February 01, 2015
Hy Cite: The Recipe for Growth
by Barbara Seale
- Founded: 1959
- Headquarters: Madison, Wisconsin
- Executive: Chairman and CEO Erik Johnson
- Products: Cookware, air and water filtration systems, juice extractors, dinnerware, cutlery
Family-owned direct seller Hy Cite Corp. is a master chef when it comes to cooking up growth. They do it by actively and enthusiastically embracing a community that many direct selling companies seek to engage: the Latino community.
|Peter O. Johnson, Founder|
|Erik Johnson, Chairman & CEO|
Hy Cite’s engagement constitutes far more than simply speaking Spanish. Some 90 percent of its market and distributors are Hispanic. This demographic grew from three Hispanic distributors—two on one coast and one on the other—who were extremely successful in the early 1990s. Their legacy plus the commitment of Hy Cite managers to listen closely to the needs of distributors and consumers has resulted in a company that has grown by more than 15 percent average annual growth since the year 2000. In fact, except for the two toughest years in that economic period, growth has been closer to 20 percent.
Hy Cite was founded in 1959 as the Hope Chest Club (HCC) by Dave Johnson, but it was Peter O. Johnson, an unrelated college student, who carried the company into the future. Peter paid his college expenses by selling the company’s products to young women who collected its cookware, china and flatware as they anticipated their marriages. After college Peter worked for another cookware company for a short time to learn more about the cookware business. He was a fast learner, and he rejoined HCC as a partner in 1961. Dave eventually left the business, but Peter carried on. He grew the business and evolved it as the country’s culture changed and the “hope chest” market shrank. He expanded the original vision, and with that expansion came a name change.
Some 90 percent of Hy Cite’s market and distributors are Hispanic.
“As folklore has it, we realized we needed a different name, but we had a lot of letterhead that said HCC,” explains Hy Cite’s Chairman and CEO Erik Johnson, Peter’s son. “Things were tight right then, but the top managers had ‘high sights’ for the future. So they had a meeting and came up with a name that would let them maintain the corporate brand: HCC—Hy Cite Corporation.”
Erik wasn’t in that meeting in 1974. He hadn’t even had his first of many part-time jobs at the company: working in the warehouse during the summer at age 12. Throughout high school and college he continued to work in most departments, but, like his father, he went to work at another company after college. He spent five years at Procter & Gamble. Then he returned to his family business in 1995 as a project manager focused on improving its business systems. When Peter retired in 2000 Erik was named Chairman and CEO. He and his brother Peter, Hy Cite’s President and COO, continue to run the company.
|Andrea Legarreta, a well-known TV personality in the Hispanic market, is the Brand Ambassador for the Royal Prestige® line of cookware.||Founded in 1959, Hy Cite has expanded into 20 countries over the last two decades.|
Improving Lives through Education
Hy Cite is committed to expanding the opportunity for a great life even beyond its own ranks. That’s why the company and its more than 2,200 distributors believe in supporting the communities throughout the world where it does business.
While the company has supported health-based organizations such as The United Way, Direct Relief International, March of Dimes, American Cancer Society, American Red Cross, and Kick AIDS, it has begun to focus its resources heavily on education.
“We believe that education leads to prosperity and self worth, and with education you can improve people’s standard of living and overall life experience,” notes Hy Cite Chairman and CEO Erik Johnson. “In many of the countries our distributors come from, educational opportunities are not that strong. We want to make sure that people throughout the world have the chance to receive educational opportunities like they would in the United States.”
As a company that does 90 percent of its business in the Latino community, Hy Cite has become a major contributor to the Hispanic Scholarship Fund. Its scholarship grants provide educational opportunities, as well as another way to enhance brand awareness and loyalty for its Royal Prestige cookware line. The Royal Prestige Scholarship Program provides scholarships to low-income Latino students who are dependents of Royal Prestige’s customers and distributors. The program is designed to make a positive impact on students’ education and career preparedness, while creating a positive awareness of Royal Prestige as a potential employer and good corporate citizen.
Philanthropic donations to the University of Wisconsin, located in the company’s home town of Madison, have been a Johnson family tradition for decades. In fact, Hy Cite Founder Peter O. Johnson has been a longtime donor and ambassador of the University of Wisconsin-Madison, serving in a number of capacities over the years.
In Mexico Royal Prestige is also heavily involved with a telethon that supports the needs of children with developmental handicaps.
Erik says that much of the company’s success is product-based. It has three brands of cookware—Royal Prestige, its first and biggest brand of top-quality products, especially in the Hispanic market; NutraEase, a high-quality stainless steel line sold at in-home dinner parties; and its latest, Kitchen Charm, which was introduced in early 2014 and is focused on the bridal market. Each includes supporting products, such as water filtration units, juice extractors and air purifiers, but the core product in each line is cookware. Both distributors and consumers know the company by its cookware brands, rather than by the corporate name. Distributors focus on a single brand to sell and build their businesses.
The decision to focus on the brands rather than the company name was made in the 1980s. “No one thought that consumers related to the name Hy Cite,” Erik explains. “We hired a marketing firm to come up with our own product brand name, which was Royal Prestige. Before that we had sold other companies’ brands. But we had gotten to the size and scale where we wanted consumers to recognize our own brand.”
The cocinaMAX™ magazine was created to nurture the connection of the customers with the brand. It is mailed to over 130,000 Hispanic households every quarter.
Consumers don’t just recognize the brands; they’re intensely loyal. Even though the cookware carries a 50-year warranty, consumers keep returning to the company to purchase its latest products. But since the cookware maintains its quality so long, they pass it along to family members and then buy more for themselves. Hy Cite and its distributors keep previous buyers informed about new products through direct mailers. Distributors often purchase local advertising, which Hy Cite supports with $3 million to $4 million of national television advertising on stations such as Univision and Telemundo in the U.S. and Televisa in Mexico.
Hy Cite also publishes a quarterly magazine, cocinaMAX™, which it sends free to consumers who have purchased products within the past two years. The company nurtures the connection to the brand and the cookware by publishing health tips, recipes and general information about cooking. It also runs recipe contests that keep customers cooking and using their products, and it features well-known Hispanic TV personalities, such as Andrea Legarreta.
Even though the cookware carries a 50-year warranty, consumers pass it along to family members and keep returning to the company to purchase its latest products.
The marketing plan has driven Hy Cite brands to No. 1 among direct-sales cookware brands within the company’s target demographic in the United States. Brand recognition in the Hispanic marketplace exceeds 85 percent in the U.S. and almost 50 percent in Mexico. That brand recognition supports both recruiting and sales, even translating to repeat sales.
“We run over a 25 percent add-on rate,” Erik notes. “Our consumers are very pleased and enjoy our products, so they’re always looking to add to their collections. We even have consumers who call us to ask whether we have anything new.”
The answer to those consumers is often “yes,” and the new product has typically been developed because of consumer demand. Hy Cite stays in constant communication with its field salesforce, plus it gathers regular input from consumers to understand what they want in products for their kitchen. The company then incorporates technical cookware advances, such as a silicone-rimmed cover on the Royal Prestige line that allows food to be cooked with minimal liquid, preserving flavor and nutrients.
“We haven’t hung onto the past or to a single product,” Erik emphasizes. “We let the marketplace take us to where the marketplace is going, and that has led us to bring out new products that consumers are looking for.”
Those new products have helped Hy Cite grow. In addition to the completely new products, it made modifications to cookware, including detachable handles and a moisture-viewing window. Consumers eager for the latest innovations don’t hesitate to purchase them. The average order value is more than $1,200, and Hy Cite helps make those high-ticket purchases possible by offering consumer financing.
“One of our major differentiators is that we provide proprietary consumer financing that lets our end consumer pay for their purchase over 24 to 36 months,” Erik says. “That opens a purchasing door to someone who bought their cookware a few years ago, so they pass their older product to their daughter or son and they
buy new cookware.”
“One of our major differentiators is that we provide proprietary consumer financing that lets our end consumer pay for their purchase over 24 to 36 months.” —Erik Johnson, Chairman and CEO
|Hy Cite continually awards and recognizes the performance of its large network of distributors.
That kind of support creates a thriving business for many distributors. It’s often a family business with entire families becoming involved over several months or years. One spouse may work full time in the family Royal Prestige business while the second spouse is employed elsewhere and is involved part time. Once the business grows large enough to replace the second spouse’s income, he or she also joins the business full time. Often their older children become involved as well and develop their own businesses when they become adults.
The process can also open doors to another group that most direct sellers want to attract: millennials. Erik says that they are a developing market segment for Hy Cite. Research on millennials shows that 25- to 35-year-olds are increasingly interested in cooking. He notes that many young Hispanics maintain the eating and food traditions they learned as they grew up.
“What has helped is making sure that we have cookbooks and sponsorships with Latino chefs, and we’re providing information that helps young people cook traditional dishes in our cookware,” he says.
In addition to providing consumer financing, Hy Cite supports distributors with product innovations, order processing and distribution, sales and marketing materials, and motivational incentives such as trips—areas where it can leverage size and scale. That frees its distributors to focus on selling, recruiting and training. Hy Cite is able to provide effective support to a salesforce in multiple countries through a corporate employee base that is around 80 percent bilingual. Many employees speak English and Spanish, but other languages are represented as well.
Hy Cite takes advantage of state-of-the-art technology and the latest trends to develop its different product lines.
That well-oiled system has worked well as Hy Cite has entered new territories that have expanded its revenue sources. When Erik became the company’s CEO in 2000, more than 95 percent of the company’s business was in the United States. Today the company has expanded into 20 countries and had 2014 revenue of approximately $177 million. Its U.S. market is still strong at 50 percent of sales, plus other markets have expanded. Mexico and Canada are thriving, and the fastest growth is in South America. One of its newest market expansions, Brazil, is growing by 300 percent annually. Erik explains that the quality of the company’s products and the quality of the business opportunity is appealing to entrepreneurs in the small but developing middle-class in South America.
The Royal Prestige business opportunity is something that people in those countries see as an opportunity to elevate their standard of living, and that of future generations. The company has been able to recruit highly educated, talented people who want to become distributors. Its current growth focus is in Brazil, followed by Colombia and Peru, which it opened in January. It prepared by establishing offices, service personnel and product distribution, as well as hiring sales management. They deployed two senior executives to recruit and train distributors, and to help them build their networks in South America. The company’s goal is to double its business in those countries every five years.
“Looking out 10 years, once we build out our business in the Americas, our next step will be expansion into Asia-Pacific,” Erik forecasts.
He notes that the element that unites Hy Cite—including employees, distributors and brands—is family.
“We sell family values—working and eating together, health, and keeping the family together,” Erik reflects. He notes that the same culture thrives at the corporate headquarters. “We believe that the field salesforce drives sales and much of our marketing and idea generation. We believe strongly that the entire organization learns from each other and that people help each other so that we are all successful together. After 55 years in business, we have a multi-generational family business being successfully led by the second generation. We’re very proud of that.”