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Amway surged by converting a multitude into sales agents

And half of them are actually consumers who have become distributers primarily to buy for themselves at a discount

Surajeet Das Gupta & Sounak Mitra  |  New Delhi 

In terms of revenue it is already bigger than fast moving consumer goods (FMCG) giants such as Procter & Gamble, Gillette and home-grown Kolkata-based Emami. It is also closing in on big boys like GSK Consumer Healthcare, Godrej Consumer Products and Marico. And, unlike its competitors, the Rs 2,288-crore company sells only directly to customers, rather than through the normal retail chain.

Amway India, the country’s largest direct selling company, whose chief executive officer, William S Pinckney, and two other directors were arrested yesterday in Kerala and granted bail on Tuesday, operates through 1.5 million direct distributors. Half of these are actually consumers who have become distributors, primarily to buy for themselves at a discount. A substantial alternative distribution chain, as the country has about eight mn retailers and beverage cover four to five mn retail outlets.

Under the direct selling system, distributors are enrolled free of cost and make commissions on selling products directly to consumers and also from a share of their own group’s business volumes, comprising of other downline distributors. Amway started operations in 1998 and has quickly built an extensive distribution structure. It has 145 offices and 65 warehouses, covering about 10,000 postal index codes and as many as 80 cities across the country.

Amway executives say their nearest direct selling competitor in India would be having a presence in half this number of cities and with a turnover less than a fourth of what they sell. Competitors include Oriflame, Herbalife, Avon and Modicare. It has a 36 per cent share of the Rs 6,300 crore direct selling market.

It began by importing products and now produces 95 per cent of these within the country, through seven contract manufacturers, helping it to reduce prices. Its own manufacturing facility is being set up at Nilakottai (near Madurai), with an investment of Rs 500 crore by 2015.

The company has also learnt to play the pricing game with its ‘great value’ products targeted solely at the mass market. To take on the big boys of FMCG, it offers an array of products — razors, shaving creams and foams, amla and coconut hair oil — at prices 10-15 per cent cheaper than competition. Its success is reflected in the fact that these products constitute eight per cent of total revenue.

Substantial advertising, especially on TV, and door to door pushing by its distributors has helped it build some large brands.

For instance, Amway earns a little over half its revenue from Nutrilite, the vitamins and dietary supplements brand which is even recommended by doctors. It toothpaste brand, Glister, and liquid detergent brand, SA8, are other top-selling brands of the company which have crossed the Rs 100-crore annual sales mark.

Apart from the Nutrilite range, Amway gets 10-12 per cent of revenue from beauty products, including brands such as Artistry and Attitude. Home care products, which include SA8, Dish Drops, surface care product LOC and speciality cleaners, contribute nine to 10 per cent of Amway India’s revenue. Personal care products, which include brands like Dynamite, Glister, Persona and G&H, contribute about Rs 200 crore annually.

Leveraging its distributors, Amway India has also tried out the services business. It is a corporate agent for Max Life Insurance and sells health insurance for Royal Sundaram Alliance through its subsidiary, AmSure Insurance Agency Ltd.

<b>Pinckney, others granted bail</b>

Amway India on Tuesday said its chief executive and managing director, William S Pinckney, and two other directors — Anshu Budhraja and Sanjay Malhotra — who were arrested by the crime branch of Kerala Police, had been granted bail on Tuesday afternoon by the Wayanad district court.

“We reiterate our continued confidence in the Indian legal and judiciary system and are confident of a favourable outcome at the end of the investigative and legal process in Kerala,” Amway India said.

Meanwhile, the Federation of Indian Chambers of Commerce and Industry said the arrest of Pinckney under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS) was inappropriate.

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First Published: Wed, May 29 2013. 00:45 IST