March 01, 2015
News in Brief, March 2015
Creative Memories: A Respected Brand Finds a New Home and New Backing
The iconic brand of Creative Memories (CM) has undergone its share of struggles in the past, including two bankruptcies in the last seven years. The second bankruptcy saw the emergence of a new company name—Ahni & Zoe by Creative Memories—which also closed its doors in late summer 2014. That’s when an unexpected twist occurred: Caleb Hayhoe, Chairman of Flowerdale Group Ltd., and previously, Founder and CEO of RT Sourcing, made a decision to buy the Creative Memories Japan business and in North America the Creative Memories® and Ahni & Zoe™ brands, patents, artwork, products and manufacturing equipment—and reopen once again as a direct selling company. Now debt-free and backed financially, CM is ready to carve a new path.
Hayhoe became involved with Creative Memories in 1997 when the company approached his product design and sourcing company—which then was operating with over 300 employees in Asia—to add to their product line. Hayhoe himself attended many CM events, workshops and even parties, inspired by the passion of the consultants. So when he learned the company was for sale, it was natural for him to consider the purchase. He personally knew many consultants as well as the staff at the home office in St. Cloud, Minnesota, and was convinced that with the right adjustments, the company could once again be successful for consultants and consumers. The new business is operating just around the corner from the old Creative Memories building in St. Cloud. A small, dedicated team of employees, whose average tenure with Creative Memories is 10 to 12 years, has stayed on to work with CM Group Holdings.
DSN staff spoke with Hayhoe about his strategy and vision for the company.
DSN: What factors led to your decision to reopen as a direct selling company?
Hayhoe: Among the thousands of decisions involved in a startup, having a direct sales element was never a question. With many tens of thousands of former Consultants who loved the products, mission and the difference the opportunity made in their own families, our leadership team was united in offering a compelling earnings plan. There was also much learning from the past, which included a deep understanding of our audience and their preferences. We wanted to support the former leaders who relied on Creative Memories and/or Ahni & Zoe for a substantial income, as well as those who joined to work occasionally and be part of a warm community.
With our unique hybrid model we put quite a few traditional direct sales sacred cows out to pasture. Like minimums, titles and leadership requirements, to name a few. All Advisors are welcome, valued and equal, with equal earnings opportunities, whether they joined during our November launch in 2014 or join five years from now. We’re just a few months in, and there’s already a group earning more than they had before with many leaping up the levels of the plan. There’s also a whole group who’s happy to work at their own pace and share with friends and family. We’re thrilled to be able to help people share and earn as they choose.
DSN: Creative Memories underwent two bankruptcies before reopening as Ahni & Zoe, only to close again. What strategies are you putting in place to revive these struggling brands?
Hayhoe: It’s important to separate the former companies’ financial difficulties from the brands. The Creative Memories® brand has enormous recognition and respect worldwide for its quality products and caring Consultants. Beyond North America, there is also considerable interest in large international markets like Australia and Germany, and the 14-year-old Japan business is thriving.
The Ahni & Zoe™ brand had less time to gain traction, but in its six months of life Consultants were able to reach an entirely new group of busy people who found Fast2Fab albums the ideal way to enjoy beautiful finished albums in no time.
We believe that what CM Group is offering now is the best of both brands, with a flexibility and modern e-commerce platform neither prior company offered. CM Advisors can sell the products they like (most sell both brands) and run their businesses as entrepreneurs. Our strategy is to offer exceptional products, service and a unique earnings plan that allows for some of the most generous profit-sharing in the industry, while maintaining a lean, relentlessly efficient operation.
The new CM annual Advisor Earnings Plan had to pass the “easy to explain, easy to share, easy to earn” test. Basically, Advisors achieve a higher profit rate on the products they sell, and higher commission rate on their downline group sales, based on the sales balance in their own account. Each consultant pays a $49 annual fee to stay in the program. It’s very basic and simple.
DSN: In response to the CM launch, what kind of feedback have you gotten from former Ahni & Zoe representatives?
Hayhoe: The reaction from former Consultants has exceeded our wildest expectations. Ahni & Zoe Consultants were quick to join, and there’s also been a huge revival of Creative Memories Consultants who missed the products and mission and like the simplicity and flexibility of the new business. With the simple, welcoming plan and freedom to sell one or both lines, they’re able to serve new people who are after fast albums that look good as well as those who love scrapbooking. It’s been great fun hearing from former Consultants who have reactivated their networks and are gathering people for workshops and retreats with a whole new level of energy.
DSN: Will you utilize online sales apart from direct sales through Advisors? How will the two channels work together?
Hayhoe: CM’s in the interesting position of having a 30-year legacy brand while also being a startup. We encourage Advisors to cultivate direct relationships with their customers and sell in person or via their personalized link. Our desire to protect that relationship is behind us encouraging Advisors to use one of the many excellent free/cheap, email/contact management systems available, as well as providing an Advisor locator, so long-lost customers can connect with their Advisor of choice. Customers also have the choice to shop and/or sign up directly with CM if they wish.
DSN: Forever Inc. announced last month that it had acquired the Creative Memories digital catalog. Does CM plan to focus solely on physical scrapbooking products?
Hayhoe: Currently, yes. As part of the Creative Memories closure in 2014, the software was transferred back to its developers. The latest announcement was the last piece of that deal, which is not connected to CM. Though the digital market is highly commoditized, our team believes there is potential to differentiate and offer something that is uniquely CM. It’s part of our plan to explore in 2015.
DSN: Is CM looking to expand into additional categories in the near future?
Hayhoe: Our near future will be focused on continuing to support our CM Advisors, offering exceptional service and quality and rounding out the product line. As a memory-keeping company, there’s potential for all sorts of interesting new directions in the future, though this will be done thoughtfully and carefully. Our focus is on simplicity, maintaining our reputation for exceptional quality, staying true to our Advisor community and mission, and running a lean, profitable, sustainable business.
Herbalife’s $100M Plant Brings Hundreds of Jobs to N.C.
Herbalife is marking a company milestone two years in the making. The global nutrition company recently celebrated the grand opening of its fourth and largest Herbalife Innovation and Manufacturing (HIM) facility. The Winston-Salem, North Carolina, location will produce an estimated 150 million units of made-in-the-U.S.A. product each year.
In 2012, Herbalife announced plans to convert an existing, 800,000-square-foot building in Winston-Salem, an investment of $130 million. The NSF-certified facility came online in 2014 and currently houses approximately 350 employees. That number will top 500 when the site reaches full production capacity later this year.
“The economic impact of this facility will be felt throughout the Winston-Salem area, particularly for the hundreds of talented workers who will contribute to its success,” said Rep. Virginia Foxx (R-N.C.), on hand with other officials and business leaders to celebrate the grand opening. “It gives me great pride to see national companies like Herbalife recognize all North Carolina has to offer, and I believe today’s event is another sign that our best days are ahead of us.”
With a sister site in California and two in China, HIM Winston-Salem is the largest facility ever built by Herbalife. The company will distribute nutrition powders, liquids and teas from the plant to more than 50 countries worldwide. Within its one-mile loop, HIM Winston-Salem also houses Herbalife’s Global Technical Operations Center and a state-of-the-art quality and testing lab.
“This is an incredibly important project for Herbalife as we strengthen our influence throughout our supply chain—from seed to feed—and increase capacity to meet the growing demand for our nutrition products,” said Michael O. Johnson, Herbalife Chairman and CEO.
Amway Boosts Business with XS Energy Acquisition
Industry giant Amway has acquired XS Energy, the brand behind its popular line of nutritious, sugar-free energy drinks. Amway says the move is part of its strategy to connect with young entrepreneurs, who represent a growing number of Amway business owners.
“According to our research, no demographic is more positive about entrepreneurship than those younger than 35, which is the precise target group for the XS brand,” Chairman Steve Van Andel shared in the company’s release. “Bringing Amway and XS together will strengthen our efforts in the years ahead and create more opportunities for aspiring business people.”
Former Amway business owner David Vanderveen co-founded XS Energy in 2001, and Amway became the exclusive distributor of the company’s products in 2003. Available in 38 of Amway’s international markets, XS Energy has now topped $150 million in annual sales. With the help of Vanderveen, who has signed on as Vice President and General Manager for the XS brand, Amway is looking to build upon its success in the $27.5 billion energy drink market.
It Works! Founders Donate $3 Million to Michigan State Athletics
A $3 million gift from It Works! Founders Mark and Cindy Pentecost will fund improvements to the men’s basketball program at Michigan State University. The donation supports MSU’s ongoing Empower Extraordinary campaign, which launched publicly in October 2014. Running through 2018, the campaign aims to raise $1.5 billion for the university. The Pentecosts support Empower Extraordinary alongside more than 30 other leaders and volunteers on the Athletic Director’s Campaign Leadership Council.
Mark Pentecost, It Works! President and CEO, grew up among Spartans fans in MSU’s hometown of East Lansing. As a former basketball coach, he has also witnessed firsthand how athletics can impact an individual’s life. The Pentecosts’ gift will help MSU extend that impact with updates to the men’s basketball offices and practice facilities at its Alfred Berkowitz Basketball Complex. The donation also establishes an endowment for further facility improvements in the future.
“Prior to entering the direct selling industry, I was a teacher and high school basketball coach trying to help kids accomplish their goals. I still feel like I get to be a coach every day, but now on a larger scale with thousands of It Works! team members around the world,” Mark Pentecost told DSN. “Giving back to the student athletes at MSU is something we’ve always wanted to do, and we hope it’ll help them continue to perform at the highest level and reach their dreams.”
USANA Sees Sales Surge in Fourth Quarter
Strong salesforce incentives contributed significantly to USANA’s (USNA—NYSE) positive results for fourth quarter 2014, not only in customer sales but also associate growth. USANA’s revenue was up 22.3 percent at $227.9 million for the quarter, while earnings were $21.3 million, or $1.65 per share, an increase of 17.0 percent, though lower than the Capital IQ Consensus Estimate of $1.92.
Sales incentives introduced in the quarter drove the number of active Associates up 31.7 percent, particularly in the company’s Asia Pacific region, which contributed to a sales surge of 34.1 percent to $163.3 million in the region, compared with $121.8 million for the fourth quarter of the prior year. Net sales also increased by 25.4 percent on a sequential quarter basis.
Full-year results included a profit of $76.6 million, or $5.60 per share, with revenue of $790.5 million, compared with $718.2 million the previous year. Earnings per share for the year increased by 0.7 percent to $5.60, compared with $5.56 in the prior year.
North American Power Terminates Direct Selling Enterprise
North American Power recently brought its direct selling operations to an unexpected halt. In a statement posted to its representative site, the U.S. energy supplier announced the termination of its North American Power and Thrive customer referral programs, although it will continue to operate through its other business channels.
Veteran energy executives Kerry Breitbart and Carey Turnbull founded the Connecticut-based company in 2009, and by 2013 North American Power had reported $256 million in revenue, earning it the No. 47 spot on the DSN Global 100. The company will continue to grow its direct-to-consumer channels, enroll new customers, and serve its existing customer base, North American Power’s Director of Corporate Communications, Chad Klein, told DSN in an email.
“Although we are no longer accepting new enrollments through our referral network, our Independent Representatives will continue to receive residual commissions on customers that have been referred to date,” said Klein. “We are truly grateful for all of our Representatives’ efforts throughout this memorable journey, and wish them the very best of luck in the future.”
UK-based Kleeneze to Join CVSL’s Family of Companies
CVSL Inc. is adding another direct seller to its line-up of brands. The Dallas-based company has signed an agreement to purchase health and household company Kleeneze from Findel PLC of the United Kingdom for $5.5 million.
Upon completion of the acquisition, CVSL will own one of the U.K.’s longest-operating and best-known direct selling businesses, which is also a founding member of the U.K. Direct Selling Association. Established in 1923, Kleeneze originally sold products through catalog. The company now offers household cleaning, health and beauty, home, and outdoor products through a network of more than 7,000 independent representatives in the U.K. and Ireland.
By joining the CVSL family of companies, Kleeneze will retain its own separate brand identity, salesforce and compensation plan but operate under the support of a growing portfolio of companies that include The Longaberger Company, Your Inspiration At Home, Agel Enterprises and Uppercase Living.
Nu Skin Reports 2014 Financial Results
Nu Skin’s (NUS—NYSE) regulatory review last year in Greater China has had a significant impact on the company’s recently posted 2014 fourth-quarter and year-end results. In response to the revenue drop in the company’s largest market to $213 million in Q4 from $482 million in the prior-year period, Nu Skin’s overall profit fell almost 63 percent for the quarter to $46.5 million, or 77 cents per share.
Despite the year-long decline in the region, according to President and CEO Truman Hunt, revenue began to stabilize there earlier in the year and has continued. Results were also negatively impacted by the strengthening of the U.S. dollar bringing revenue down by more than $100 million in 2014, and by $24 million consecutively from the third to the fourth quarter.
Total revenue for the quarter was $609.6 million, at the high end of the company’s guidance, compared to $1.06 billion in the prior-year period, but according to Hunt, the $550 million TR90 launch—the company’s largest product introduction—in the second half of 2013 accounts for the uneven year-over-year comparison. Nu Skin reported profit of $189.2 million, or $3.11 per share, for the year with revenue of $2.57 billion, compared to $3.18 billion the previous year.
Team 4Life Welcomes Olympic Gold Medalist
Australian professional snowboarder Torah Bright, who was a stand-out competitor and medalist in the 2014 Winter Olympics, has joined Team 4Life. Already a fan of the health and wellness company’s products, she will endorse 4Life’s Transfer Factor line.
Bright was a Silver medalist in the Half-pipe competition of the most recent Winter Olympics in Sochi, where she won Australia its first medal of that year’s Games. Adding to the Gold she had won in the same category in the previous Olympics in 2010, Bright became Australia’s most successful Winter Olympics athlete. She’s also won two Gold and two Silver medals for her performance in the Snowboard SuperPipe competition at the Winter X Games in Aspen, Colorado, and in 2013 took first place at the Sprint U.S. Grand Prix at Copper Mountain, Colorado.
Growing up in Cooma, New South Wales, Australia, Bright was first introduced to 4Life products in 2013 through her mother, Marion, who was already a long-time distributor for the company. Team 4Life gains another world-renowned athlete in Bright, who won Bronze in the Women’s Snowboard SuperPipe competition for the 2015 Winter X Games in Aspen in January.
Avon Losses Widen as Quarterly Earnings Drop
An increasingly strong dollar weakened fourth quarter sales at Avon Products Inc., and the beauty company expects to feel continued negative effects in 2015. The global brand projected that 2015 revenue will decline by 12 percentage points due to currency rates. Fourth quarter revenue decreased 12 percent to $2.34 billion; however, Avon reported modest 5 percent growth in constant dollars.
North America continues to pose the greatest challenge for Avon. The New York-based company saw regional sales fall 12 percent in the quarter and 17 percent for the full year. Avon posted global revenue of $8.85 billion for 2014, an 11 percent decrease versus the prior year, or relatively unchanged in constant dollars. The company reported a net loss of $331 million, or 75 cents a share, broadening its $69 million loss in 2013. Excluding one-time costs, operating profit totaled $734 million.
The company also reported declining sales outside the U.S., where it generates 88 percent of its sales. Revenue fell 7 percent in both EMEA (Europe, Middle East & Africa) and Asia Pacific. Latin America, Avon’s most profitable market, posted revenue of $4.24 billion for the year, a 12 percent decrease versus 2013.
Stella & Dot CEO Addresses Inaugural Silicon Valley Conference
Stella & Dot CEO Jessica Herrin joined an impressive lineup of speakers at the first-ever Watermark Silicon Valley Conference for Women. Hillary Rodham Clinton, fashion icon Diane von Furstenberg, and professor and best-selling author Dr. Brené Brown were among the women who delivered keynotes at the event. Also in the lineup was Dr. Gloria Mayfield Banks, an elite executive national sales director with Mary Kay Inc. as well as a motivational speaker and trainer.
Watermark is a community of executive women in the San Francisco Bay Area, home to tech industry hotbed Silicon Valley. For more than two decades, the nonprofit has worked to increase representation of women at executive levels, specifically through connection, development and advocacy programs.
The inaugural conference took place in Santa Clara, California, on Feb. 24. With the theme “Lead On,” the event promoted leadership as well as personal and professional growth. Throughout the day, more than 100 other speakers led discussions and interactive sessions on issues impacting women in the workforce.
Tupperware Closes FY 2014 Beating Q4 Consensus
In the fourth quarter 2014, Tupperware Brands Corp. (TUP—NYSE) beat EPS expectations by 19 cents, with earnings of $1.72 per share. The Orlando, Florida-based direct seller posted a profit of $82.3 million, down 8 percent versus prior year, but excluding the impact of foreign currency rates on the comparison, profit was up 6 percent versus 2013. Though down 5 percent in constant dollars compared to the previous year, net sales for the quarter ended Dec. 27, 2014, were $679.9 million, up 6 percent in local currency. Emerging markets accounted for 64 percent of the company’s fourth quarter sales.
Net sales for the full year were $2.61 billion, down 2 percent from the previous year. Gross margin was $1.72 billion compared to $1.78 billion in 2013. Net income totaled $214.4 million, or $4.20 diluted earnings per share, compared to $274.2 million, or $5.15 earnings per share in 2013.
Rodan + Fields Begins Global Expansion with Canada Launch
In its first step toward global expansion, Rodan + Fields is venturing beyond U.S. borders into Canada. Having outpaced its competitors in 2014 to become the fastest-growing premium skincare company in the U.S., according to a study by Euromonitor International, Rodan + Fields is looking to build momentum with its first market expansion into the rapidly growing Canadian skincare market. The San Francisco-based company has grown to more than $300 million in annual revenue since Dr. Katie Rodan and Dr. Kathy Fields, creators of the popular Proactiv skincare brand, launched the business in 2008.
AdvoCare Partners with MLS in Largest Sponsorship Yet
AdvoCare International is bolstering its sports performance products with the largest endorsement deal in the company’s history. Major League Soccer has selected the North Texas-based brand as its Official Sports Nutrition Partner. Kicking off this year, the partnership will run through the 2019 season.
Last fall, AdvoCare announced that it would extend its FC Dallas jersey sponsorship through 2020. As the league’s Official Sports Nutrition Partner, AdvoCare will have the opportunity to introduce all MLS clubs to its products. AdvoCare Rehydrate, a drink mix that promotes hydration, recovery and electrolyte balance, will be on the sidelines during league games as the Official Sports Drink of Major League Soccer. The company will work with individual clubs to utilize AdvoCare products in league locker rooms and team training.