Natura Archives - The World of Direct Selling

Mixed Growth Performances in the First Quarter

Hakki Ozmorali — Mon, 18 May 2020 01:00:22 +0000

Among the six major direct sellers reviewed here, four of them reported weakening sales. Given the circumstances we are all in globally, this was not surprising obviously. It was interesting though, the other two announced they had managed to grow. Let’s take a closer look at each of them:

HERBALIFE

Herbalife came up with a solid 8% revenue growth in the first quarter, increasing its quarterly sales to $1,262 billion. Maybe the most striking performance was from its China region that posted 26% growth. Sales in Asia-Pacific increased by 12%, in North America 8%, and in EMEA 3%.

In the U.S., the first quarter and the month of March were all-time record highs for Herbalife.

Management said it owed the postive results in China to the strategy change the company made in this market after last year’s “100-day review of the health products industry”. Then, Herbalife had decided to be less reliant on large in-person meetings. And therefore, it created a robust e-commerce platform and moved many of the sales meetings online. Eventually, “this has proven to be extremely helpful during the pandemic”, Herbalife stated.

Despite the positive results in the first quarter, management announced the pandemic’s impact on the results in the second quarter and also on full year 2020. So, “the company would periodically reassess its ability to provide guidance for full year 2020 as and when the impact of the pandemic could be reasonably estimated”. In fact, Herbalife’s global growth was in a decline last April by nearly 1%. While China and the U.S. were up 20% and 14%, India and Brazil were down 30% and 31%, respectively.

For more on Herbalife’s first quarter performance, please click here.

NATURA &CO

As we all know by now, Natura had added Avon to its portfolio last year and Avon was included in Natura’s consolidated figures for the first time in Q1 2020. With the addition of Avon, Natura &Co became the leading beauty company in Latin America, with 11.8% market share, as reported by the management

The group’s consolidated revenue in Q1 2020 was R$7,518 b (approx. US$1.3 billion). This was up 2% versus prior year. Within this, Natura &Co Latam recorded 2% growth. The Body Shop’s revenue increase was 3% and Aesop’s 27%. Avon International, once again, reported a sales decline: -2%.

Although too early, Natura management has so far been satisfied with Avon’s results. “The rapid progress in integration” has led the company to raise its total synergy target to US$300 million to US$400 million over the next four years. This total synergy target has four pillars: Sourcing, manufacturing and distributon, administrative and revenue.

“Natura &Co Latam” unit brings 55% of the group’s global business, Avon Internatioal 28%, and The Body Shop 11%. Aesop, the unit that announced the highest percentage-wise growth, contributes 5%. As a side note, Avon’s Latin America business is included in “Natura &Co Latam”, together with The Body Shop’s and Aesop’s LATAM units.

Roberto Marques, Chairman and CEO, declared: “The first quarter of 2020 is the first to include Avon in our scope. We are very pleased by the rapid progress that has been made in integrating the company. This is more notable in that we have achieved this in the midst of the unprecedented global health crisis caused by the spread of the Covid-19 pandemic, which impacted our Q1 performance. In the face of the pandemic, the Group took quick action to adapt to this crisis, with three key priorities: Care for our people, care for our communities and care for our company.”

For more on Natura & Co’s first quarter performance, please click here.

NU SKIN

Nu Skin reported 17% revenue decrease in the first quarter versus last year’s same period ($518 m vs. $624 m). Company’s all business units contributed to this decline, China being on top of the list (-34%). Then came EMEA (-15%), and Americas/Pacific (-14%).

While the business in China was considerably down over previous year, management said it performed slightly better than they had anticipated. On the other hand, while South Korea performed mostly in line with the company expectations in Q1, the anticipation is that the effects of COVID-19 to be more impactful in the second quarter. South Korea represents about 15% of Nu Skin’s global revenue.

Commenting on the results CEO Ritch Wood said, “Our first quarter results demonstrated continued stability in the Nu Skin business with strong customer activity. More than 80 percent of our revenue comes through our digital properties which have been enhanced by our strategic investments in technology infrastructure and digital tools. Additionally, our manufacturing and supply chain investments have enabled us to effectively manage inventory and fulfill customer orders worldwide through very challenging circumstances.”

During the earnings call with the investors, the company also announced its plan to launch a new digital tool called “VERA”. This tool is to leverage artificial intelligence and machine learning to provide personalized product recommendations.

Nu Skin expects $520 to $550 million revenue in the second quarter. For the whole of 2020, the expectation is $2.17 to $2.26 billion. This is significantly lower than its 2019 sales (was $2.420 b).

For more on Nu Skin’s first quarter performance, please click here.

ORIFLAME

Oriflame reported 2% decline in its sales in the first quarter of 2020 as compared to last year (EUR 303 m vs. EUR 309 m).

The decrease in sales was mainly due to Asia and Europe offset by positive development in Latin America, Turkey & Africa and CIS. In fact, Asia (-13%), and Europe (-7%) were the two business units that came up with negative figures. Each of CIS (+11%), Latin America (+4%) and Asia & Africa (+4%) reported growth.

Oriflame’s independent consultants in the quarter remained almost stable at 2.8m (2.9m) on the field. Conpany’s unit sales decreased by 9% and the price/mix effect was positive 6%.

“During the quarter our ability to conduct physical meetings and conferences was affected and we also faced challenges in parts of the supply chain.Under these circumstances I am of course pleased that we today offer our Independent Beauty Consultants a modern way of social selling, with 96% of all orders being placed online. In addition, focusing on our strategic product categories has proven successful with wellness showing the largest sales increase in the quarter,” commented CEO Magnus Brannstrom. Wellness category deserved this special mention as its share showed a substantial increase last quarter: From 12% to 15%.

Besides 96% of the company’s global orders were online, during the first quarter mobile use was 79% (73%) of total sessions on Oriflame’s web sites and orders placed using mobile devices were 56% (47%). The total share of orders processed through the Oriflame app was 33%.

For more on Oriflame’s first quarter performance, please click here.

TUPPERWARE

Since 2013, Tupperware’ numbers have been in a downward trend. Looking back, this is quite a long time but until now, not much could have been changed. This eventually led to several changes at the top management which so far have not produced any substantial achievements. The most recent such appointment was Avon Italy General Manager Marco Brandolini’s to lead Tupperware EMEA.

At its peak, Tupperware’s annual sales was $2.672 B in 2013 and it came down to $1.798 B in 2019. In additon to this 30+% decline, management reported an additional sales decrease in the first quarter of 2020: -23% versus Q1 2019.

Tupperware shares were being traded at $67-68 at the end of 2013. This is now $2-3!

Obviously, the pandemic has only added to Tupperware’s existing problems. During the first quarter of 2020, the impact of COVID-19 on the company’s business was most pronounced in Europe and Asia Pacific, the management reported. Tupperware experienced partial or country-wide lockdowns in various markets in these regions, including China, France, Italy, and Philippines. That said, all regions contributed significantly to the sales decline as shown on the table to the right. Tupperware’s global active sales force was also down 15% in the first quarter.

Miguel Fernandez, President and CEO said, “Our top priorities are to protect the well-being of our employees and sales force, and to support our operations through the unprecedented challenges we face today.”

“Due to the material uncertainty of the duration and extent of the COVID-19 pandemic impact”, Tupperware management withdrew its full year 2020 outlook it had provided in February 2020.

For more on Tupperware’s first quarter performance, please click here.

USANA

As opposed to Tuppeware’s 23% revenue decline in Q1, USANA’s was more than acceptable, given the situation in the world: -2%.

The worst decrease was in China (-9%), Americas & Europe also reported a decline (-2%). Sales in North Asia grew by 23% and in Southeast Asia Pacific by 4%.

“Although COVID-19 in general, negatively impacted our business during the quarter, strong consumer demand for our high-quality, essential, health products and successful promotions helped us deliver operating results moderately ahead of our expectations. Importantly, our manufacturing facilities in the U.S. and China remain fully operational to date, and we have experienced no meaningful disruptions to our world-wide supply chain,” CEO Kevin Guest commented.

USANA had been in a very positive trend for several years until 2019 (it posted 11% revenue decline). Even with this, company’s 10-year compounded annual sales growth (CAGR) was 9%.

For 2020, USANA revised its revenue expectations to be between $1.00 – $1.08 billion (was $1.03 – $1.13 billion). This figure, if achieved, will be similar to company’s 2016 performance. As for the quarter we are in, management said the target was $250 million.

For more on USANA’s first quarter performance, please click here.

The general expectation is that things will be more difficult in the second quarter (and possibly, in the remaining of 2020). We will all see to what extent the industry will be able to adapt to the “new normal” and bounce back.

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Hakki Ozmorali is the Principal of WDS Consultancy, a management consulting and online publishing firm in Canada, specialized in providing services to direct selling firms. WDS Consultancy is a Supplier Member of the Canada DSA. It is the publisher of The World of Direct Selling, global industry’s leading weekly online publication since 2010. Hakki is an experienced professional with a strong background in direct sales. His work experiences in direct selling include Country and Regional Manager roles at various multinationals. You can contact Hakki here.

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2019 in a Few Major Companies’ Figures

Hakki Ozmorali — Mon, 30 Mar 2020 01:00:29 +0000

In this brief analysis, we take a look at a few of the major direct sellers’ fourth quarter and 2019 growth performances. It is true that these companies alone do not fully represent the sentiment or the trends in the industry, yet how they are doing does give some significant indications. Below is a general picture:

HERBALIFE

“As I close out my tenure as Chairman and CEO and prepare to hand off both of these positions to John Agwunobi, I want to express my sincere gratitude to our distributors and employees who have worked so hard to advance our mission to change lives and communities around the world. It has been an honor to serve and see the growth of this great company over the last 17 years,“ commented Michael Johnson, following the Q4 results.

John Agwunobi, who as previously announced will become CEO effective March 30, 2020, will also assume the role of Chairman of the Board, effective upon his election to the Board.

Herbalife reported $1.2 billion sales in the last quarter. This represented 2.8% growth versus prior year same quarter. This was achieved despite a 15% sales decline in China. Asia-Pacific was impressively up 18% and North America up 9%. The growth in Asia-Pacific was led by India, Indonesia, Vietnam, Malaysia and South Korea, all of which grew by double-digits, management said.

With this quarter, Herbalife ended the year with a revenue figure ($4.877 b) very close to last year’s ($4.892 b).

At this time, management refrained from giving any guidance for 2020, mentioning the difficulties in estimating the extent of impact from the Coronavirus. They said they would update its guidance for full year 2020 when they could reasonably estimate this impact.

For more on Herbalife’s fourth quarter performance, please click here.

NATURA

Natura had been on the headlines almost continuously throughout 2019 due to its Avon acquisition, a major transaction from many aspects. This operation was finalized early this year and the new entity (i.e. “Natura & Co”) started trading on the New York Stock Exchange on January 6.

Revenue-wise, last year was certainly a success for Natura. The consolidated net sales increased to 14,447 b. Brazilian Real (approx. US$ 3 b). That was 8% growth from previous year.

Natura’s consolidated sales included its direct selling arm Natura, The Body Shop and Aesop, all of which reported positive sales increases in 2019. Natura’s growth was 7%, The Body Shop’s 6%, and Aesop’s 23%. Natura is the largest unit of the three, generating more than 60% of the group sales.

These businesses reported strong results in the last quarter, too: Natura grew by 5% as compared to Q4 2018, The Body Shop by 7%, and Aesop by 26%.

Roberto Marques, Group CEO and Chairman of Natura &Co said, “2019 was another year of profitable growth and transformation for Natura & Co, as we continued to make significant progress in building a multi-brand, multi-channel, purpose-driven group that has now become the -largest pure play beauty company.”

For more on Natura’s fourth quarter performance, please click here.

NU SKIN

“In the fourth quarter our business performed in line with expectations,” said Ritch Wood, chief executive officer of Nu Skin. “Our customer base remained relatively strong however, our sales leader count was down in the quarter, primarily driven by a decline in Mainland China.”

Nu Skin’s last quarter global sales was $583 million, down 15% from prior year same quarter. Together with this, company closed the year with $2.420 b sales. This again, meant a 10% annual revenue decline.

Like Ritch Wood said, Nu Skin owed much of its revenue decline to its China market. Sales in China dropped by 29% or by $63 million (2/3 of Nu Skin’s overall sales decline) on a quarterly basis. That said, none of Nu Skin’s other units posted growth in Q4 (Japan did marginally).

For 2020, management announced their outlook as $2.17 billion to $2.30 billion revenue (or, 5 to 10% negative growth). They anticipate the overall business will return to growth in the fourth quarter of 2020, driven by the launch of a new beauty device. Their projected sales decline in Mainland China for the year is 20 to 25%.

For more on Nu Skin’s fourth quarter performance, please click here.

ORIFLAME

Oriflame, once again in its history, was delisted from the stock exchange and has been a private company since mid-2019. As it continues reporting its figures and as it is a major force in the European direct selling industry, I have included it in this review.

Company reported EUR357 million sales in the last quarter. This meant 1% decline. Company’s annual growth in 2019 was also down 2%.

Oriflame complained in its report about the challenges in some of its main markets primarily in Asia & Turkey. The situation in Asia & Turkey, the management said was mainly as a result of a decrease in the number of registered actives. Latin America continued to deliver positive performance driven by Peru and followed by Mexico and Ecuador. Positive sales development was seen in Africa primarily driven by Nigeria while Europe declined due to sales force and activity reduction. CIS delivered an increase in local currency sales supported by a solid growth in productivity an increase in registered actives. The new market Uzbekistan successfully commenced sales operations.

Management stressed their focus on “online” in their year-end report. During the fourth quarter, 76% of the sessions on their website came from mobile devices and 96% of the company’s global orders were placed online, of which more than 55% came from mobile devices.

For more on Oriflame’s fourth quarter performance, please click here.

USANA

USANA reported $271 million in the last quarter and this was 9% less than Q4 of 2018. With this, company closed the year with $1.061 billion sales, a decrease of 11%. Company’s total number of active customers at the end of the fourth quarter was 586,000, compared to 616,000 in the prior-year period

CEO Kevin Guest was not dissatisfied, though, saying, “Our fourth quarter results were stronger than expected and allowed us to finish the year strong. Our performance was driven by a better-than-expected response to promotions we offered during the quarter, as well as improved general momentum in many of our markets around the world, including China. As we begin 2020, we acknowledge the evolving situation in China, where our customers, employees, and China’s health officials are responding to the spread of the coronavirus.”

China is a very important market for USANA, generating about half of company’s global revenue. In fact, USANA basically does not have strong presence in markets out of Asia. Total sales in Americas and Europe make up 20% of USANA’s total.

During the investors’ call, management made an early announcement and said they were planning to roll out a whole new product category in early 2021. This new product line is expected to offer customers a more holistic approach to their health and wellbeing.

USANA expects net sales between $1.03 billion and $1.13 billion in 2020.

For more on USANA’s fourth quarter performance, please click here.

We will have to wait now to see what this year will look like for the direct sales industry. Given the current situation we all have been in, most probably things will not be as good.

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A Year in Review: 2019 in the News

Hakki Ozmorali — Mon, 06 Jan 2020 01:00:37 +0000

This week’s featured article is a brief compilation of industry news of significance from 2019. As you scroll down, I am sure you will agree with me that it was most certainly another exciting year for the industry with all the positives and the negatives.

I have also included articles from The World of Direct Selling that attracted much interest last year.

> Herbalife CEO Richard Goudis Resigns Over Comments He Made Before Taking the Job
> New Avon Names Laurie Ann Goldman CEO
> Stella & Dot to Exit European Market
> China Launches Campaign to Regulate Health Product Market
> Nerium Gets New Name
> Jeunesse Posts Record Year with $1.46B in Annual Sales
> Mary Kay Celebrates 50 Years of an American Icon – the Mary Kay Pink Cadillac
> LuLaRoe Founders Accused of Hiding Millions to Avoid Creditors

Most-Read Article in January on The World of Direct Selling:
What Direct Sellers Can Learn from the Corporate Training Industry (Vince Han)

> Amway Reports Sales of $8.8 Billion USD in 2018
> USANA Posts Another Sales Increase as China’s Direct Selling Clampdown Looms
> Avon Sees Revenues Decrease in Q4, Full Year 2018
> Herbalife Neared $5 billion Mark in 2018; Waits for Other Shoe to Drop in Goudis/China Probe
> Medifast Announces 87% Revenue Increase in Q4 and 66% for the Full Year
> Nu Skin Expands to Peru
> Skin Care Billionaires Rodan and Fields Return to the Teen Acne Market

Most-Read Article in February on The World of Direct Selling:
The 7 Giants’ 2018 Growth Review (Hakki Ozmorali)

> Fact or Fiction? Let’s Set the Record Straight – US DSA President
> Brazil’s Natura and Avon Confirm Deal Talks
> Nature’s Sunshine Reports $365 Million Sales for 2018, Up 7%
> Tupperware Parties: Suburban Women’s Plastic Path to Empowerment
> Two Mary Kay Executives Make Black Enterprise’s 2019 Most Powerful Women List
> Why Direct Sales Appeals to So Many Moms

Most-Read Article in March on The World of Direct Selling:
Common Pitfalls that Prevent Profitability in Direct Selling Start Ups (Dan Murphy)

> DSN Announces the 2019 Global 100
> Young Living Celebrates 25 Years of Global Growth
> Amway Disrupts Its Own Beauty Business, Launching 50 New Mobile Apps
> More Than 100 LuLaRoe Sellers Have Filed for Bankruptcy
> How Blake Mallen Capitalized on the Gig Economy Before It Was a Thing
> Brazilian Cosmetics Giant in ‘Advanced Talks’ with Avon
> Mary Kay Recognized by Forbes as One of America’s Best Midsize Employers 2019

Most-Read Article in April on The World of Direct Selling:
Marketing’s New Role to Keep A Direct Selling Company Relevant (Jonas Hedberg)

> Oriflame’s Co-Founder Jonas af Jochnick Has Suddenly Passed Away
> Nu Skin Named the World’s #1 At-Home Beauty Device System Brand by Euromonitor
> Tupperware Names CEO Tricia Stitzel Chairman of the Board
> AdvoCare Business Changing
> Founding Family Offers to Buy Out Oriflame
> It’s Official: Natura Buys Avon

Most-Read Article in May on The World of Direct Selling:
AdvoCare Abandons MLM: Uncertainty Returns to Direct Selling (Jeff Babener)

> WFDSA Announces Record-setting 2018 Direct Selling Business Results
> LG to Acquire New Avon North America
> US DSA Announces 2019 Awards Winners and Highest Performing Companies
> Natura’s Avon Acquisition Creates the First Latin American Beauty Powerhouse
> Retail Was Never in Our Plan and It Won’t Happen in Future Also: Frederic Widell, Oriflame VP
> Kirsten Dunst Is Making a Show About a Cult-Like MLM Company
> Amway, the Family Business that Became Global (Google-Translated Text)

Most-Read Article in June on The World of Direct Selling:
2019: The Year Direct Selling As We Know It Changed Forever (Brett Duncan)

> Happi Magazine Announces Top 50 Household and Personal Products Companies
> Canada DSA’s Recipients of the 2019 DSA Awards
> Amway Sues Sellers for Trademark Infringement, Faulty Product Distribution
> As India Hicks Closes Her Luxury Label, Is This the End of Tupperware-Party Shopping?
> USANA: China’s 100-Day Crackdown Has Damaged Consumer Confidence; Sales Drop by 15%
> Mary Kay Champions Business Excellence, Ethics and Social Responsibility, Reaps Rewards in Europe
> Nature’s Sunshine Announces New Global Leadership Structure and Appointments
> Pampered Chef Succeeds in Trademark Infringement Battle

Most-Read Article in July on The World of Direct Selling:
Five Ways the Direct Selling Industry Can Achieve Sustained Growth (Ben Gamse)

> New Amway CEO Shares Digital Vision
> doTERRA CIO Todd Thompson: Social Selling Is Taking off
> Executive Changes at Scentsy
> LG Closes $125M Acquisition of New Avon
> Coty and Younique to Part and Focus on the Development of Their Respective Strengths
> US Direct Selling Association CBD Memo: Ingestible CBD-Infused Products Violate DSA Code of Ethics
> “Tupperware-Style” Retail Makes a Comeback with 27% Growth in UK

Most-Read Article in August on The World of Direct Selling:
Why Are They Leaving Our Company? (Hakki Ozmorali)

> DSA Canada Responds to Globe & Mail Article
> Natura Lands in Asia and Starts Operations in Malaysia
> Tracy Britt Cool to Leave Pampered Chef to Start New Venture
> Rodan + Fields to Launch in Japan
> WorldVentures Expands to Brazil
> Nature’s Sunshine Announces Entry into CBD Market
> MONAT Expands into Europe with Its Launch in Ireland and Poland
> Amazon Challenges Amway, Modicare and Oriflame Ruling in Supreme Court

Most-Read Article in September on The World of Direct Selling:
Natura and Avon: Will This Acquisition Work for Both Sides? (Hakki Ozmorali)

> AdvoCare Will Pay $150 Million To Settle FTC Charges
> FTC v. AdvoCare: Enforcement Action Demonstrates Importance of Compliance Programs
> Uber Is Launching a New App That Matches Freelance Workers with Businesses
> Herbalife Announces CEO Succession Plan
> How Mary Kay China Is Trying to Stay Relevant with Younger Beauty consumers
> Beautycounter Appoints COO and CCO
> Origami Owl CEO Chrissy Weems Explores the Roots of a Successful Business
> USANA Announces Appointment Promotion of Walter Noot to Chief Operating Officer
> Oriflame to Focus on Wellness, Position as Healthy Lifestyle Brand: CEO Magnus Brannstrom

Most-Read Article in October on The World of Direct Selling:
FTC vs. AdvoCare: A Teachable Moment for Direct Selling (Jeff Babener)

> Neora Files Suit Challenging FTC’s Attempt to Change Direct Selling Laws
> Herbalife, Younique, LuLaRoe And Other MLMs Suddenly Under Fire
> LuLaRoe: From Startup to Over $1 Billion in Less Than 4 Years. Lessons and Growing Pains
> Tupperware Appoints Chris O’Leary Interim CEO
> U.S. Charges Two Former Herbalife Executives in China over Bribery Scheme
> UK DSA Announces 2019 Star Award Winners
> Jeunesse Enters Global Essential Oils Market

Most-Read Article in November on The World of Direct Selling:
AdvoCare, Neora, an Ever More Aggressive FTC! What Now? (Alan Luce)

> Kyani Founders Identified as Victims in Plane Crash
> Former New Avon CEO: Company Reneged on $1M Severance
> USANA Announces Retirement of Founder and Chairman, Myron W. Wentz
> Why Market America Is a Legitimate and Thriving Business
> US DSA 2019 Sales and Marketing Conference Reveals New Data on Direct Selling and Independent Work
> The 10 Beauty Brands That Defined the 2010s

Most-Read Article in December on The World of Direct Selling:
5 Keys to Communications Confidence in 2020 (Crayton Webb)

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Hakki Ozmorali is the Principal of WDS Consultancy, a management consulting firm in Canada specialized in providing services to direct selling firms. WDS Consultancy is a Supplier Member of the Canada DSA. It is also the publisher of The World of Direct Selling, global industry’s leading weekly online publication since 2010. Hakki is an experienced professional with a strong background in direct sales. His work experiences in direct selling include Country and Regional Manager roles at various multinationals. You can contact Hakki here.

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Natura and Avon: Will This Acquisition Work for Both Sides?

Hakki Ozmorali — Mon, 16 Sep 2019 01:00:02 +0000

Beginnings

Natura was founded in 1969 in Brazil by Luiz Seabra. 27-year-old Seabra founded Natura as a small lab and a cosmetics shop. In the beginning, his intention was traditional retailing.

Five years later, the decision was to go direct selling, following Avon, which had been successfully operating in Brazil for a while.

For eight years after that, Natura remained in its home market direct-selling only in Brazil. 1982 was the year when it went international for the first time, launching in Chile.

Growth

Natura’s sales grew at an amazing 43% compound annual rate between 1979-1989. And in 2004, Natura became the top cosmetics company in Brazil. It has been the market leader since then. To remind, Brazil is a huge cosmetics market, ranking now the third in the world. The same year Natura went public and was listed on the Sao Paulo Stock Exchange.

Natura has been known as a “Brazilian cosmetics direct-seller” rather than an “international company”. The most realistic reason behind this seems to be a combination of “having no compelling economic reason to go abroad and limited managerial resources at home to spare”. Apparently, increasing volume in Brazil made the prospect of investing elsewhere less attractive.

Thus, Natura’s international expansion remained limited to Latin America countries. Even this expansion did not contribute much to Natura’s overall volume. As of end-2018, 71% of its global revenue was still being generated in Brazil. The remaining 29% was coming from its five other markets, namely, Argentina, Mexico, Colombia, Chile and Peru. So, yes, even after so many years, this giant does not have any strong presence in the U.S., Europe or Asia. It has very recently landed in Malaysia as its first market.

The First Two Acquisitions

Aesop

Natura acquired 65% stake in Aesop in 2013 for about US$70 million. Established in Australia in 1987, the cosmetics retailer Aesop was selling skin, hair and body care products. At that time Aesop had 57 retail locations in 8 countries. For a company with an annual revenue of more than US$1.5 billion at the time, this was not a major financial transaction, obviously.

Then in 2016, Natura also bought the remaining 35% of the shares, increasing its ownership to 100%. By that year, Aesop’s retail distribution had grown to 177 stores in 20 countries.

Aesop’s net revenue was about US$260 million in 2018, representing more than a 50%-increase from previous year.

The Body Shop

Natura’s next move in 2017 was a bigger one: The Body Shop was bought for US$1.1 billion from L’Oreal. The Body Shop was established in the UK in 1976 by the late Dame Anita Roddick and had been owned by L’Oreal for the past 11 years before it was bought by Natura.

The Body Shop had over 3,000 stores in 66 countries and it had been suffering from a steady sales decline over the years. This was due, according to some, to the dilution of its environment-friendly brand image and to the existence of more powerful competitors in the natural beauty market. In 2016, its sales declined by 5%, and its operating profit by 38%.

As of-mid-year 2019, the situation at The Body Shop seems better. That business unit of Natura’s reported 9% revenue increase as compared to the first six months of 2018.

Transformation to “Natura & Co”

Early in 2018, the company announced it had rebranded itself as “Natura & Co”. “The Natura & Co brand embraces the codes and values of three brands which have had different journeys but always shared a common purpose in their commitment to life and the planet,” said Andrea Alvares, VP of Marketing.

Natura, The Body Shop and Aesop, the three companies in the Natura & Co group, would maintain their own strategic agendas, but the group management would expect sharing solutions and seeking synergies.

So, in 2019, while celebrating 50 years of existence, Natura defines itself as “a global, multi-brand and multi-channel group”.

Now, Avon

Then came the breaking news in May this year: Brazil’s Natura announced it had agreed to buy Avon in an all-stock deal valued at about US$2 billion. Including debt, the transaction was valued at US$3.7 billion, the company said. Natura said it had plans to turn Avon around by speeding up Avon’s existing initiatives on e-commerce and development of new products.

Of these three acquisitions, this most recent one is definitely the riskiest. For one thing, it required the highest amount of funds. Natura went to banks that agreed to provide it as much as US$1.6 billion to be used in financing for Avon stocks and for payments that may be required for Avon’s debt.

Secondly, and maybe more importantly, Avon had been the one having the most problems. Its revenue has been constantly declining since 2011, despite several major initiatives taken.

Lastly, it is worth remembering that Cerberus had acquired Avon’s North America unit’s majority shares for US$170 million in 2015. It sold it for US$125 million this year to LG Household and Healthcare!

Avon has tried many initiatives, including several major top-managerial changes in the last 6-7 years. None of them has so far produced any major positive impact on its growth. We now wait and see if things will be different within the Natura group. If this marriage fails, it could be quite costly for Natura.

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Direct Selling Giants’ Growth Performances, Mid-2019

Hakki Ozmorali — Mon, 19 Aug 2019 01:00:23 +0000

This week I have the quarterly growth analysis that I have been doing for several years. It focuses on the largest public direct sales companies and as far as I am concerned, gives an insight on the global industry’s direction.

Previously, this analysis had included Oriflame as well, but as this company decided to go private (i.e. its shares would not be traded on the stock exchange) last May, we no longer have access to its public figures.

AVON

Avon’s second quarter revenue was $1,174.8 million, down 13% from 2018 Q2. All of its four regions reported declining sales last quarter: EMEA -15%, South Latin America -14%, North Latin America -7%, and Asia-Pacific -4%. Active representatives declined 10%, too, with decreases reported in all regions.

Jan Zijderveld, Avon CEO, said, “We continued to execute our Open Up strategy, with pricing and productivity gains which drove adjusted operating margin expansion and improved free cash flow. Our focus on productivity in the second quarter, including less discounting, more effective incentives, optimizing promotions and more favorable mix, led to a 5% improvement in average representative sales with price/mix up 9%.” This clearly showed management’s focus was on productivity and profitability rather than growth.

Miguel Fernandez, Global President, explained how their focus had been shaping in terms of recruiting new reps. He said, “The previous recruiting narrative that we had in the company for many years was ‘Come to Avon because you’re going to get great products at the best price’. So, in many cases we were recruiting the consumer that was looking for a discount… We’re stepping away from that.”

You will remember that Avon was acquired by Natura, the cosmetics giant of Brazil in last May. This acquisition is expected to be completed by early 2020.

For more on Avon’s second quarter performance, please click here and here.

HERBALIFE

Herbalife reported net sales of $1.2 billion, a decrease of 3.5% compared to the second quarter of 2018. The worst performance came from China: -35%. South & Central America came up with -13%. Remaining four regions of Herbalife reported positive figures: Asia-Pacific 18%, North America 6%, Mexico 3%, and EMEA 1%. Excluding China, its net sales grew 5.4%.

Chairman and CEO Michael Johnson said, “Our second quarter results were within our guidance range. We delivered year-over-year net sales growth in 4 of our 6 regions. We reported year-over-year net sales growth in 8 of our top 10 countries. However, we recognize China is an issue and we have a plan in place that is working.”

Herbalife’s growth expectation for the whole year of 2019 is between -1.7% and +2.8%. As of mid-2019, Herbalife’s sales is down 2% versus last year.

For more on Herbalife’s second quarter performance, please click here and here.

NATURA

Natura’s consolidate sales was up 10% in the second quarter, reaching R$ 6,319 million (approx. USD 1.6 billion) as of mid-year.

Natura & Co.’s consolidated reporting currently includes Natura, The Body Shop and Aesop. Natura’s own revenue was up 7% in the first half, The Body Shop’s 9%, and Aesop’s 27%.

Commenting on the results, Natura & Co. Chairman Roberto Marques was happy, saying, “All three of our existing brands contributed to this strong performance. Natura posted a sharp improvement in Brazil despite a weak CFT market… The Body Shop’s transformation is advancing. Sales grew despite the closure of underperforming 37 stores… Aesop’s profitable growth continues.” Then, he added the acquisition of Avon was “a decisive step in the creation of a multi-brand, multi-channel, purpose-driven group.

Currently, units’ shares in the group revenue are as follows: Natura 63%, 28%, and Aesop 9%.

For more on Natura’s second quarter performance, please click here.

NU SKIN

“Our second-quarter results were negatively impacted by limited sales meetings, media scrutiny and consumer sentiment in Mainland China in connection with the recently completed 100-day review of the nutrition and direct sales industries,” said Ritch Wood, CEO of Nu Skin.

Nu Skin reported $624 million sales last quarter. This was 4% less than last year same quarter’s figure ($704 million). Of the seven regions, only Japan reported growth (2%) and China dropped the most (-24%). China is Nu skin’s biggest market with its more than 1/3 share in the global sales.

During the earnings call following the quarter results, Nu Skin management stressed the fact that China would remain as their top priority. They explained three specific initiatives: Launch of a new product, new business incentives to improve sales leader productivity, and initiatives focusing on customer acquisition and retention including a new customer referral program.

Management’s revenue expectation for 2019 is: $2.48 billion to $2.52 billion or -6% to -8%. Nu Skin’s 2019 mid-year revenue is 7% less than last year’s.

For more on Nu Skin’s second quarter performance, please click here and here.

TUPPERWARE

Tupperware’s second quarter sales performance was far from being satisfactory: $475 million (-11% as compared to last year same quarter). All regions reported negative figures, Asia-Pacific and South America leading them (each with -14%). Tupperware’s global sales force decreased to 565 million, representing a 9% decline.

“Overall, the business fell short of our expectations in some markets as geopolitical concerns and lower consumer spending headwinds in two of our key markets resulted in a miss of our local currency sales expectations,” said Tricia Stitzel, Chairman and CEO of Tupperware.

Tupperware expects an annual sales decline of between 9-11% in 2019. Tupperware’s sales had decreased by 8% in 2018. In fact, the company reported positive growth only in one year (2017) during the past five years. Tricia Stitzel commented on the future, “This is the three-year endeavor that may be bumpy at times, we’re tasked with turning a large ship and bringing along a family of over 3 million individual sellers with us.”

For more on Tupperware’s second quarter performance, please click here and here.

USANA

USANA reported quite disappointing results for the second quarter: Global sales was down 15% versus last year (USD 256 m vs. USD302 m). During the first quarter, USANA had come up with negative growth as well (-6.5%). Consequently, company’s mid-year growth is 10% behind last year.

The worst figure came from USANA’s largest business region of the four, China. Sales in China was down 23% and accounted for about 70% of the total decline in USANA’s sales. Americas & Europe (-15.9%) and Southeast Asia Pacific (-1.5%) also reported declining sales. The only positive situation was in North Asia (+19%), company’s smallest business unit.

Commenting on the results, CEO Kevin Guest said, “The continuing challenging market environment in China was the major factor that impacted our second quarter results. During the second quarter, we offered promotions and incentives in China that have historically generated meaningful sales and customer growth. However, the contribution of these promotions was significantly lower than we anticipated, which we believe is due to the low consumer sentiment toward health products in China.”

USANA management announced the net sales outlook for 2019 as “between $1.02 billion and $1.06 billion”. This is significantly lower than their expectation after the first quarter (was between $1.21 billion and $1.26 billion). If this revised projection happens, USANA will be reporting an annual sales decline for the first time after several years of substantial sales increases.

For more on USANA’s second quarter performance, please click here and here.

Generally speaking, the picture was not bright at all as a whole for these giants in the first half. Let’s see how their performances will evolve during the second half.

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