MUMBAI: Amway, the $10.8-billion American multi-level marketing leader, has been in India for over 20 years now but it still faces some concerns with regard to its business model.
Yet, Amway says it will continue to invest in India. In an interview to TOI, Amway's global president Doug DeVos said the company will continue to invest on multiple fronts. According to him, over the next five years, Amway's direct and indirect investments in the country will cross Rs 1,000 crore. DeVos, who is the son of Amway's co-founder Rich DeVos, however, believes in order to protect consumers and direct sellers, action by the central government is needed in the form of legislation that protects consumers from fraudulent enterprises. Excerpts:
How much is Amway investing in India over the next five years?
India is a nation of great importance to Amway - a top-10 market for us with the potential for great growth in the future. In order to support that growth, we must invest and are doing so in several ways. Our investment in manufacturing is a major component and we're pleased that our new Rs 550-crore plant near Madurai in Tamil Nadu is up and running, producing world-class products for the Indian market. The plant represents the largest investment of our global $335-million manufacturing and R&D expansion, at approximately 30% of the total spend. Our investments don't end there. We continue to invest on multiple fronts, including digital platforms that help our distributors to showcase products to consumers and ease the management of their businesses, along with enhanced centres for people to experience our products for themselves. We have launched an aggressive effort to enhance several of our physical locations - converting them into digitally-enabled, next-generation facilities. We are working with Microsoft India to help us design these locations with the goal of opening 15 sites in India over the next five years. The first facility will be launched in Bangalore later this year. Overall, our direct and indirect investments in the country will easily cross Rs 1,000 crore over the next five years.
What is the growth potential that is driving Amway to invest in the country? Please give the size of Amway relative to the industry and also current and potential growth numbers...
It is evident that the entrepreneurial spirit is strong in India. In fact, according to our most recent research on the topic, a majority of Indians could imagine themselves starting a business of their own and 70% of the nation's population has a positive attitude toward entrepreneurship. We are the largest direct selling FMCG company in India and in the world. According to a Ficci-KPMG report on direct selling in India, the industry can grow to Rs 64,500 crore by 2025 - an almost ninefold increase from its current estimated size of Rs 7,200 crore. The potential of the industry also can be measured by the fact that it forms 0.4% of the total retail sales in India currently. Direct selling makes up a higher percentage of overall retail sales in other key markets and we believe India has this potential as well.
Does Amway have any concerns in India with regard to the business environment?
We're thankful that the Indian government is engaged and feel that specific legislation for the industry is the best course forward. The lack of clear direct selling laws currently fails to help law enforcement distinguish between direct selling and fraudulent schemes that masquerade as direct selling companies. In order to protect consumers and direct sellers, action by the central government is needed in the form of formal legislation that protects consumers from fraudulent enterprises. Properly constructed legislation will allow the many Indian direct sellers to focus on growing their business through product sales, and at the same time will protect consumers from fraudulent enterprises.
Are there any segments of consumer products where Amway has or is close to gaining a leadership position according to your estimates? Please provide details...
Amway has a portfolio of world-class products in the categories of nutrition, beauty and home. In fact, Nutrilite is the world's No. 1 selling vitamins and dietary supplements brand. Nutrilite has firmly established itself as the leading brand in the vitamins and dietary supplements category in India as well. The brand contributes more than 50% of Amway India's sales (over Rs 2,000 crore). In India, we have found success with the Artistry (among the world's top five premium skincare brands) range of products. The direct selling model is a strength in the prestige skincare segment, as our distributors are able to provide consumers with personalized service that helps them to maximize the benefits of the products. We also are exploring bringing cookware products to India and believe there is great opportunity in this category as well.
Do you believe there are still doubts in the minds of consumers/government/law enforcement authorities about multi-level marketing business in India? How are these doubts being dispelled?
While there has been some confusion about the direct selling business model in India, I think both consumers and the government are beginning to understand the business model better. We are thankful that the issues faced by the direct selling industry are now being looked at by the government of India. A white paper released by the ministry of corporate affairs' think tank, the Indian Institute of Corporate Affairs, helped to clarify the business model for the nation and made strong recommendations that should be beneficial for all. More than 60% of Amway distributors in India are women. I think there is a greater understanding in India today of our $180-billion global industry.
Source | Via