had served as a board member.
For more on Natura’s 2014 performance please click here.
Nu Skin’s Q4 performance was a record-low among the five companies: -42%. Year-over-year quarterly sales decrease came from all of Nu Skin’s regions: South Asia/Pacific (-13%), EMEA (-33%), Americas (-35%), North Asia (-35%), and Greater China (-56%). The total number of active distributors decreased by 10%, too.
“While 2014 started out with some challenges, we were pleased to conclude the year with stabilization in our global business. We delivered the results we expected in the fourth quarter,” said CEO Truman Hunt. In explaining the drop in sales in 2014, he continued saying, “In the second half of 2013, we launched our weight management system that generated about $550 million in sales. This launch helped the company post a nearly 50% year-over-year growth rate in 2013. A 50% growth rate is hard to lap even in the best of circumstances, so these tough comps of 2013 to 2014 made for a challenging 2014.” It seems those who bought that “system” in 2013 did not at least repurchase it in 2014, providing just another tool to those who have been attacking the industry in the recent years.
This year Nu Skin said it had plans to rollout a number of new essential oil products starting in the second quarter. Commenting on this, CEO Hunt said, “It’s not just a one company phenomenon (H.O: Meaning, doTERRA who has been strong in this category). A lot of the companies that track market data still don’t see essential oils on their radar screen necessarily. But we do, we think it’s a growing category. And for us, given our global geographic footprint, when we see a category like this emerge, we say to ourselves, ‘Why not take advantage of our global footprint? And take advantage of a growing category before some of the younger companies without the global footprint can really go into foreign markets.’”
Nu Skin’s strategic growth has been quite good, on the other hand. As you can see on the above chart, the company has almost doubled its sales in the last five years, making it the best among the five covered.
Q4 was another quarter of disappointment for Oriflame with a 5% decrease in sales as compared to the same quarter of 2013. With this, Oriflame’s yearly sales growth was -10%, and Oriflame’s revenue has been in a decline for the fourth consecutive year.
CEO Magnus Brannstrom said, “2014 has been a year marked by challenges of various kinds for Oriflame… The slower local currency sales development in the first quarter-to-date reflects the continued external challenges and uncertainties we are likely to be faced with throughout 2015.”
Oriflame not only came up with unfavorable results on the sales side, profitability was also shaken. EBIDTA for the whole year for instance, was 26% less than 2013 and net profit was 52% less.
Oriflame’s CSI region contributed to Q4 performance with a -18%, and Europe with -11%. These two regions together account for more than 60% of company’s global business. Last year, Oriflame had troubles with the tax authorities in Russia and as a result, the company received the first level of tax court decision which was not in favour.
As a last note, Oriflame announced its global average full-time equivalent employees had dropped from 7,366 to 6,875. We don’t know if this 7% decrease was due to increased efficiency or due to layoffs.
For more on Oriflame’s 2014 performance please click here.
With a 5% drop in quarterly USD sales, Tupperware’s yearly revenue growth in 2014 was -2.5%. For the whole year, all regions but South America (+3%) contributed to this negative performance. Company’s year-end profitability was also impacted negatively with net income being 22% less than that of previous year’s.
In fact, Tupperware seems to have stopped growing globally. In the last three years covering 2012-2014 period, company’s sales increase was only 0.08% ($2.606b vs $2.585b). The number of its active consultants was on the other hand, in a downward slope: 801,000 (2012), 784,000 (2013), and 776,000 (2014).
”While there continue to be challenging external forces, this quarter’s results demonstrated we can and will continue to navigate through the environments we find ourselves in,” CEO Rick Goings commented.
Management said they were particularly happy with last-year performances in Brazil ($200m/year) that became Tupperware’s third biggest market, and China ($100m/year) that made it the ninth biggest. The water filter that sells for $1000 is company’s “hot” product in China where one third of Tupperware’s business comes from water-related products. Indonesia remained in 2014 to be Tupperware’s largest market.
During the investors’ meeting, CEO Rick Goings comment on “MLM” was noted with interest. He said, “We think it’s not a sustainable way to do a direct selling business when all you basically are a wholesale buying club. So, no interest at all in going that direction.”
For 2015, Tupperware’s official expectation is that the global sales in USD will be 4-6% less than what it was in 2014.
Regular readers would know that this quarterly review has been focusing on the largest six public companies, for two reasons: First, to give an overall picture without boring the readers with so many companies’ figures; second, we only have access to public companies’ reports in detail.
However, for the third time this year, Amway reported its yearly figures. According to the announcement made, Amway’s global sales last year was $10.8 billion. This represented an 8% decline from 2013 ($11.8 billion). Even with this though, Amway has kept its leadership position in the global direct selling industry.
The top 10 markets for Amway in 2014 were China, South Korea, Japan, United States, Thailand, Russia, Taiwan, India, Malaysia and Ukraine, the company said.
Nutrition products constituted the largest category for Amway (43% of revenue), followed by beauty products (25%), durables (19%), home care products (8%), and others (5%).
In 2015, Amway plans to complete $332-million expansion in five manufacturing sites around the world. Other new manufacturing facilities also are being built in the state of Washington, California, India and Vietnam.
For more on Amway’s’ 2014 performance please click here and.
So, this was how six of the giants did last year. Not so good, I must say. Some blame the external factors like strengthening of a currency or a political turmoil in an area. At the end of the day, it is the end-figure what counts. My wishes are for a better year for all!