Mixed Bag for Two MLMs in a 2010 First-Quarter Earnings Roundup

Mixed Bag for Two MLMs in a 2010 First-Quarter Earnings Roundup

Global nutritional supplement direct-seller Reliv International Inc. reported April 29 that its first quarter 2010 net sales totaled $22.7 million, a 4.5% decrease over the same period last year. Reliv’s Q1 2010 woes seem a continuation of the company’s 2009 troubles, when yearly sales topped out at $85.4 million for the multi-level marketer (MLM), down from $98.2 million in 2008.

Robert L. Montgomery, Reliv’s chairman, Reliv’s president and CEO, attributed the decrease to the down economy, noting that average order sizes from distributors were declining. “Over the last two years, the number of orders has remained relatively steady, which indicates a solid customer base,” Montgomery said during an April 29 earnings call. “We believe the recession, therefore, is the main culprit leading to lower average order sizes. Our U.S. distributors and customers are still feeling the effects of the recession, as their spending remains below last year’s levels.” Reliv reported a 1% increase in distributors in 2009 over 2008 in its Q4 2009 earnings release, but a poor showing in January and February of 2010 left the company with low enrollments for the first quarter of 2010.

Despite a 9% decrease in U.S. sales, though, Reliv was pleased to report a 36.1% increase in international sales, though about half of the increase was a consequence of global currency fluctuations. “International sales were a bright spot this quarter, increasing approximately 19% excluding the effect of currency fluctuations,” Montgomery said. Montgomery tried to remain optimistic, claiming that at least “the rate of the sales decline…has moderated compared to previous years’ declines.” Reliv saw a 6.5% decrease in sales in Q42009 compared to the fourth quarter of 2008.

On the flip side, fellow global nutritional MLM USANA Health Sciences, Inc. reported that its first-quarter sales of 2010 grew an impressive 22.4% to a record $119.1 million, over its $97.3 million in net sales in the first quarter of 2009. USANA’s distributor base in North America in this first quarter had declined 3.1% from the year previous, but, in stark contrast to Reliv’s troubles, the MLM found success in the form of an increase in average customer sales, with net North American sales climbing 8.3% to $60.5 million. “While we are disappointed with our lack of customer growth in this region, we believe that there is significant potential for growth in North America,” said Dave Wentz, CEO of USANA, in an April 28 earnings call. “We remain committed to regaining momentum in this important region.”

Like Reliv, USANA also experienced strong international growth. Net sales jumped 41.5% over the first quarter of last year to $58.6 million in its Asia Pacific market, where USANA also saw double-digit growth in its number of active distributors.

NBJ Bottom Line:

USANA and Reliv are both publicly traded MLMs selling nutrition products, and they operate in nearly the same number of international markets.So why the disparity? In short, for MLMs, size matters. Reliv reaches a global base of about 66,000 independent distributors, but USANA boasts 200,000. While Reliv must constantly seek out new distributors to compensate for shrinking consumer orders, USANA can rely on a larger base to grow its sales from within. USANA also has a long history of research excellence and dedication to manufacturing quality to help sell its products. Finally, it’s important to note that, although Reliv’s management attributes its recent revenue declines to the economy, its sales problems began showing up before the recession began.

For a complete analysis of the tools and tactics of the nutrition industry’s most successful MLMs, including a breakdown of new markets, new products and the trends that drive both success and failure for direct sellers, be sure to check out NBJ’s April 2010 MLM & Practitioner Sales in the Nutrition Industry Issue, available now.

Related NBJ links:

Two Up, One Down in a 2009 Supplement Firm Earnings Roundup
2009 Scientific Achievement Award: USANA
Supplement Sales Swell in Practitioner Channel, but Shrink via MLMs in ’09

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