Amway challenges biggies, beats Nivea, L'Oreal in size

Amway challenges biggies, beats Nivea, L'Oreal in size

NEW DELHI: Direct selling company Amway now outsells several mainstream brands in select segments. Amway's Nutrilite protein powder, for example, is far ahead
of rivals like Wockhardt's ProtineX, while its supplement pill Nutrilite Daily is neck-and-neck with Ranbaxy's heavily advertised Revital and its Glister toothpaste is on
the heels of Dabur Red.
"Our competition now spills beyond direct selling companies," Doug DeVos, Amway president and youngest son of its co-founder Rich DeVos, told ET in an exclusive
interaction.
As a company too, Amway has outgrown multinationals like L'Oreal, Nivea and Kellogg in India by reporting Rs 2,130 crore in sales for calendar 2011.
The US company, which started operations in India 14 years ago, attributes its success to 550,000 active distributors, aggressive pricing and advertising, and it plans
to double its advertising spends this year to Rs 58 crore from Rs 30 crore in 2011 as it targets double-digit growth to follow 19% rise in sales last year.
"The strategy is to gain market share and tell consumers our value story," DeVos says. Industry experts and analysts, however, say scalability is a challenge. "For
direct selling firms, achieving scale in the long term for top line and distribution is much more challenging compared to traditional firms like, say, a HUL or a Marico,"
says Pinakiranjan Mishra, partner and national leader (retail and consumer product practice) at consulting firm Ernst & Young.
Unlike traditional model of selling through retailers, direct-selling firms appoint distributors who sell products directly to customers against a commission, which varies
from company to company.
Anand Mour, senior analyst at financial services firm Ambit Capital, says Amway is operating smartly with its pricing and advertising. "But it will take time for Amway
to directly challenge traditional FMCG brands in established categories," he says.
Another long-term strategic challenge for the Rs 4,200-crore direct-selling business is the lack of a legislation to regulate it. Top players such as Amway, Oriflame,
Avon and Tuppeware have been lobbying for legislation and industry status, unsuccessfully.
"Without good regulation it's tough for consumers to figure out what's legitimate and what is not. If the legislation issues would not have been there, growth could
have been faster," says DeVos.
He is confident that the legislation will eventually happen. Amway India, a wholly owned subsidiary of the Michigan, US-based $9.3-billion Amway Corp, accounts for
half of the total direct-selling market in the country.
Its Nutrilite protein powder, launched in year 2000, is now a Rs 250-crore brand, and Nutrilite tablets is a 200-crore brand, having grown 34% last year. Glister
toothpaste too crossed Rs 100-crore turnover in 2011.
Amway's Satinique shampoo-which is available in Rs 5 sachets too-is competing with Hindustan Unilever's Sunsilk and Procter & Gamble's Pantene.
Amway India MD & CEO William Pinckney says, "We have value products that compete directly with market leaders and we offer a full-money back guarantee that
competitors don't.
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