Billion Dollar Club

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  • 1. Industry News The Billion DollaR Club How the Top Companies Compare by Brittany Glenn
  • 2. Tired of reading about the global economic crisis? Here’s the good news: Among the many industries falling by the wayside, the direct selling industry is charting a strong and steady course around the world.So strong and steady that we thought it would be interesting to see how the industry’s top companies—those with annual billings of more than US$1 billion— were faring, despite all the doom and gloom reported by the media. We decided to call this very exclusive group of industry leaders the billion-dollar club. Although each company has a healthy respect for today’s global economic challenges, each is experiencing continued growth and success. Most of the executives we spoke to believe the current financial crises are responsible, at least in part, for the direct selling industry’s current solvency and success. continued on page 8
  • 3. The Billion Dollar Club continued from page 7 And now, we’d like to invite you to peek inside the companies that comprise the direct selling • Name of Company: Avon Products Inc. industry’s own billion-dollar club. • Type of Company: Public (AVP—NYSE) • Number of Employees: 42,000 • Number of Markets: More than 100 1. Avon Products Inc. $10.9 Billion • Revenue: $10.9 billion in revenue Topping the billion-dollar club list is, of course, New York City-based for last four quarters (Q4 2007 – Q3 public company Avon (AVP—NYSE), the industry’s mother ship. As 2008); $9.9 billion in revenue for 2007 the world’s largest direct seller, Avon markets to women in more than 100 • Jul – Sep 2008 (Q3 2008): countries through 5.5 million independent sales representatives. $2.6 billion in revenue Judging by Avon’s latest financial figures and its third-quarter earnings • Apr – Jun 2008 (Q2 2008): statement, the company is in a growth cycle. $2.7 billion in revenue In 2007, Avon’s revenue was $9.9 billion. Over the last four • Jan – Mar 2008 (Q1 2008): quarters—Q4 2007 through Q3 2008—Avon’s revenue was $10.9 billion. $2.5 billion in revenue Additionally, third-quarter 2008 revenue grew to $2.6 billion, a 13 percent • Oct – Dec 2007 (Q4 2007): increase over Q3 2007. $3.1 billion in revenue “Avon’s third-quarter performance reflects continued momentum of our turnaround plan,” Andrea Jung, Avon Chairman and CEO, said in a press release. “Our investments in advertising and the Representative Value Proposition (RVP) are yielding strong results.” Avon was ranked No. 265 on the 2008 Fortune 500 list. • Name of Company: Amway 2. Amway Corporation $8.2 Billion Corporation • Type of Company: Private In the No. 2 spot is direct selling giant Amway. Its annual sales for 2007 • Number of Employees: 13,000 were $7.16 billion, and for 2008 were $8.2 billion. • Number of Markets: More than 80 Amway Chairman Steve Van Andel says the company continues • Sales: $7.16 billion annual sales to remain optimistic about its future growth potential, despite a bleak in 2007; $8.2 billion annual sales economic outlook in some of its markets. “Amway’s rapid expansion in 2008 around the world and the acceptance of the direct selling business model by countries such as Russia, India, Ukraine and others, has blunted the impact of the economic downturn on our company,” he says. In late 2007, Amway completed its production and warehousing facility in Vietnam. Since then, Amway Vietnam Co. Ltd. has become one of the company’s fastest-growing markets. “Officially launched in February 2008, Amway Vietnam now has more than 40,000 independent business owners throughout the country,” Van Andel says. In 2009, Amway plans to increase its efforts in more established markets such as the United States and Great Britain—“to revive our former buoyancy,” Van Andel says. “We’re expecting big things to happen in 2009, such as continuing to increase our visibility through advertising, sponsorships and a growing physical presence around the world,” he says.8 Direct Selling News | February 2009
  • 4. The Billion Dollar Club But to a certain extent, Vorwerk is 3. Vorwerk & Co. KG $3.15 Billion protected from financial turbulence. “As a Founded in 1883 as a carpet company, Wuppertal, financially viable, family-owned company, we German-based private firm Vorwerk & Co. KG has been are not dependent on banks,” Hardt says. selling quality products—from household appliances to Hardt says, as others have, that more people may be cosmetics—through the direct sales channel since 1930. willing to join Vorwerk—and other direct selling companies, For 2007, Vorwerk reported a sales volume of $3.15 billion too—during tough financial times. “Availability of salespeople (€2.32 billion). is one of the most important factors for success in direct Vorwerk is the parent company of JAFRA Cosmetics, sales,” he says. “Our growth expectations are unlimited.” which had a sales volume of $469.71 million (€342 million) in 2007. Regarding the current monetary malaise affecting countries worldwide, “Vorwerk’s managing partners decided not to participate in the global economic crisis,” says Vorwerk Senior Vice President of Corporate Communications Jürgen Hardt. “In truth, the European—and especially German— • Name of Company: Vorwerk & Co. KG economy is better prepared for global turbulences than other • Type of Company: Private – parent company parts of the world.” of JAFRA Cosmetics While Hardt says Vorwerk’s growth has been significant • Number of Employees: 23,000 in the past 10 years, he admits the firm must be careful to • Number of Markets: 61 balance potentially negative influences. “The company will • Sales Volume: €2.32 billion ($3.15 billion) in not be totally free of the negative impact of the crisis,” he says. sales volume for 2007 “While our business isn’t countercyclical to the economy, 4. Herbalife Ltd. $2.4 Billion as of Q3 2008, it seems to be resilient to the economy,” Los Angeles-based public company Herbalife says Des Walsh, Herbalife Executive Vice President, (HFL—NYSE) sells its products through more than Worldwide Operations and Sales. “Eighty percent of our 1.9 million independent distributors who conduct business is outside the United States, so we’re constantly business worldwide. In 2007, Herbalife’s net sales were operating in various economies. Naturally, in a tough $2.14 billion. Over the last four quarters—Q4 2007 economic climate, our business opportunity is even more through Q3 2008—the company’s net sales were attractive to someone who loses his job or is in need of $2.4 billion. supplemental income.” Walsh says Herbalife has made substantial investments • Name of Company: Herbalife Ltd. in markets outside the United States. In 2008, Herbalife • Type of Company: Public (HFL—NYSE) opened four new markets: Honduras, Guatemala, • Number of Employees: 3,644 Nicaragua and Ecuador. • Number of Markets: 70 Herbalife has also invested more than $50 million • Net Sales: $2.4 billion in net sales for in upgraded Oracle applications, so it has the IT last four quarters (Q4 2007 – Q3 2008); infrastructure necessary to support significant $2.14 billion in net sales for 2007 future growth. • Jul – Sep 2008 (Q3 2008): $602.2 “We’re currently doing business in 70 countries, but million net sales there are several markets we are planning to open in 2009,” • Apr – Jun 2008 (Q2 2008): $639.7 Walsh says. “Also, we’re focused on more deeply penetrating million net sales our existing markets and globalizing best practices.” • Jan – Mar 2008 (Q1 2008): $604.4 million net sales • Oct – Dec 2007 (Q4 2007): $578.1 million net sales continued on page 10 www.directsellingnews.com 9
  • 5. The Billion Dollar continued from page 9 Club • Name of Company: 5. Mary Kay Inc. $2.4 Billion Mary Kay Inc. Addison, Texas-based private company Mary Kay Inc. was founded in • Type of Company: 1963 by Mary Kay Ash with her life savings of $5,000. From its humble Private, family-owned beginnings in a 500-square-foot Dallas storefront, Mary Kay Inc. has grown • Number of Employees: into one of the largest direct sellers of skin care and color cosmetics in the 5,000 world, with a global independent salesforce exceeding 1.8 million. • Number of Markets: Since the firm’s founding, Mary Kay Inc. has averaged double-digit growth More than 35 each year. In 2007, the firm generated $2.4 billion in wholesale sales. • Sales: $2.4 billion in Mary Kay opened its first international market—Australia—in 1971, and wholesale sales for its most recent—India—in 2007. Among its more than 35 active markets, 2007 Mary Kay’s three top international markets are China, Russia and Mexico. In 2009, Mary Kay Inc. plans to invest time and money in its corporate social responsibility initiative, Pink Changing LivesSM. Mary Kay Inc.’s financial and product donations spotlight changing the lives of women and children around the world, with a focus on the prevention of violence against women. Additionally, Mary Kay Inc. will plant 100,000 trees in North America and embark on a groundbreaking initiative to turn waste from its manufacturing process into usable energy. 6. Primerica Financial Services Inc. • Name of Company: Primerica Financial $2.3 Billion Services Inc. Based in Duluth, Ga., private firm Primerica Financial • Type of Company: Private, subsidiary; Services—a subsidiary of public parent company Citi Parent company, Citi (C—NYSE) (C—NYSE)—boasts the largest salesforce in the financial • Number of Employees: 2,000 services industry. There are approximately 100,000 licensed, • Number of Markets: Three independent Primerica representatives across the United • Revenue: $2.3 billion in revenue in 2007 States (including Puerto Rico), Canada and Spain. For Primerica, the current credit crunch is a blessing in disguise, or maybe just a blessing. Primerica Co-CEO John Addison is known for saying, “There might be a recession in America, but there’s no recession at Primerica.” The numbers bear him out. “Through the first three quarters of last year, of the top 100 largest life insurance significant investments in our technology platform companies in the United States, 89 had a net decrease to make the recordkeeping for our independent in their capital base,” Addison says. “Only 11 had an contractors simpler.” increase in their capital base, and the third largest capital Addison expects these investments to pay dividends base increase out of all the life insurance industry was in the near-term—and even in the midst of a recession. Primerica Life at $120 million.” “Our model of building distribution weathers the storms At a time when layoffs and cutbacks are the rule not that are going on in the world incredibly well,” he says. the exception, especially in the financial services industry, “Our goal is a 20 percent increase in recruiting, a 20 Primerica is investing in its future. “We’ve implemented percent increase in licensing. While everybody else is a new bonus that’s very much aimed at licensing and focused on doing damage control, we’re going to go do building new people,” Addison says. “We’re making some damage.”10 Direct Selling News | February 2009
  • 6. 7. Tupperware Brands 8. Forever Living Products Corporation $2.21 Billion International Inc. $2.1 Billion Publicly traded Tupperware Brands Corporation (TUP—NYSE), based in Orlando, Fla., sells storage and • Name of Company: Forever Living Products serving products through Tupperware, and beauty and International Inc. personal care products through Avroy Shlain, BeautiControl, • Type of Company: Private Fuller, NaturCare, Nutrimetics, Nuvo and Swissgarde. • Number of Markets: 135 In 2007, Tupperware’s sales were $1.98 billion. • Annual Sales: $2.1 billion in sales for 2007 In the last four quarters—Q4 2007 through Q3 2008—the company’s sales were $2.21 billion. “Our emerging markets accounted for 56 percent of Private firm Forever Living Products, based in our third-quarter sales, and the bulk of these businesses Scottsdale, Ariz., sells aloe vera drinks and aloe vera- continued to perform extremely well,” says Chairman and based aromatherapy products, cosmetics, dietary and CEO Rick Goings in Tupperware’s Q3 earnings release. nutritional supplements, lotion, soap and tooth gel “We believe we will generate modest local currency growth products in some 135 markets. Annual sales for 2007 from established markets in 2009 and forward, as we’ve were $2.1 billion. seen the payoff in selected markets of the work we’ve done According to Rex Maughan, Forever Living over the last several years to revitalize these businesses. CEO and Chairman of the Board, “2008 has been a Tupperware is listed as No. 903 on the 2008 Fortune 1,000 list. remarkable year for Forever Living. “In spite of the global turmoil, I am grateful for the fact that Forever Living is going strong,” Maughan • Name of Company: Tupperware Brands says. “Although I have not seen all the figures yet, I am Corporation confident that 2008 will be a great year. Although no • Type of Company: Public (TUP—NYSE) business is recession-proof, there is always opportunity • Number of Employees: 12,800 in every business climate. • Number of Markets: 100 “When times are tough, people often look for ways • Sales: $2.21 billion in sales for last four quarters to earn more money or even find an alternate source of (Q4 2007 – Q3 2008); $1.98 billion in sales for income in case their ‘main’ job is threatened.” 2007 • Jul – Sep 2008 (Q3 2008): $513 million in sales • Apr – Jun 2008 (Q2 2008): $584 million in sales • Jan – Mar 2008 (Q1 2008): $543 million in sales • Oct – Dec 2007 (Q4 2007): $577 million in sales 9. Oriflame Cosmetics $1.68 Billion Swedish company Oriflame offers high-quality skin care, fragrances, color cosmetics, toiletries and accessories. Oriflame has grown rapidly, recently opening two markets—Iran and China. • Name of Company: Oriflame Cosmetics “We have increased sales by more than 17 percent per year • Type of Company: Public (ORI—SDB.ST) on average for the last 20 years,” says Magnus Brännström, • Number of Employees: 7,000 Oriflame’s CEO. “This is clearly above-market growth. We intend • Number of Markets: 61 to continue to grow more than the cosmetics market in the future. • Sales: $1.68 billion in sales for 2007 We believe we will take market share in 2009.” continued on page 12 www.directsellingnews.com 11
  • 7. The Billion Dollar Club continued from page 11 • Name of Company: Natura Cosmeticos SA • Type of Company: Public – São Paulo Stock Exchange (NATU3) 10. Natura Cosmeticos SA • Number of Employees: 5,919 $1.52 Billion • Number of Markets: Seven São Paulo, Brazil-based firm Natura Cosmeticos SA • Net Revenue: $1.52 billion in net revenue for last four is traded on the São Paulo Stock Exchange (NATU3). quarters (Q4 2007 – Q3 2008) Natura operates in the Chile, Peru, Argentina, Mexico, • Jul – Sep 2008 (Q3 2008): Net revenue R$921.1 million Colombia and Venezuela. It manufactures deodorants, = $412.21 million sunscreens, lotions, creams, lipsticks and perfumes. • Apr – Jun 2008 (Q2 2008): Net revenue R$883.1 million Over the last four quarters—Q4 2007 through Q3 = $395.21 million 2008—Natura’s revenue was $1.52 billion. • Jan – Mar 2008 (Q1 2008): Net revenue R$668 million = Natura’s Q3 earnings statement says: “The globalized $298.66 million world’s main economies are currently undergoing a period • Oct – Dec 2007 (Q4 2007): Net revenue R$937.8 million of significant change. Developing countries, however, = $419.29 million may be less affected by the crisis, and could thus play an important role in the growth of the global economy. Our report. “We have decided to suspend our company is highly profitable, has strong cash generation entry into that market for an indeterminate and a treasury that operates safely and selectively.” period. We will maintain our operation Natura is focusing on international expansion, but the in France as part of a group of initiatives firm is choosing its markets with care. “Studies for the to build our global brand and as a source implementation of a United States operation have shown of learning about demand in a highly that the moment is not suitable,” reads the Q3 earnings sophisticated market.” 11. Nu Skin Enterprises Inc. $1.23 Billion • Name of Company: Nu Skin Enterprises Inc. Provo, Utah-based publicly traded • Type of Company: Public (NUS—NYSE) company Nu Skin Enterprises • Number of Employees: 1,200 Inc. (NUS—NYSE) markets • Number of Markets: 48 personal care products under the • Revenue: $1.23 billion in revenue for last four quarters Nu Skin® brand; science-based (Q4 2007 – Q3 2008); $1.15 billion in revenue for 2007. nutritional supplements under the • Jul – Sep 2008 (Q3 2008): $310.27 million in revenue Pharmanex® brand; and technology-based products • Apr – Jun 2008 (Q2 2008): $321.7 million in revenue and services under the Big Planet® brand. • Jan – Mar 2008 (Q1 2008): $298.1 million in revenue Over the last four quarters—Q4 2007 through • Oct – Dec 2007 (Q4 2007): $306.1 million in revenue Q3 2008—Nu Skin Enterprises’ revenue was $1.23 billion. In 2007, the firm’s revenue was $1.15 billion. Ritch Wood, Nu Skin Enterprises Chief Financial Officer, says although there are repercussions excitement in these two markets,” Wood says. “As of December for every company because of the current economic 2008, South Africa has welcomed 2,100 distributors. We look situation, he believes Nu Skin Enterprises is in a position forward to continued growth from both of these markets to weather the storm due to its sales momentum, in 2009.” innovative products and strong balance sheet. Finally, Nu Skin reminds us that sharing success is the key “In 2008, we experienced double-digit growth in many to attracting more success. of our markets around the world, and we look for this “Nu Skin and its distributors continue to generate success— momentum to continue in 2009,” Wood says. “We are looking and in the process, continue to be a force for good by giving forward to a great 2009.” back to those in need,” Wood says. “As dollars for charitable Nu Skin Enterprises opened two new markets—South giving shrink, the Nu Skin Force for Good Foundation Africa and the Czech Republic—in 2008, bringing the continues to grant more than $1 million each year to help company’s market total to 48. “We have already seen great nourish the minds and bodies of children.”12 Direct Selling News | February 2009
  • 8. TheBillion-Dollar Bonus Billion Dollar At a Glance ClubAlthough we did not include Keller Williams Realty in the official billion-dollar club, the company deserves to be mentioned in this story. ThoughKeller Williams’ corporate office reports annual revenue of $119 million in Company Name Year Founded Revenue (in US Dollars)2007, the company’s 70,000 agents generated $3 billion in transaction Avon Products Inc. 1886 10.9 billioncommissions. The corporate office paid $40 million to its agents based on a Amway Corporation 1959 8.2 billionseven-level profit-sharing plan. Vorwerk & Co. KG 1883 3.15 billion Herbalife Ltd. 1980 2.4 billionWith its multilevel compensation and recruitment model, Keller Williams Mary Kay Inc. 1963 2.4 billionRealty may just be the direct selling industry’s best-kept secret. It has Primerica Financialbecome one of the largest and fastest-growing real estate franchise Services Inc. 1977 2.3 billionsystems throughout North America. Tupperware Brands Corp. 1951 2.21 billion Forever LivingKeller Williams Realty was founded in 1983 by Gary Keller and Joe Williams. Products Intl. Inc. 1978 2.1 billionIt began franchising in 1991 and opened its first Canadian office in 1998. Oriflame Cosmetics 1967 1.68 billionKeller Williams may not be the largest residential real estate franchise in the Natura Cosmeticos SA 1969 1.52 billionUnited States, but its agent-friendly business concept has made its mark. Nu Skin Enterprises Inc. 1984 1.23 billionEach Keller Williams franchise is agent-owned and -operated, commissionsare split at least 70/30 and the company rewards agents through multi-level * Revenues above are from 2007 or from the last four fiscal quarters.compensation, which they call profit sharing. “Keller Williams Realty’s mission is to build careers worth having,With more than 70,000 agents working from about 650 locations in the businesses worth owning and lives worth living,” Keller Williams CEO MarkUnited States (13 of those locations are in Canada), the strength of Keller Willis says. “Not only do we believe we can achieve our goals, but that ourWilliams’ foundation begins with its distinctive business model. The associates can best fulfill that mission by emphasizing the values of God,company is built on four focal points—culture, profit sharing, education family and then business, in that order.” It’s these philosophies that haveand technology. These areas define Keller Williams Realty as an industry given Keller Williams its unique culture within the industry—something theyinnovator and leader. call the “Keller Williams family.” continued on page 54
  • 9. The Billion Dollar Club Honorable Mentions Although these companies did not qualify for membership in the billion-dollar club, their annual sales and dynamic growth indicate they will soon join. Melaleuca Inc. $859 Million 50 percent of consumers have changed, and many of Based in Idaho Falls, Idaho, private company Melaleuca was those customers went with Stream Energy/Ignite.” founded in 1985 to market a tea-tree oil formulation called melaleuca oil. The company sells personal care products, In the January 2009 Direct Selling News, Domhoff cosmetics, household-cleaning supplies and vitamins. attributed these impressive numbers to a product that’s a necessity, saying, “One of the great things about Ignite is Melaleuca began with seven people; it now employs that we offer a product that is habitually used and everyone more than 2,400. Its net sales for 2007 were $859 must have, regardless of how the economy is performing.“ million, a fact it openly displays on its Web site. Stream Energy Chairman Rob Snyder says Ignite has The company’s operations are run from a 100,000-square- benefited from the current economic downturn “since foot corporate office complex along with manufacturing an increasing number of people have been investigating and distribution plants in Idaho Falls and Rexburg, new avenues for earning income and providing a Idaho (totaling 274,000 square feet). Melaleuca ‘fallback’ career. also has a 170,000-square-foot manufacturing and distribution facility in Knoxville, Tenn. “As to the parent company, Stream Energy itself, the firm has been almost wholly unaffected by the economic Name of Company: Melaleuca Inc. downturn insofar as, during periods of recession, Type of Company: Private consumers consistently pay their utility bills before Number of Employees: 2,400 purchasing items of discretionary spending,” Snyder says. Number of Markets: 18 Net Sales: $859 million in net sales for 2007 In 2008, Ignite expanded into Georgia, competing in that state’s natural gas market. The company already boasts approximately 2 percent of the market and Ignite $800+ Million 20,000 independent associates. Dallas-based private company Ignite is a subsidiary of electricity and natural gas provider Stream Energy. “In 2009, Stream Energy and Ignite intend to enhance their When Texas’s electricity market was deregulated in existing market positions in Texas for electricity services 2001, Stream Energy saw an opportunity. It chose and Georgia for natural gas services,” Snyder says. DSN direct selling as its marketing method, and Ignite was born in 2005. Already, the company is predicting Name of Company: Ignite more than $800 million in revenue for 2008. Type of Company: Private, subsidiary of Stream Energy “When Stream Energy entered the Texas market in Number of Employees: 350 2005, roughly 10 percent of consumers had changed Number of Markets: Two providers from their incumbents,” says Founder of Ignite Retail Sales: $606 million in retail sales for and Co-Founder of Stream Energy Chris Domhoff. “Now, 2007; over $800 million in retail sales for 2008 Direct Selling News has accumulated this information from various sources, including interviews, press releases, onlinesources such as Lexis Nexis and Hoover’s Online and public-company earnings reports. The companies included on this list areones we were able to confirm through our research; there may be others with revenue of more than $1 billion. No company wasintentionally omitted.14 Direct Selling News | February 2009