September 02, 2014
Amway: Rising to the Top
by Barbara Seale
Headquarters: Ada, Michigan
Founders: Rich Devos and Jay Van Andel
Products: Nutrition, wellness, beauty and home products
Amway watchers have many things to admire: an impressive 55 years in business, sales growth of almost $1 billion in 2012 and 2013 combined, and brands that are among the leaders in their category. The company’s 2012 sales allowed it to climb to the top of the Direct Selling News Global 100 list, where it remains. Last year sales reached $11.8 billion.
Those imposing figures are just the latest in a history that includes growth in 13 of the past 14 years. The secret to its recent success? A strategy it calls Growth Through Innovation.
Now seven years into the strategy, the company has approximately doubled its size—its original goal. In fact, Amway executives can point to many successes. Most of its top 10 markets grew in 2012 and 2013, despite political turmoil and economic crises in some of them. As the company grows, its manufacturing capability grows, too. Amway is in the middle of a $332 million global expansion of it manufacturing and research and development, including four facilities in the U.S. that support the Nutrilite® brand, a new manufacturing facility in India, a second manufacturing site in Vietnam and an R&D center in China.
Amway has fueled its growth by focusing on the basics, providing products customers want to buy and creating an experience that satisfies the entrepreneurial needs of its 3 million Amway Business Owners (ABOs). Along the way, Amway has learned to customize its approach so that it creates success in many markets at the same time.
“The priority we’ve set around the world is on the experience of both customers and Amway Business Owners,” says Amway Chief Sales Officer John Parker. “We try to ensure that we’re providing the right support, tools, products and training to create an environment that helps people achieve their goals. It takes hard work, and there was no silver bullet—not one single product or initiative. Achieving growth around the world has required getting the right portfolio of strategies in place, strong partnerships in our regional organizations, and executing effectively.”
|Global R&D expansion was one of the goals met by Amway’s Growth Through Innovation strategy.|
In China, a fairly new market where the country’s unique regulatory environment requires direct sellers to adapt their traditional business models, Amway focused on brand-building, lots of training and ensuring that its products meet the unique needs of Chinese consumers, where nutrition and herbal remedies are a core part of the culture. The work is paying off. Amway earned about 40 percent of its 2013 revenue in China.
In stark contrast with China, the company’s business in Japan is more developed. Parker says that some of Amway’s most innovative work in the last few years has been done in Japan. Though it has been a challenge, a stagnant economy coupled with uniquely demanding, sophisticated consumers tests every company.
“For our business in Japan to get on a growth track, we needed to understand the unique nuances of the Japanese consumer,” Parker says. “One issue is the level of service they demand. As Americans, it’s hard to appreciate the service demands there, but our team there did a fantastic job of understanding where we weren’t delivering against service expectations and raising the bar uniquely in Japan. Again, it wasn’t just one magic bullet, but the right combination of initiatives: delivery, customer service, and the type of experience we offer in training centers and brand centers in Japan. Product launches created growth there, and the launches of skincare products that appealed to Japanese consumers have been very successful.”
Amway coupled product launches in Japan with training, tools and innovative events in clubs and on beaches that focus on brand-building, but without the traditional business presentations. Many initiatives are especially focused on achieving the right combination of initiatives for ABOs, and a focus on customer satisfaction drove excitement in the under-35 demographic of consumers
“At the end of the day there are certain things we’ll do well at headquarters and certain things we must empower our teams around the world to do,” Parker explains. “We had to figure out the formula.”
The second half of the formula revolves around products, especially the company’s star brands—Nutrilite and Artistry®—which open doors for ABOs around the world.
Nutrilite, the company’s line of wellness products, pre-dates Amway itself. This year Amway celebrates the 80th anniversary of Nutrilite. In fact, Amway founders Jay Van Andel and Rich DeVos started their direct selling careers in 1949 as Nutrilite distributors. The brand was already 15 years old. Rich has said that without Nutrilite, there would be no Amway. Jay and Rich introduced the Nutrilite brand to Amway distributors in 1972 when they acquired a 51 percent interest in Nutrilite. They gradually acquired more and more of Nutrilite stock until 1994, when they purchased Nutrilite Products in full. According to Euromonitor International Limited, today Nutrilite is the world’s No. 1 selling vitamins and dietary supplements brand, accounting for almost half of Amway product sales. One of the earliest wellness products, Nutrilite Double X®, is still the company’s flagship nutrition product.
The company’s other mega-brand is Artistry. Also according to Euromonitor, for years the product line has been in the world’s top five largest-selling premium skincare brands, and among the world’s top 10 largest-selling premium cosmetic brands. The product line was born in 1959, the same year Amway was founded. Today it includes 250 products that are sold in 50 countries around the globe. Some 25 percent of Amway product sales are Artistry products.
Amway founders launched the company with one of the first biodegradable products, L.O.C.™ (Liquid Organic Cleaner) Multipurpose Cleaner. Today the L.O.C. name has morphed into the LEGACY OF CLEAN® brand, which includes an extensive line of products made with naturally derived ingredients. The company also offers eSpring water treatment and purification systems—now the world’s No. 1 selling brand of home water treatment systems*—as well as XS® Energy Drinks. While Amway offers all these product lines, its revenue workhorses are the Nutrilite brand of nutrition products and Artistry skincare and cosmetics. With some 450 individual products, Amway is a beauty and wellness powerhouse, offering products and the Amway opportunity in more than 100 markets around the world.
Artistry and Nutrilite share some characteristics beyond their goliath revenue-production abilities. They’re both backed by science and developed by robust research and development teams. They have the support of Scientific Advisory Boards. And they were birthed by entrepreneurial creative teams comprising the founding families at Amway and Nutrilite Products. Today their legacies continue. Dr. Sam Rehnborg, son of Nutrilite Founder Carl Rehnborg, is now President of the Nutrilite Health Institute, while Steve Van Andel and Doug DeVos follow in their fathers’ footsteps, serving as Chairman and President of Amway, respectively.
A look at Amway’s approach to the Nutrilite brand reflects the way it manages others in the company. It starts with Amway’s commitment to innovation and quality in all of its products.
“The secret is if you are true to your roots, that commitment becomes part of your DNA. It’s second nature to every employee,” says Kanan Banerjee, Vice President, Global Brand Management, Nutrition and Wellness. “No matter which function you talk to, it’s our benchmark, as well as our legacy.”
When Amway develops Nutrilite products, it ensures that they are rooted in nature, differentiated by their phytonutrient story, and best-in-class. To that foundation of plant-based ingredients, Amway adds science, which often allows products to provide a targeted benefit, such as memory support. And Amway ensures that products are relevant, conducting research into key consumer needs.
“With the number of scientists we have, the number of ideas for products can grow exponentially,” explains Audra Davies, Vice President of Nutrilite Product Development and Analytical Science. “We must prioritize all those ideas, so the criteria of consumer relevance, combined with science, combined with our nature story, create a winning combination.”
Part of the product-science combination includes the publishing of basic scientific research, such as a report published in August. Released by the Nutrilite Health Institute of Amway, The Global Phytonutrient Report highlights a significant shortfall in fruit and vegetable consumption in global diets, preventing individuals from receiving crucial health benefits. It reveals that the majority of adults worldwide would have to at least double their current consumption of fruits and vegetables to meet the World Health Organization’s minimum recommendation of five servings per day. The vast majority of adults worldwide—60 to 87 percent across 13 geographic diet regions—fell short of this recommendation.
The research indicates a global gap between the recommended amount of fruits and vegetables and what adults are actually eating, despite a growing body of research, which suggests that eating foods rich in phytonutrients—organic compounds found in fruits and vegetables—provides a range of health benefits, such as supporting the body’s antioxidant defenses and immune system.
Reports such as this one help reinforce the relevance of Amway products. Davies regularly takes the story of the science behind Nutrilite products to meetings of ABOs. She believes that they value the company’s commitment to science.
“It differentiates our brand and validates our product offerings in the marketplace,” she notes. “Sometimes products have gone through hundreds of thousands of tests before being launched. That gives ABOs confidence in the quality of the products, validates the health benefits of the products as part of a healthy lifestyle and helps them explain ‘why Nutrilite, why Amway?’ ”
Amway ensures that ABOs have access to communications and sales tools that meet the needs of both the ABOs and their customers. Tools such as videos, unusual events, free training, digital apps for a variety of functions and even endorsements all increase credibility and ease the sales and prospecting process. And realizing that the under-35 demographic is becoming a larger part of the salesforce, Amway is developing new methods and frequencies of recognition.
“We haven’t cracked the code yet,” Parker says, “But I think we will need to adapt our recognition programs as a company to deliver more recognition earlier and in new ways—online, for example. Likewise, we need to empower leaders in the field to help them provide more recognition earlier in the Amway experience. We’re thinking about how we can build recognition into social media platforms. Those things are part of the psyche of the next generation, so we have to figure out how to deliver there. It’s not going to be a nice-to-have. It’s a requirement.”
Such efforts reflect the customization in Amway’s global business these days. Parker believes that the next 10 years will see Amway focused on getting the right growth initiatives implemented in the right markets based on local entrepreneurs and consumers.
“For a big company like Amway, it would be easier if we had the same three initiatives around the world. Sometimes that will be the case, sometimes not,” Parker says. “We’ll meet consumers where they’re at with products and messages that resonate. We measure our success based on the success of our business owners—how many people are achieving the goals they set in their Amway business each year; how compelling are the products, training and events we’re doing every year; and we have to add the social dynamic into the mix as well. If we can create an atmosphere where people are enjoying what they’re doing, that’s an important part of the equation for our business. It might look different around the world, but the outcome is the same.”
Nutrilite: Celebrating 80
Photo on left: Amway Co-Founders Rich DeVos and Jay Van Andel (bottom row, second and third from the right, respectively) pose with Nutrilite Founder Carl F. Rehnborg and his wife Edith Rehnborg, in 1956. (Amway) Photo on right: Carl F. Rehnborg in his Buena Park, California, office, circa 1950. (Amway)
Eight decades of success deserves a party, and Amway is celebrating the 80th anniversary of Nutrilite by launching the second edition of The Nutrilite Story: Past, Present and Future. The first edition was published five years ago. The update, which Amway published as an ebook, adds five chapters that chronicle the brand’s tremendous growth from 2009 to 2014. That growth reflects advancements in research that drive innovative product development, investment to expand global manufacturing capabilities, and the unique global agribusiness approach that supports Nutrilite organic farms. The book also adds entries from more than 100 top-selling Amway Business Owners.
The book’s author, Dr. Sam Rehnborg, is the son of Nutrilite creator Carl Rehnborg and the President of the Nutrilite Health Institute. “Dr. Sam,” as he is affectionately known throughout Amway, inherited his father’s passion for creating optimal health through a plant-based diet and plenty of exercise. And like his father, he recognizes that people around the world simply don’t live the lifestyle needed to reach their optimal health. Supplements help fill dietary gaps. That’s been the role of Nutrilite for 80 years.
“It gives me intense pleasure to see people awakening to the connection between nutrition, health, and disease prevention,” Dr. Sam says. “The heart of the Amway business is exactly what my father was after—people taking charge of their lives. When you do, you take responsibility for your health, your wealth and the health of the planet.”
He points with pride to the Amway sales model—also his father’s brainchild—which is based on satisfied customers getting excited about the product and sharing it with others. And he is proud that the products themselves are supported by scientific research and ingredients harvested at Amway farms—over 6,400 acres in the U.S., Mexico and Brazil. Nutrilite is the only global vitamin and mineral brand to grow, harvest and process plants on its own certified organic farms.
Proceeds from the sale of the book benefit the Nutrilite Power of 5 Campaign, which partners with nonprofit organizations to provide a micronutrient supplement to malnourished children through Nutrilite Little Bits, a one-gram nutrient powder packet containing 15 vitamins and minerals that can be sprinkled onto any food.
Dr. Sam explains, “Recent research has shown that if you can provide children through 5 years of age with good nutrition, they have a chance to fulfill their potential. If they’re malnourished, children will never be able to achieve their ultimate potential.”
Linked to the Nutrilite anniversary celebration and the Power of 5 Campaign is a ribbon cutting and open house on Sept. 17 that will showcase the newly designed Center for Optimal Health and rooftop replica of Carl Rehnborg’s historic Quonset hut, which served as his early home and lab. The ceremony is one of a series of events at more than 100 locations where Amway distributors have invited guests to donate their handprint to help in the fight against childhood malnutrition. For every handprint received, Amway will contribute $1 and match donations up to $400,000 to CARE International to support the Power of 5 Campaign.