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May 31, 2016

Cover Story

Growth Comes in All Shapes and Sizes for the Global 100

by Andrea Tortora


Click here to order the June 2016 issue in which this article appeared or click here to download it to your mobile device.


IN THIS ISSUE:

DSN AWARDS:


Over the past seven years, the Direct Selling News Global 100 has become the definitive ranking of the world’s largest companies distributing their products and services through a network of independent direct selling entrepreneurs. But the list is much more than a recitation of company names and revenue numbers.

A deeper dive into the list unveils a dynamic channel. Direct selling company home offices, in partnership with their salesforces, are generating economic opportunities that have lasting social impact. They are accomplishing this in virtually every consumer product segment and in nearly every market around the world.

One of the insights gained from the 2016 Global 100 list is that growth within direct selling today can be as varied as the companies themselves. The list points out some common characteristics of growing companies: a focus on products, customers, serving their salesforce and creating a culture that reinforces a sense of family. It also reveals the power direct selling has to help a company grow rapidly, with more companies surpassing the $1 billion revenue mark than ever before. And, while direct selling continues to expand internationally, this year’s list also shows that there are plenty of growth opportunities to be had in the U.S.

Growing with Targeted Focus

Growth is happening, and it’s happening quickly. The time it takes direct selling’s top companies to surge to the upper levels of prosperity—and grow beyond $500 million and even to hit the $1 billion mark—is shrinking. How do upper middle market firms continue to prosper? They have a laser focus on superior customer acquisition; digital technology such as social commerce and data mining; and innovation at all levels.

Angela Loehr Chrysler, CEO of Team National, which increased its net sales by $150 million last year, said she and her team studied what was fueling the company’s year-over-year growth and developed strategies to keep those fires burning. The company is No. 26 on the Global 100 list, with 2015 revenue of $549 million.

For example, the company changed its core promotion efforts to increase rewards for new independent marketing directors as quickly as possible in order to capitalize on the early excitement and belief that comes with joining a direct sales opportunity. “We want to build up their belief, and that belief in turn inspires them to go out and have more success,” Chrysler says.


How do upper midmarket firms continue to prosper? They focus on products, customers, serving their salesforce and creating a culture that reinforces a sense of family.


Independent marketing directors can earn a cruise if they make two sales within their first two weeks. They get the support they need to do it within 24 hours of signing up, says Andres Forero, Vice President of Membership. A starter kit gets sent through the mail, but independent marketing directors can access all marketing materials, plus training videos online immediately. A mobile app that’s just 2.5 years old makes it all possible. And at first, “no one wanted to use it,” Forero says.

Team National executives did their homework and knew they needed to be in the mobile space, despite a salesforce that said it didn’t want or need the tool. Market research and internal Team National data said otherwise, so the app was created and became another arrow in the quiver. “That’s a hidden part of our success,” Chrysler says, noting that corporate provides a variety of tools that fit with the Team National system. Independent marketing directors can choose and use the tools that work best for them.

Data mining and statistics take the emotion out of decision making, and they are used more than ever to inform strategy about all aspects of the business, from product pricing to marketing materials. “We have sales leaders with great success who have never used the mobile app and we are OK with that,” Chrysler says. “Their teams are using it, and it is there and it lets us get into something different than the traditional way we did it.”

At It Works!, which offers personal-care and wellness products including its signature body contouring wrap, a game plan that allows for constant tweaking helps guide steady, fast growth, says CEO Mark Pentecost. It Works! is No. 29 on the Global 100 list with 2015 revenue of $748 million, an increase of $210 million over the prior year.

Pentecost and his managers spend a lot of time on preparation, culture and branding, and ensuring their consultants are properly trained in delivering these messages. In the past 15 years they’ve learned how to build a solid foundation. “Early on in the business, we had to learn when to say yes to opportunities and when to say no,” Pentecost says. “That was an important lesson, which has helped us get this far.”


“Early on in the business, we had to learn when to say yes to opportunities and when to say no. That was an important lesson, which has helped us get this far.”
—Mark Pentecost, CEO, It Works!


Social media is one area where It Works! shouts a resounding “yes!” It has become a business asset not to be ignored. “You have to embrace it,” Pentecost says. “We’ve taught our team to be thoughtful on social media. It’s been a change in mindset that has fueled our growth online.”

Kevin Guest, Co-CEO of USANA Health Sciences, agrees that social media has played an integral role in their success. Guest says, “Staying current, providing genuine content and reaching out on new platforms ensures we remain relevant to our field and our customers.” A key part of the USANA culture is the input executives seek from the field leaders. Guest says, “It has always been a part of our strategy to work closely with our Distributors and treat them as business partners. We use their feedback to create the tools they need to be successful.”

At Rodan + Fields, growth is fueled by focusing on the brand and the people, says Oran Arazi-Gamliel, Chief Global Officer. “The strength of our company is the winning combination of the strength of the brand in the hands of people that are trusted,” he says. “We are first and foremost a prestige skincare brand that is leveraging the channel as a go-to-market strategy.”

The Rodan + Fields culture and a combination of high touch, high tech and a social selling model that Arazi-Gamliel refers to as “Community Commerce,” which emphasizes that consultants are establishing caring relationships with their customers, even though technology plays a large part in the selling transaction. According to business intelligence firm Euromonitor, Rodan + Fields has been the fastest growing skincare brand in the United States for the past five years.

Expansion of the Billion Dollar Club

The ability to harness technology and data and execute on the insights those tools provide means companies can top revenue milestones at lightning speed. For some businesses, this puts the elusive $1 billion mark within reach in a matter years instead of decades. “The rate of speed at which firms are growing and hitting $1 billion is much faster,” says Bob Bass, a senior analyst at Amway’s world headquarters in Ada, Michigan. “Social media and digital commerce are combined to create an opportunity to share and tell the story while still leveraging friends and one’s network. We are just more connected, and we can see the opportunities available on a very quick time frame.”

Take a look at Jeunesse. A maker and distributor of youth enhancement products, the company broke the billion-dollar barrier in 2015 after just six years, growing sales by $672 million or 160.38 percent since 2014. The only other direct seller to achieve the $1 billion goal as fast as Jeunesse is Ambit Energy, which topped $1 billion in 2013 after launching in 2006. Scott Lewis, Chief Visionary Officer at Jeunesse, credits the company’s focus on generating growth in international markets for their meteoric rise to $1 billion.

According to Lewis, the company established 30 offices and 44 distribution centers around the world in six years. “Our key strategy was to build from the outside in,” Lewis says. “Rather than invest resources and drive growth in the domestic market, we invested in developing a strong international infrastructure, with a plan to get as many markets as possible around the world operating with $1 million monthly revenue, knowing this would set a foundation on which we could organically build sustainable growth for the long term.”


“Social media and digital commerce are combined to create an opportunity to share and tell the story while still leveraging friends and one’s network. We are just more connected, and we can see the opportunities available on a very quick time frame.”
—Bob Bass, Senior Analyst, Amway Inc.


Young Living, a maker and distributor of essential oils, also joined the Billion Dollar Club after boosting 2015 sales by $400 million or 66.67 percent. The 21 years it took Young Living to hit this milestone makes it only the fourth company to garner $1 billion in revenue in 21 years or less. Last year, Young Living invested heavily in infrastructure improvements, doubling shipping capacity, tripling manufacturing capability and growing from 1,000 to 2,000 employees in order to support the company’s growth trajectory. Though operating in 14 markets with three more market openings planned for this year, Young Living’s primary market remains the U.S.

Young Living embraces an ambitious customer acquisition model. The company’s goal is to bring essential oils into every home in the world.

Growth in the USA

The success of five companies on the Global 100 list exhibit the power that direct selling holds in the U.S. market. With sales only in the U.S., Thirty-One Gifts, Team National, Rodan + Fields, Team Beachbody and Stream are proof that there is a large, untapped market still available for the direct selling distribution model here at home.

It also illustrates that direct selling is applicable to a wide range of product categories within the market: handbags, beauty and personal care, health and wellness, energy services and savings memberships. Team National’s Chrysler says her company has no plans to expand into other markets—at least not until every person on the U.S. is covered by a Team National membership. She says Team National’s current growth shows that people here want to be their own boss: “That’s why we are seeing the YouEconomy grow with Uber and Airbnb. People are interested in growing their own wealth without having to work for someone else.”

In fact, Chrysler thinks that companies like Uber and Airbnb point out tremendous opportunities and could mesh well with direct selling. She envisions people who might rent out their home, use their car for Uber and be a distributor for a direct sales company all at the same time.

Five U.S companies appeared in the ranking for the first time this year and show the diversity in growth accelerators that can be found within the direct selling channel:

  • New Avon (No. 19)
  • Young Living (No. 20)
  • Le-Vel (No. 48)
  • Jamberry (No. 64)

  • Total Life Changes (No. 100)

New Avon is the resulting company after Avon Products Inc. sold its North Americca business earlier this year to Cerberus Capital Management LP. Cerberus acquired majority ownership of Avon’s domestic operations with a $435 million investment and took the company private.

Young Living, a leader in the essential oils category, is the veteran of the bunch, at 23 years old, and recently built out its infrastructure and manufacturing capabilities to meet growing demand, resulting in 2015 net sales of $1 billion.

Young companies Le-Vel and Jamberry have both embraced technology, building loyal communities and developing strong customer acquisition models in the process. Le-Vel guides its premium lifestyle brand from a cloud-based environment while nail-wrap maker Jamberry has successfully navigated virtual parties, with most of its nail parties now held online.

Health and wellness company Total Life Changes has seen a surge in growth over the past year, due in large part to the addition of key regional and national leaders in its North American market, and joins the Global 100 with $77 million in 2015 revenue.

Looking Ahead

As we close out the 2016 Global 100, we are grateful to all of the companies that have worked with us to share their stories and to contribute to creating more transparency in the direct selling community. From key ingredients for growth, the excitement of watching midmarket companies soar toward $1 billion and beyond, and the continued momentum in the U.S., the 2016 Global 100 was a great capstone on the year.

And, of course, we already are looking ahead to beginning the research for the 2017 list. Watch for nomination information toward the end of the calendar year as well as details on the 2017 Global 100 Celebration to be held in Dallas, Texas, in April.


The Chinese Direct Selling Revolution

For the first time, China is likely to eclipse the United States as the world’s largest direct selling market in 2016 or 2017. As the country hurtles toward the No. 1 slot, many of direct selling’s largest companies are paying close attention to the Chinese economy and the regulatory environment within its borders.

China’s potential is huge. Just take a look at the Top 11 companies on the 2016 DSN Global 100 list. Nine of them consider China to be a top market, or a market that is becoming more important to their revenue mix. Those companies include Amway, Herbalife, Vorwerk, Infinitus, Mary Kay, Perfect, Tupperware, Nu Skin and Tiens. Only Avon, which exited direct selling in favor of a retail play in China; and Natura, which focuses on the South and Central American markets, are not targeting the country.

And the Chinese government continues to issue more licenses to companies looking to offer direct selling within its borders. At the end of 2014, there were 48 licensed direct sellers in China. Today there are 78. That’s a jump of more than 50 percent in the number of companies competing in the China market, says Bob Bass, a senior analyst at Amway’s world headquarters in Ada, Michigan. “At this pace, you can see how there might be more than 100 companies competing in just a year or two,” Bass says. “That shifts the landscape and how you look at it and what kind of headwinds you will have.”

A revolution is underway as more homegrown companies gain a foothold. Euromonitor, a global provider of business intelligence and market research, reports that direct selling in China continued to post outstanding performance in 2015, registering current value growth of 10 percent. At the same time, up-and-coming Chinese companies are experiencing 15 percent to 20 percent year-on-year growth. “We see a trend of the government continuing to improve its positive, pro-business, friendly atmosphere, and this will help domestic companies to grow,” says Frank Jiang, who leads Amway’s global China sales team. These firms are starting to show up on the 2016 DSN Global 100 list. Companies like:

  • No. 81 Kangmei, which makes nutritional supplements and beauty products, had 2015 revenue of $151 million.
  • No. 83 Kasley Ju, which manufactures healthcare products, functional foods, and health management products, reported 2015 revenue of $149 million, up from $75 million in 2014.
  • No. 92 Golden Sun, which is a maker of nutritional products, earned 2015 revenue of $108 million, up from $83 million in 2014.
  • No. 95 Ten Fu Tenmax, which makes and distributes skincare and nutritional products made from tea extracts, posted 2015 sales of $90 million, up from $80 million in 2014.

China’s direct selling landscape will no doubt become more competitive. Large direct sellers such as Amway, Herbalife, Mary Kay, Nu Skin and Oriflame are keeping a close eye on the market and the loosening of regulations by the Chinese government. Amway remains the leading player in China’s direct selling market, and the company is optimistic about the market, says Jiang.

Jiang and Bass say China will continue to be a top investment priority for Amway. The company has grown and built an extensive network of distributors, as well as customers. It also improved its engagement and communication with customers by opening “experience stores” in Shanghai and Shenzhen, where customers can get product samples and information about innovative product developments.

While the Chinese government is opening up its direct selling market, it continues to be vigilant on the regulatory side, Jiang says. Such monitoring is a necessity, given the industry’s lack of maturity in China. He says, “This is a good thing for the industry because there are some players operating in the space and doing some fishy things.”

All of these factors combine to make China a direct selling powerhouse. The industry is expected to see a compound annual growth rate (CAGR) of 6 percent at constant 2015 prices, says Euromonitor.

All of China’s new direct selling companies may not make an immediate impact on the market, says Amway’s Bass. But changes will start to appear within five years. “Market share and company rankings within China, though they shift, are what we are watching very closely,” Bass says. “It will bring a new aspect of competition into a new marketplace that is very fluid.”


THE $100 MILLION GROWTH CLUB

With annual sales increases of $100 million or more in one year, a dozen and a half companies are making a surge towards greater prosperity. Many of the same companies appear again in this elite group of achievers, but a handful of newcomers also are making waves in the $100 Million Growth Club.

What’s more, businesses in the $100 Million Growth Club make an impact far beyond their corporate employees and distributors. This elite group delivers big economic gains as the income earned by employees fuels job creation and more revenue spending in their respective communities.

A total of 18 companies on the 2016 DSN Global 100 list increased sales by more than $100 million between 2014 and 2015, and all but two of those businesses—NHT Global and AnRan—posted 2015 revenues above $500 million.