China beckons

May 5, 2010
| By Pete Daly |
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With its sales growing fastest in China, it was probably inevitable that Amway Corp. would move some production there.

Last week, the direct-sales giant announced it will be moving several production lines to Europe and Asia over the next three years, with a net loss of about 50 Amway jobs in West Michigan. It will also be closing its Lakewood, Cal., facility, with the loss of about 150 jobs there.

For 2009, Amway reported $8.4 billion in sales, “and more than 80 percent of that took place outside of the United States. That’s a big change from 20 years ago when we designed our supply chain,” said Amway spokesperson Rob Zeiger.

Last week’s announcement focused on “our attempts to get our supply chain aligned with where our customers are,” he added. “China is our largest market and has been since 2003, I believe. We’re the No. 1 direct seller in China and one of the best known American brands” there.

According to the announcement, most of its production of consumer air treatment and water treatment products will move to Asia by 2013, “where the vast majority of those products are sold. Similarly, production of some home care products will shift closer to high-demand markets in Europe and Asia.”

The changes over the next three years are expected to eliminate 100 existing jobs in West Michigan, but some of the production that will end in California will be brought to the Ada facilities, for a net job loss here of 50.

Zeiger said the company expects normal attrition and voluntary retirements over the next three years will “minimize any involuntary job loss from this. We should have enough people retire that most of the affected workers are going to have a position available to them here at Amway. ... And during that period, we’re also adding 50 new production jobs to Ada, bringing them in from a California operation.”

“As part of our long-term strategy, we are moving some production closer to customers to cut supply times and significantly reduce shipping-related costs. Some of these steps are difficult, but they will help us drive long-term growth and sustain existing jobs in all our markets,” said Amway chairman Steve Van Andel.

The company’s Spaulding Avenue facility near Ada, underused since catalog sales and fulfillment operations were discontinued in 2009, will close in 2011. Employees will relocate to the main campus.

Some of the other production jobs Amway will eliminate in Lakeview will move to the Buena Park, Cal., facility and to Amway organic farms in Washington State, Mexico and Brazil.

“Changes that affect jobs are always difficult, even when they are done to make our company more competitive,” said Amway president Doug DeVos. “Saying good-bye to long-time friends and colleagues who have been with us through good and tough times is especially painful. We will do all we can during these changes to provide support to affected employees. We owe them our thanks for helping build a strong Amway over the years.”

Zeiger said Amway’s most successful products overseas are its Nutrilite nutrition supplements and Artistry cosmetics line. The two product lines are “uniformly our most popular everywhere in the world, including the U.S.,” said Zeiger.

He added that they do not sell a lot of the home care products and air/water treatment products in the U.S.

Zeiger said he believes that Amway has about 250,000 sales agents in China.

DeVos said at the Asian Gala 2010 in Grand Rapids in March that two-thirds of Amway’s business is concentrated in China, and he mentioned that the Chinese government requires Amway to sell its products in stores.

Amway has about 4,000 employees in West Michigan.

Zeiger said the Amway employee count for all of the U.S. is about 5,000. In China, he said, the Amway employee count is more than 5,000, “but that comes with a big asterisk,” he said, because it includes the people who work in more than 200 storefront facilities where people go to pick up their orders, complete transactions and hold Amway meetings.

“Most production workers are in the U.S.; most of the white collars are in the U.S.,” he said.

Most of the products Amway makes in China “are sold in China,” he said. “China is not a big source, at this point, of products for elsewhere in the world. We are largely shipping American products everywhere, and that will still be the case after this announcement.”

Amway’s business in China has averaged “double digit growth for most of the decade,” said Zeiger. Other markets that are growing rapidly are India, Southeast Asia and Russia.

“The U.S. market continues to meet its target for us,” said Zeiger. “Like a lot of established markets, we’re fighting hard for each point of market share, but we’re happy with how the U.S. business is.”

Amway announced earlier in April that it is now marketing a new line of products under the same brand as “Intelligence for Your Life,” a radio show starring John Tesh. Tesh, former co-host of "Entertainment Tonight," now has a syndicated talk show focused on suggestions and products to help people lead happier and healthier lives. Amway’s first Intelligence For Your Life products are healthy snacks, including Steel-Cut Oat Bars, Almond Nut Bars and Almond Clusters. The products are sold through Amway independent business owners and can be ordered online at intel4yourlife.com.

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