Herbalife increasingly eyes Asia as growth engine of future

By Hank Schultz

- Last updated on GMT

Related tags Multi-level marketing

Herbalife increasingly eyes Asia as growth engine of future
Herbalife’s global sales rose 15% in the third quarter. Record sales in China and the rest of Asia helped drive the result, and the company bucked recent trends in the multi-level marketing sector by posting sales increases in North America as well.

In its third quarter report, Herbalife, the world’s biggest MLM devoted solely to the sales of nutritional products, posed $1.2 billion in revenue. That represented a 15% year over year increase.

Like some other MLMs, such as Usana, Herbalife is growing most strongly in China and the rest of the Asia Pacific region. When taking currency fluctuations into account, Herbalife’s sales in China rose 27% year over year to reach $266 million. In the rest of Asia Pacific, sales hit $274 million for an 19% rise.

North America sales rebound

MLMs in general have had a more difficult time in North America in recent quarters. The strong economy with low unemployment has given other options to people who otherwise might have signed up as sales associates. And the ‘Amazonification’ of the marketplace, where consumers can shop for, order and have delivered nutritional products without having to go through a MLM middleman, has had an effect as well.

Herbalife managed nevertheless to plow through that trend by posting $240 million in sales in North America for a 20% rise. Europe and the Middle East is still an important market for the company, where sales hit $236 million and rose by a little more than 10%.

Mexico is a big market, too, but sales growth was less dynamic there. The figures for the country for Herbalife’s third quarter were $121 million in sales with a 6% rise.

The lone blemish on the country’s earnings report was the rest of Latin America. Sales in Central and South America plunged by 10% to come in at about $105 million. This decline does not take into account the situation in Venezuela, where the economy is in free fall. Herbalife said sales in that country now account for less than 1% of its overall total.

Asia is the growth engine

According to Herbalife’s research, the opportunities in the Asia Pacific region will only grow in the future.

“I don't expect that 20% growth rate (in actual product volumes) is sustainable, but I think long term there's big opportunities in China,”​ said chief financial officer John DeSimone.

According the company’s research, the global middle class, as measured by households spending $10 to $100 a day, will increasingly be centered in Asia. By 2020, 54% of global households fitting this description will be in Asia, while in 2030 that figure will rise to 66%. By that time, only 7% of such households will be located in North America, 14% in Europe, 6% in Central and South America and 7% in Africa.

Herbalife believes long term demographic trends favor the company in other ways, too. According to information it has gleaned from Forbes and Bloomberg, Herbalife said in a presentation to investors that millennials are more likely than their forebears to participate in the sharing economy and have a more entrepreneurial outlook, with more of them saying they’d like to start a business. By 2025, millennials will make of 75% of the workforce in North America.

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