December 01, 2015
News in Brief, December 2015
Industry Veteran Ken Brailsford, Founder of Zija, Pens Autobiography
A new autobiography from Ken Brailsford, Founder and Board Chairman of Zija International, highlights a direct selling career that has spanned more than four decades. In My Life Encapsulated, Brailsford shares insights gleaned along the way.
The industry veteran founded his first direct selling company, Nature’s Sunshine Products, in 1972, where he earned the title “Father of Encapsulation.” He went on to co-found Nature’s Labs Inc., renamed Enrich International.
In 2005, he launched Zija International to bring the benefits of the moringa oleifera plant to market. In 2012—its best year yet—the nutrition and skincare company topped $100 million in revenue.
Brailsford recently spoke to DSN about his career in direct selling, and below is an excerpt from our interview.
DSN: When you founded Nature’s Sunshine in 1972, direct selling was not nearly as prevalent as it is today. What attracted you to the model?
KB: We started out with the retail model; we were selling in health food stores. We had an individual tell us we ought to be selling through multi-level marketing, and I didn’t see a downside to it, other than that we had to put a different label out. So it was all potentially an upside. I didn’t know too much about it at the time. I knew about Amway, but that’s it.
DSN: You came out of retirement to help launch Zija International. What inspired you to get back into the business?
KB: I didn’t intend to get back into the business at all—it’s not an easy business, and I have invested in others that are doing well. I was shown a video on the moringa plant by a friend of mine who wanted to start an MLM company. I told him I’d give him 30 minutes of my time, but didn’t tell him that at the end of 30 minutes I planned to tell him I wasn’t interested. Watching the video, I could see this plant replaced a couple hundred products from my old company. That was always a challenge, having too many products. I also felt this was a nutritional product that needed to go throughout the world, that God wanted it for his children. It’s called the “miracle tree” by the indigenous people because of the effects it has on a person’s health. When I saw that, I wanted to get back into the business.
DSN: As Chairman at Zija, you still have an insider’s perspective on the industry. What would you consider a challenge facing direct selling companies at this time?
KB: One of the challenges within the industry is that you sometimes have people running companies who put the companies ahead of the distributors. I don’t think that’s good long term. There has to be a balance; it has to be good for everybody. …I also look at the industry as the closest thing we have to capitalism and free enterprise left in our country, if not in the world. It’s a great opportunity for people to start their own business for almost no investment, and it totally falls upon them to be successful or not. I think it’s a great tool.
DSN: When you’re not hard at work, how do you prefer to spend your time these days?
KB: I’m different from a lot of people. I don’t fish or hunt, but I do read a lot. I love to read all kinds of books—religious, historical, motivational. If you ask my hobbies, I suppose I’d say business and reading. I own 10 or 12 businesses. They’re all doing quite well, but I don’t run them. I find good people who can run the businesses, and I just look at the big picture.
Nu Skin Meets Quarterly Earnings Expectations, Raises Share Buyback
Nu Skin’s quarterly earnings met Wall Street expectations despite a 17 percent revenue decrease in Greater China, the company’s largest business segment. Reported earnings totaled 28 cents per share, reflecting a $37.9 million inventory write-down charge in China and a resulting higher tax rate, as well as a foreign currency impact of 13 cents a share. Actual earnings of 84 cents per share were in line with average estimates by analysts. Revenue fell 11 percent to $571.3 million. The company expects fourth quarter revenue in the $570 million to $590 million range, with earnings per share of 70 cents to 73 cents.
Primerica Beats Wall Street Expectations with Record Earnings
Primerica Inc. (PRI—NYSE) generated net income of $49.4 million in the third quarter. The Duluth, Georgia-based company posted record earnings of 98 cents per share, up 19 percent from a year ago. On average, analysts surveyed by Zacks Investment Research had predicted earnings of 93 cents per share. Revenue climbed 5 percent to $355.8 million. The year-over-year growth resulted primarily from higher sales of the company’s term life insurance product. The number of policies issued rose 21 percent in the quarter, driving operating revenue in the segment up 11 percent to $197.2 million.
Facebook Taps Stella & Dot in Trial Run of New Business Offering
“Facebook” and “work” might seem like a contradiction in terms, but the social media giant is looking to unite the two with the rollout of its new service, Facebook At Work. The company’s San Francisco Bay Area neighbor Stella & Dot is one of several businesses testing the product ahead of its official launch.
Facebook At Work, an enterprise version of the classic network, is Facebook’s answer to popular collaboration tools such as Microsoft’s Yammer, Slack, and Chatter at Salesforce. The service enables companies to create their own networks, with employee profiles that resemble regular Facebook profiles; however, profiles on the new interface are shaded white instead of the company’s signature blue.
Accessories seller Stella & Dot has always embraced social media in its day-to-day business, Vice President of Product Meera Bhatia told DSN. Field-facing employees heavily use Facebook, in particular, to communicate with the brand’s Independent Business Owners. After Facebook approached Stella & Dot earlier this year, the company rolled out Facebook At Work to its full team of about 400 employees in August. Like the classic version, the service features a company-wide News Feed, Groups and Events. Employees also can communicate through direct messages, voice and video calls, and screen-sharing capabilities.
“Employees have created many affinity groups for purposes ranging from inter-team communication to developing a running club,” said Bhatia. “Our most popular group by far is ‘Stella Shout Outs,’ where employees call out their fellow employees for different accomplishments. It’s great to see this happening at the employee level versus being driven by management.”
Belcorp Named a World’s Best Multinational Workplace
Peruvian beauty giant Belcorp appears alongside household names such as Microsoft, American Express and Marriott in a new ranking of the World’s Best Multinational Workplaces. Great Place to Work, a global research and consulting firm, surveyed employees and management to discover the priorities of today’s worker and identify the top 25 multinational companies. Belcorp landed the No. 12 spot in its second consecutive year on the list, led by No.1-ranked Google. The cosmetics and personal-care products seller employs more than 10,000 at its headquarters in Lima, Peru, and in seven additional markets across Latin America.
Herbalife Misses Sales Expectations, Raises Outlook
Herbalife Ltd. (HLF—NYSE) yielded a profit of $93.6 million in the third quarter. The shake and supplement seller reported net income of $1.09 per share, compared to 13 cents per share a year ago. Excluding one-time costs, earnings were $1.28 per share, exceeding management’s guidance of $1.00 to $1.10 and the Zacks Concensus Estimate of $1.07. Expenses incurred in the quarter included $4.7 million related to regulatory inquiries and $2.8 million spent responding to attacks on the company’s business model.
Quarterly revenue totaled $1.1 billion, down 12 percent on a reported basis and up 5 percent in constant currency. Analysts had expected revenue of $1.15 billion. The most significant revenue growth came from China, where constant currency sales spiked 27 percent. The company’s weakest performance came from the Asia Pacific region outside China, which reported a 16 percent revenue decline. For the full year, management now expects earnings in the range of $4.65 to $4.75, up from its previous guidance of $4.50 to $4.70.
Direct Selling Day Brings More than 500 Distributors to Capitol Hill
|Direct Selling Day participants gather outside the U.S. Capitol.|
More than 500 direct selling entrepreneurs converged upon Washington, D.C., on Oct. 29 for the third annual Direct Selling Day on Capitol Hill. The U.S. Direct Selling Association (DSA) initiative is an opportunity for independent consultants to share with lawmakers the value of the business model, both to individuals and the economy.
Throughout the day participants from 32 states took part in one-on-one meetings with representatives and heard from congressional speakers from both parties. The event also featured a Direct Selling Marketplace in the Rayburn House Office Building, where Members of Congress and their staffs could see firsthand the kinds of products and services sold through direct selling companies. In a statement from the floor by Rep. Marsha Blackburn (R-TN), Co-Chair of the recently formed Direct Selling Caucus, the House of Representatives marked the occasion by formally recognizing Oct. 29, 2015, as Direct Selling Day.
Blackburn also emphasized the importance of the business ethics and consumer safeguards put in place under the DSA’s leadership. Those efforts were the topic of discussion at the DSA Global Regulatory Summit, held two weeks earlier in Washington, D.C. The summit brought together regulators, law enforcement officials, and industry leaders to explore various challenges facing direct selling companies, including issues raised by the Federal Trade Commission’s ongoing pyramid scheme lawsuit against Vemma Nutrition Co. and hedge fund manager Bill Ackman’s three-year short campaign against Herbalife Ltd. Both Direct Selling Day and the Global Regulatory Summit are part of what DSA President Joseph N. Mariano calls a “tapestry of communication and advocacy” the organization is weaving at the federal and state level to provide an accurate picture of direct selling.
“We want to have the important and sometimes difficult dialogue with regulators on issues that are of concern, but we also want to have this important conversation with lawmakers and policymakers, as a demonstration of who we are, and then we want to have involvement in the community by our member companies and members of the field,” Mariano told DSN. “It’s all of those things together, along with the day-to-day activities of the association and the Direct Selling Education Foundation (DSEF) that will end up, we trust, creating a positive understanding of direct selling and protecting and supporting us in the marketplace.”
Amway Opens $13 Million Botanical Research Center in China
|The Amway Botanical Research Center in Wuxi, China.|
To facilitate the study of plants integral to Amway’s best-selling Nutrilite supplement line, the company has opened the Amway Botanical Research Center in Wuxi, China. The $13 million site, developed over the past two years, comprises a laboratory and large greenhouse built on 84 acres of farmland.
Chinese herbal medicines were a source of inspiration for Carl Rehnborg, the creator of Amway’s Nutrilite brand of vitamins and dietary supplements. In a statement, the Michigan-based company said it will use the site to expand its research on botanicals and integrate the findings into Amway products. The company operates 6,400 acres of certified-organic farmland across Brazil, Mexico and the U.S., in addition to the new site in China.
Brazil Challenges Hurt Quarterly Profit at Natura
Brazil’s Natura Cosmeticos SA posted a 39 percent drop in quarterly profit, reflecting unfavorable conditions in the brand’s domestic market. On the back of lagging sales, higher taxes and currency depreciation in Brazil, where revenue dropped nearly 10 percent, profit fell 39 percent to 132 million reais (US$34 million). On average, analysts had estimated profit of 190 million reais. The results also include a provision to buy the remaining 29 percent of Aesop, Natura’s Australian subsidiary. The retail brand now has 120 stores in 18 countries, up from 94 stores in 12 countries a year ago. The beauty enterprise reported net revenue of 2 billion reais (US$513 million), up 6.9 percent from the third quarter of 2014. Earnings before income, taxes, depreciation and amortization dipped 6.4 percent to 400 million reais.
NEON by ViSalus Sponsors ‘American Idol’ David Cook’s 34-City Tour
|David Cook and Vi Promoters share a NEON Energy Drink backstage.|
Weight-loss and fitness company ViSalus has teamed up with rocker David Cook in a large-scale promotion of its NEON Energy Drink. NEON is sponsoring the “American Idol” winner’s 2015 Digital Vein Tour and giving ViSalus Promoters a chance to win VIP concert tickets.
Since winning Season 7 of the popular singing competition, Cook has become a platinum-selling recording artist, known for hits like “Light On,” “Time of My Life” and his current single, “Criminals.” The tour featuring songs from his latest album, “Digital Vein,” runs from September to November.
ViSalus introduced NEON in April, billing the product as a good-tasting energy drink with a proprietary blend of ingredients for energy and antioxidant support. NEON earned its name from the glow it emits under black light, due to an element sourced from the South American Cinchona tree. The Michigan-based company reports that NEON sales to date have topped $4 million.
Alongside its sponsorship of the Digital Vein Tour, ViSalus is rewarding qualifying Promoters with a VIP experience at the tour stop of their choice. In a statement, the company said more than 550 qualified for the offer, which includes two concert tickets with priority seating and the opportunity to meet Cook backstage.
ViSalus plans to continue offering its Promoters exclusive or “A-List” experiences built around the NEON brand, Vice President of Marketing John Laun told DSN. Earlier this year, ViSalus hosted a NEON A-List Party on July 4 in Malibu, California, and another on Labor Day in Miami.
“We’re always looking for premium experiences and brands to tie in to the product,” said Laun. “As more of these opportunities pop up I’m sure we’ll be throwing more A-List Parties and participating in events around the world, giving people the opportunity to experience these events who would have no way to go otherwise.”
USANA Boosts Earnings Outlook on Strong Q3 Results
|USANA headquarters in Salt Lake City|
USANA Health Sciences (USNA—NYSE) reported its fourth consecutive quarter of double-digit growth in sales, earnings and customer acquisition. The health firm posted net income of $25.6 million in the third quarter, up 31 percent from $19.5 million a year ago. Diluted earnings were $1.92 per share, coming in 16 cents higher than the average estimate from analysts. The Utah-based company closed out the quarter with zero debt and $174 million in cash.
Revenue for the quarter rose 21.5 percent to $233.3 million, despite an $18.3 million hit from currency rates. Constant currency revenue increased 31.1 percent. The Asia Pacific region accounted for 72 percent of total sales, with 29 percent growth in the quarter. The Americas and Europe reported a 5.5 percent uptick in revenue. Globally, the company’s network of active sellers grew by 39 percent.
CVSL Builds UK Business with Acquisition of Betterware
|Betterware’s Birmingham headquarters.|
CVSL Inc. is strengthening its position in the U.K. direct selling market with the acquisition of Betterware Ltd. The deal follows CVSL’s February acquisition of Kleeneze, another prominent U.K.-based brand. Like Kleeneze, Betterware has operated in the U.K. since the 1920s. Both brands market a range of houseware, home-cleaning, health and beauty, clothing and outdoor products. Birmingham-based Betterware has signed on about 5,000 distributors across the U.K. and Ireland. In its last reported 12-month period, the company posted net revenue of approximately $36 million.
“With both of these established consumer growth brands in the CVSL portfolio, we expect to have a total sales network of about 13,000 people in the U.K. market, making us a major income opportunity creator in the U.K. and Ireland,” CVSL’s Vice Chairman and CFO, John Rochon Jr., said in a statement. “Having Betterware and Kleeneze together inside CVSL should give us an excellent platform for expansion into other European markets.”
Beautycounter Joins Environmental Working Group to Launch Product Safety Certification
Nontoxic cosmetics seller Beautycounter has found a like-minded partner in Environmental Working Group (EWG), the nonprofit environmental and health group known for its research on toxic and potentially harmful chemicals in consumer goods. California-based Beautycounter and skincare brand MyChelle Dermaceuticals are founding members of EWG VERIFIED, a new program to help shoppers identify safe personal-care products. Products that meet the group’s highest standards will now bear a green EWG VERIFIED seal. To gain the stamp of approval, companies must avoid an extensive list of harmful ingredients banned by U.S. or international government agencies and other public health organizations. EWG also requires that companies follow good manufacturing practices and fully disclose product ingredients on their packaging and websites.
Tupperware Beats Q3 Guidance on Strong North America Sales
Despite a dip in year-over-year revenue, Tupperware Brands Corp. (TUP—NYSE) achieved its second consecutive quarter of double-digit revenue growth in the U.S. and Canada. Revenue totaled $521.0 million, down 11 percent from a year ago. The results, driven by improving sales in the Americas, represent a 7 percent increase in local currency. Excluding some items, earnings were 79 cents per share, down 12 percent but exceeding the company’s guidance by 5 cents.
In the U.S. and Canada, where sales have slowed for many direct selling companies, revenue increased 14 percent in dollars. The region benefited from a 20 percent increase in sellers versus third quarter 2014. Emerging markets remain the backbone of the business, accounting for 70 percent of all sales. Management highlighted strong local currency gains in South Africa, where Tupperware sales were up 52 percent, and the Avroy Shlain beauty business posted a 23 percent increase in sales. In South America, Brazil generated a 21 percent increase in local currency, while Argentina spiked 39 percent on the back of inflation-related price hikes. China and Indonesia also achieved double-digit percentage gains in local currency, though the company’s Asia Pacific revenue fell 8 percent in dollars versus a year ago.
Avon Continues to Stagnate with Q3 Earnings Miss
Avon Products Inc. (AVP—NYSE) posted a quarterly loss of $50 million, coming in well below estimates by analysts. The New York-based company reported an adjusted loss of 11 cents per share, hurt in part by the strong dollar, a new industrial production tax in Brazil, and the sale of U.K.-based skincare brand Liz Earle. On average, analysts had expected a profit of 7 cents per share. On a reported basis, the company’s shortfall totaled $1.58 per share, compared with earnings of 21 cents per share last year.
Revenue was down 22 percent to $1.7 billion, dipping 2 percent in constant dollars but narrowly beating the Zacks Consensus Estimate. The results reflect a 17 percent revenue decline in Avon’s home market as the ranks of active sellers continue to thin. Globally, the company’s salesforce of roughly 6 million shrank 1 percent from a year ago.
The disappointing results come amid ongoing efforts by management, led by CEO Sheri McCoy, to restructure the beauty business. For the full year, Avon expects revenue to remain flat on a constant dollar basis. However, management anticipates foreign currency declines will cut revenue nearly 19 percentage points, compared with earlier guidance of 17 percentage points. The company maintains that free cash flow this year will be positive, though lower than the prior guidance of roughly $100 million.