‘Direct’ Competition Takes A Toll On Amway Growth

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New Delhi: Emergence of dubious direct selling companies, and not a general FMCG slow-down, Amway India says has been one of the prime reasons for its stagnant sales in fiscal 2003-04.

“The single biggest reason why our sales did not move ahead was that the market was being bombarded by direct selling companies claiming to be ‘just like Amway’,” Amway India managing director and CEO William S Pinckney told FE.

The Indian arm of the $5-billion US-based direct selling company Amway Corporation recorded stagnant sales at Rs 580 crore for the year ended August 2003. But the company is hoping to achieve a 9 per cent growth for the year September 2003-August 2004 at a turnover of Rs 630 crore, Mr Pinckney said.

In its early days in the country, the direct selling industry is largely unregulated and has, therefore, seen the emergence of many fake direct selling companies. Even as the industry has under the aegis of Indian Direct Selling Association (IDSA) been lobbying for a separate directing selling legislation, the matter is still pending before the government.

On its part, Amway, last year addressed the issue through an advertising campaign that aimed to change people’s perception about the company and educate them as to how to differentiate between a genuine direct selling company and a dubious one. Amway now plans to come out with a new campaign, next year.

While the issue affects the entire direct selling industry, Amway being the largest player in the industry, feels it has paid a heavier price. “Since we are the largest, our name tends to get misused the most,” Mr Pinckney said.

The company has lined up a slew of strategies to drive growth in its next financial including 10 new product launches, development of distribution network (will enter 500 new cities) and investment in training.

Amway India currently operates in categories like personal care, nutrition and wellness and cosmetics. Of these, nutrition has emerged as the largest category and constitutes about 40 per cent of the total turnover.

The company, produces 80 per cent of its products in the country through contract manufacturing. At present, it outsources from five manufacturers in different parts of the country. The company has invested Rs 151 crore of which Rs 26 crore is in the form of foreign direct investment.