Alticor Posts 64B In Sales

November 4, 2005
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ADA — Alticor Inc. reported a strong increase in fiscal 2005 sales in more

than half of its worldwide affiliates, but slower growth in the China market and a slight decrease in North American sales.

The company posted sales of $6.4 billion for the year ended Aug. 31, and attributed a portion of its overall sales increase to the strengthening dollar. Health and beauty products accounted for 60 percent of Alticor sales, and leading the sales pack were Nutrilite nutrition supplements, Artistry cosmetics and the new Atmosphere Air Purifier.

The company’s Quixtar business in North America saw a 3 percent decrease in sales but still marked its third consecutive year of sales above the billion-dollar mark. Internet Retailer ranks Quixtar No.1 in online health and beauty sales and No. 14 overall for e-commerce sales.

The company’s Access Business Group was up 9 percent over last year, topping $125 million in revenues through its third-party product development, manufacturing and logistics sales.

Alticor’s Amway business reported that 43 of its 57 markets posted sales increases over 2004 sales. Asian markets continued to perform well, with a 27 percent sales growth in Taiwan and 4.2 percent sales growth in the larger Japan market.

Amway China Co. Ltd. remained above the $2 billion mark for the second straight year, which the company sees as a “significant” accomplishment given all the uncertainty over the past year concerning new direct-selling regulations. The Chinese government put new direct-selling regulations in place in August.

Alticor Chairman Steve Van Andel said the regulations have been “looming over our sales organization” and that the company’s Independent Business Owners have felt a bit hesitant as to whether they wanted to move forward under the new set of regulations.

“When there’s uncertainty that looms over you, sales kind of slow down a little bit and that’s what we’ve seen in China,” he said. “But we are very optimistic moving forward there.”

Van Andel said the change in China is going to be “significant.” He said that Alticor doesn’t exactly know yet how things are going to pan out, but that the company will figure out how to make it work.

Alticor President Doug DeVos noted that the China market has been a growth driver for the company for years. He said that until the company is able to decipher the regulations and how its sales force is going to adjust to them, everybody’s kind of in a holding pattern.

For Alticor, he said, the future is really about geographic expansion and capturing greater market share in the markets where it’s already present. He noted that in the past, especially in the 1990s, the company penetrated market after market and was able to grow by just opening those markets and tacking them on to overall sales.

“Now that we’re there, our growth is going to have to come from better performance in those markets,” DeVos said. “Russia is really the last big new market that we have in the foreseeable future, so we’re going to have to get our growth from the markets where we already exist.”

He said Alticor has been doing that in some of its markets by transitioning in its product line from primarily a home-care product company to a health and beauty company. That transition is helping Alticor with its product mix in its mature markets, which helps the company become more competitive, he noted. Van Andel added that consumers and the company’s sales force drove the shift in product mix.

“They’re telling us that the products we’re offering, particularly Nutrilite products and Artistry products, are things they like,” Van Andel said. “We’ve made that shift and we think we’re still spot on in the types of products we have.”

DeVos said the company also has to make itself more attractive to people who are looking for an opportunity to own a business.

“The gist of it is to enhance our business opportunity and changing our product mix and enhancing the ability for people to be profitable sooner as they start their own business as an independent business owner. Those are the pieces that are critical to us moving forward and being able to ensure the business will continue to grow in the years ahead.”

During the past year, Quixtar introduced new health products, including XS Sports Nutrition drinks, and reformulated one of its old standbys — Nutrilite Double X Multivitamin. With the help of Interleukin Genetics LLC, the Double X product was reformulated “to deliver more plant concentrates and antioxidant protection.”

Alticor purchased 50.3 percent of the stock in Interleukin in March 2003 and connected with the emerging field of nutritional genomics, or nutrigenomics — the study of the interrelationships between human nutrition and genetic variation in health and disease. Alticor is tapping Interleukin’s intellectual property and expertise in genomics to develop “personalized,” over-the-counter nutritional and skin care products. The reformulation of Double X is a product of that partnership, and Van Andel said that relationship will result in more new or enhanced products next year.

“There’s a lot happening with that acquisition, but a lot of what’s happening is behind the scenes rather than out in front,” Van Andel said. “We are now using a lot of their technology in our R&D area.”    

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