Russia Vietnam Next For Alticor

October 28, 2002
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ADA — Alticor Inc. reported worldwide sales of $4.5 billion for the fiscal year ending Aug. 31.

Much of the past year's growth was attributed to strong sales in Asian markets, which now account for more than two-thirds of company revenues.

Sales were up overall, though the company said it had to deal with "difficult economies" this past year in its Japanese, European, Latin American and U.S. markets.

The most significant sales increases were in Korea, China, India and Thailand.

Alticor attributed the rise in sales to several Nutrilite nutrition and Artistry cosmetic product launches during the year and to particularly strong sales of water treatment and air treatment systems in Asia.

Air and water treatment system have been huge product lines in Asia for the company and remain so, said Alticor President Doug DeVos.

"We tend to be a little bit more in the cities in Asia than we are in many other countries in the world, and so air quality and water quality probably is a little more top line for most folks there than it is in other parts of the world. So, proportionally, I think we end up doing a little bit better there.

"Probably the market isn't as saturated with other products or many other choices, so we probably get a double hit from that perspective."

Other big sellers in Asia — and around the world — are the company's Nutrilite nutrition products and Artistry cosmetic brands, said Chairman Steve Van Andel.

"We've transitioned over the years. Most people back in the U.S. tend to think of us as a soap business but we really are a health and beauty business today," Van Andel said.

"Our Nutrilite products around the world tend to be some of our top products. In many countries, the No. 1 selling product is some form of Nutrilite product. The Artistry business and the beauty line is also very large."

Increases in the company's core sales force also were greatest in Asia.

A record 3.6 million independent business owners and distributors renewed agreements with either Amway or Quixtar in fiscal 2002, the company said.

Korea, China and India led the way in sales for Alticor's Amway business.

Sales also rose in the company's long established Thailand, Taiwan and Malaysia markets.

A customer-focused sales incentive program boosted sales in Korea.

DeVos said the program turned into a team-oriented effort that created a lot of camaraderie and partnership among IBOs, and as the Amway Korea market grew, they all profited from their collective success.

Sales continued to grow in China despite restrictive trade regulations, the company noted.

Van Andel said China's inclusion in the World Trade Organization last November is one more progressive step in the country's decade-old movement toward becoming a market economy.

But its membership in the WTO only marks the beginning of the process of implementation.

"With implementation we hope to see a number of changes in laws and regulations," Van Andel said.

"But with China, lot of those changes go beyond just changes in law; they're cultural changes as well. So I think that will take some time, but we certainly do see some changes that hopefully will impact us in the future as we do business there."

According to Alticor, its Web-based Quixtar business maintained its leadership position in the online health and beauty market in North America in fiscal 2002, driven by the popularity of the Nutrilite and Artistry brands.

DeVos said he thinks Quixtar's soon-to be released financial results for the fiscal year will reflect an increase in sales, but declined to make any projections as to a year-over-year percentage increase.

Alticor spokesman Mark Bain said Quixtar's numbers would likely be announced this week.

Alticor's Business Access Group, the company's manufacturing and logistics unit, posted $62 million in sales to non-Alticor companies.

Access's internal sales to both Amway and Quixtar are not included in the reported $4.5 billion in worldwide sales.

Alticor experienced the usual, inflationary increases in the cost of doing business during the just passed fiscal year, but its business didn't change dramatically with respect to operational expenses, DeVos said.

It doesn't appear that the terrorist attacks and lingering threat of terrorism over the past year had an adverse impact on sales.

Like other U.S. companies, Alticor may have experienced some temporary disruption in the week or so following the attacks.

"We certainly saw a little bit of an impact for just a week or two in the U.S. where people just kind of stopped doing business as usual," Van Andel recalled.

He said it didn't take long for people to get back to business.

"You can see in the numbers we are up nearly 10 percent and we're up in those parts of the world, and the Asian parts of the world, where a lot of the issue is," Van Andel added.

Does Alticor plan to tap into any new markets in the new fiscal year?

The company expanded geographically so much, especially in the 1990s, that it's kind of running out of new places to go, DeVos said.

"But really the markets that remain kind of on the schedule would be to pursue going east in Europe to Ukraine or Russia, potentially. Those are the ones that are really on the front burner. We've had Vietnam hanging out there as well.

"Our new market activity really has moderated significantly from where we've been in the past and our focus is to continue to build on those markets where we currently are and enhance and increase our penetration."

Van Andel said that if those new markets were added to the company's current portfolio, it would put the company in well over 80 percent of the world's markets.  

        

So how does the company protect its patented products in far away markets?

Everybody does business a little bit differently, Van Andel said. Alticor does business by creating, manufacturing and selling it products through channels that are essentially controlled by the company.

"So for us, it maybe is a little bit easier at times to control some of the counterfeiting that goes on in other parts of the world."

That's not to say it doesn't happen, Van Andel added. The company has seen its products counterfeited in different parts of the world. It happened in India when the company first entered that market.

He said the move of those markets, particularly the less developed markets, towards market economies and towards being part of the world trading system puts them in a position where they have to abide by the rules like the rest of the world.

"I think, also, what we do with continuous innovation and continuous change makes it more and more difficult for people to counterfeit," Van Andel said.

"Because we have improvements so frequently in most of our product lines, by the time anyone gets out to the point of counterfeiting us it's too late — we've already got a new product on the market."

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