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MLM Franchise Companies: Functional Foods in Direct Selling in Hungary

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Information about MLM Franchise Companies: Functional Foods in Direct Selling in Hungary
Business & Mgmt

Published on March 5, 2014

Author: SzilrdBerke

Source: slideshare.net

Description

This presentation introduce some strategies on the direct selling market. Keywords: new MLM companies, MLM franchise, DXN, marketing, functional foods, nutraceuticals, coffee, aloe vera, drinks, flavonoids, corporate strategies, compensation plans, recruiting strategies.
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Natural functional foods in direct selling in Hungary: different corporate strategies Dr. Szilárd Berke Ph.D., professor assistant Kaposvár University, Faculty of Economic Science, Department of Corporate Economics and Management Process of Habilitation, Kaposvár, 04.29.2013. /Version to the internet/ websites: mlmcoffee.dxneurope.eu biokaffee.dxneurope.eu cafe.dxn.es wellnesscaffe.dxnitaly.com mlmcoffee.dxnnet.com szilard.berke marketing.cafeaganoderma.ro

The short content of the presentation 1. 2. 3. Introduction: direct selling industry and – companies. Behind the products in Hungary: strategies in practice – some results. General conclusions.

1. Introduction: to give some fact to the 1. Introduction: to give some fact to the direct selling industry and -companies direct selling industry and -companies

1.1. The world market of direct sellers † total percent of the global market Source: WFDSA, 2012

1.1. The world market of direct sellers 11 ,2% in 20 t: 1 ge growh Avera s associate les million sa 0 ore than 9 M s companie Over 300 † total percent of the global market Source: WFDSA, 2012 o zil, Mexic Bra a, Korea, hin , Japan, C ny and Italy SA makers: U rance, Germa ide Volume F les worldw sa ts: D in retail ant marke US Import 150 billion d: SA realize D

1.2. The 50 biggest companies in the world Direct selling (MLM franchise) companies in the world Amway, Herbalife, NuSkin, Forever Living, Usana, New Era, Shaklee, DXN, Bao Jian, PURE, 4Life, PM International, Visalus Avon, Natura Cosmeticos, Vorwerk, Mary Kay, Oriflame, Belcorp, Yanbal, Amore Pacific, Scentsy, Menard, For Days, KK Assuran, Better Way, NSP, WIV Wein, Arbonne, Neways, Noevir, LR, Japan Life Tupperware, Market America, Cosway, Eureka, Vivint, Isagenix, Team National Primerica, Telecom Plus, Ambit, ACN, TPC, Partylite, Ignite, Viridian TOG, Charle Southwestern Group of main products „Wellness” (first of all beverage supplement, food and beverage) Personal Care, Beauty Home/Family Care/Home Durables Financial Services, other (gas, energy, etc) Clothing & Accessories Leisure/Educational With darkblue = Company Own research, based on DSN, 2012 Vol 8. (6), has official subsidiary in Hungary yet. WFDSA, 2013

1.2. The 50 biggest companies in the world Direct selling (MLM franchise) companies in the world Group of main products Amway, Herbalife, NuSkin, Forever Living, „Wellness” (first of all Usana, New Era, Shaklee, DXN, Bao Jian, PURE, beverage supplement, 4Life, PM International, Visalus food and beverage) Avon, Natura Cosmeticos, Vorwerk, Mary Kay, Oriflame, Belcorp, Yanbal, Amore Pacific, Scentsy, Menard, For Days, KK Assuran, Better Personal Care, Beauty Way, NSP, WIV Wein, Arbonne, Neways, Noevir, industry ss LR, Japan Life e wellne Home/Family Tupperware, Market America, s i n t h Eureka, o r k Cosway, 23% w Care/Home Durables Vivint, Isagenix, Team National Primerica, Telecom Plus, Ambit, ACN, TPC,” companies Financial Services, ss Partylite, Ignite, Viridianhe best „wellne other (gas, energy, etc) of t % e! Clothing & Accessories TOG, Charle 38 eople her sp has sale Leisure/Educational Southwestern With darkblue = Company Own research, based on DSN, 2012 Vol 8. (6), has official subsidiary in Hungary yet. WFDSA, 2013

1.3. The biggest ds companies in Hungary, which has functional foods. Company Amway* Wellnet Sunrider* Ökonet Forever Living Tiens* Flavin Naturlife* Flavon Group* Morinda (TNoni) NuSkin* Herbalife* Vemma * = HDSA member Bold = hungarian c. Market activity from: 1991 1991 1993 1996 1997 2000 2001 2002 2005 2005 2005 2005 2006 Company Gano Excel Life Care Winalite DXN Xocai Bionx Biyovis/Bionet Organic Mission Organo Gold Monavie Fitomed Serenigy Xango Market activity from: 2007 2009 2009 2009 2009 2010 2010 2010 2011 2011 2012 2012 2012 Own figures, based on: Haszon magazin, 2009; Profi MLM; WFDSA, 2012

1.3. The biggest ds companies in Hungary, which has functional foods. Company Market activity Company Market activity an official . take from: n to ssio ndep. ass from: mi yi lem: hard 1991r not Ganoerved b bs Excel o Amway* Prob 2007 secto – ns nWellnet informatio 1991 Life Care ,5 billio2009 (2 his range Sunrider* 1993 F fall into t Winalite 2009r or powde e, of F ill, capsul : retail1996 Ökonet Estimate DXN s p 2009 ot include n Forever Living billion HUF) 1997 Xocai 2009 15 010 n 2 2010 Tiens* 2000 Bionx 0 billion HUF i 5 are circa Flavin 2001 Biyovis/Bionet 2010 s Total sale y Naturlife* 2002 Organic Mission ing activit2010 nd a Flavon Group* 2005 Organo Gold tst 2011 risis, ou e the c spit De2005 Morinda (TNoni) Monavie 2011 ere NuSkin* 2005 Fitomed unded h2012 0 fo panies, 1 com Herbalife* 2005 ll 26 Serenigy 2012 era Ov Vemma * = HDSA member Bold = hungarian c. 2006 Xango 2012 Own figures, based on: Haszon magazin, 2009; Profi MLM; WFDSA, 2012

2. Hungary: insight into a strategies in practice

2.1. The five group classify /Berke, 2011/ - So called „MLM Franchise” companies      „Old Champions” Big Companies. „In the right place, at the right time, with right marketing plans ”. One leader product and many others. Forever Living Pr.(1997), USA „Pioneers ” Small companies, big ideas. Low budget. Bionx (2010), Hungary „Paratroopers” Big comp., one star product. Focus on youths. Fast business packs. Main goal: expansion with low risk; guerilla start in outsider countries. MonaVie (2011), USA „East Winds” Big companies, slow penetration. First rule: be stabil and fair ! Wide pr.l., more star products. DXN (2009), Malaysia „Grasshoppers” Small or medium companies. One star product. Own home factory or research laboratory. Restarted Life Cycle. „Khanai” philosophy. Flavon Group (2005), Hungary In the bracket: (Started in Hungary)

2.2. Collected viewpoints to start and manage ds companies Costumer self service Inner motivation Inner education Inner well-being Self consumption Source: Berke, 2012 Special decisions OUTSIDE the corporate Salespeople level 1 Events marketing Monthly consumption pr. Quickly founding leaders Education system Recruitment system Compensation Plan Pulled out facPulled out factors to insight tors to insight Product USP. Quality. Price. Vertical integration levels General scopes, 7p, Porter`s elements etc. Sales tax Behaviors Demand on market Economics, Politics, etc. Special decisions Corporate - level 3 Corporate`s decisions level 2 Corporate`s decisions level 1

2.2.1. Product - Quality - Price

Founding the core (USP) of our products: the Golden Circle Contents: Health benefits/scopes of functional foods Naturally nutrient-rich or medicinally active foods or –components Nutraceuticals Product groups of functional foods Sinek, 2012 and own data USP* = Unique Selling Proposition

Results to „WHY”: WHY We make this product, that… Unit of Companies (n=26) Bone health 1 Musculoskeletal disease, joints Main scopes: To strenghten immune f. Give anti-ageing effect Reduce cardiovascular d. 3 Diabetes mellitus 3 Cardiovascular disease 11 Obesity 6 Physical performance 8 Health and well-being in ageing 12 Mental health 10 Gastrointestinal health 9 Immune function 20 Early development and growth Used messages 0 0 2 4 6 8 10 12 Source of scopes: European Commission, Directorate E – Biotechnologies, Agriculture, Food, 2010. Source of data: Own research, 2013. 14 16 18 20

Next question: the „HOW” HOW Favourized naturally nutrient-rich or medicinally active foods Olives Noni Milk Spirulina Soy Guarana Mangosteen Honey Greens Chocolate Aloe Vera Mixed vegetables Coffee Ganoderma Berries Mixed fruits Green tea In product 2 2 2 3 3 3 3 3 4 4 4 4 5 6 8 9 12 0 2 4 6 8 10 Source of data: Own research, 2013. 12

Next question: the „HOW” HOW Favourized naturally nutrient-rich or medicinally active foods Olives Noni Milk Spirulina Soy Guarana Mangosteen Honey Greens Chocolate Aloe Vera Mixed vegetables Coffee Ganoderma Berries Mixed fruits Green tea 2 2 2 3 3 3 3 3 4 4 4 i, Goji), a ries (Ac cts: Ber u ing prod Upris e a, Coffe oderm vera gel Gan uct: Aloe 6 od 0l a r p r 2 4 8 10 Popu 4 5 6 8 9 In product Source of data: Own research, 2013. 12 12

„HOW”: preferred nutraceuticals HOW /Collected from advertisements and descriptions/ EU – Classic Retail (%) from 504 product 1. 2. 3. 4. 5. 6. 7. 8. 9. Hungary – Direct Selling from 52 products (not included variations!) (%) Flavonoids 15,4 ! Many ted 44.9 efragmen 2.ssVitamins 13,4 D ages. me Polysaccharids 11,5 Saccharides (mostly prebiotics)ated 3. varieg 20.3 s. Plant extracts 13.8 otic name 4. Caffein 11,5 Ex Terpenes 10.6 (eg: Carotinoids)d USP. 5. Antioxidants 11,5 y: To fin n occup Miscellaneous 9.6 (eg: Vitamins) 6. Minerals 9,6 s i t i o First po (49%), … Fibres 9.1 7. Organico x i d a n t s 7,7 germanicum anti Phenols 8.6 (eg: Flavonoids) Bacteria cultures (mostly probiotics) Peptides 7.8 Lipids 6.0 s prebiotic Source: europa.eu, 2013 Pro- and ) d (44,9% e favouriz 1. Charotinoids 5,8 9. Amino acids 10. Omega 3-6 fatty acids 5,8 11. Protein 12. Terpenes 13. Vitamine „C” Source: Own research, 2013 Bold = antioxidants 8.

„WHAT” shall we produce? 2,0 18,0 66,0 2,0 4 snacks, chocolate Direct Selling - Hungary (estimate) confecti- 4,0 onery beverages 4,0 54,3 30,1 3,1 2,3 0,8 Retail - EU 1,6 diary 0 10 Dairy (incl. yoghurt drinks) Confectionery Bakery Source: Own research, 2013 and JRC, 2008 beverages 20 30 40 50 60 Beverages Fats and fat supplements Convenience 70 3,4 3,1 1,3 80 90 Cereals Infant foods Miscellaneous Popular: modified diary products Producers go: beverages and confectionery. 100

Old Champion Pioneer BionX Paratrooper Immune function Gastrointestinal health Physical performance Immune function Mental health Cardiovascular disase Mental health Physical Performance Musculosceletal disase, joints Bone health +Aloe Vera, Guarana +Baoberry, Guarana +Naturally protective antioxidants, prebioticums, caffein FLP +Naturally protective antioxidants, enzymes, aminoacids, polysaccarids East Wind DXN Graashoppe r +Acai Berry, Guarana +Ganoderma, Spirulina, Noni, Cordyceps, Coffee +Berries, fruits and vegetables +Naturally protective antioxidants, prebioticums, caffein +Naturally protective antioxidants, enzymes, germanicum, polysaccaridesv itamines MonaVie Immune function Gastrointestinal health Physical Performance Cardiovascular disase Flavon G. Health and well-being in ageing +Naturally protective antioxidants Source: Own research, 2013

Old Champion FLP Pioneer BionX Paratrooper MonaVie East Wind DXN Graashoppe r Flavon G. Immune Immune Immune Mental health Health and function al function function Physical well-being Physic on + Gastrointestinal e functi n Gastroin ageing scopes: Same Mental healthimmuPerformance healthealth ardio h+C intestinal Cardiovascular Musculo- al intestin rmance + Gastrosceletal disase, Perfo disase Physical Perfor- one h. health cele musculo-smancetal d., b inst: uggest agajoints Physical MonaVie s ts. Cardiovascular with anti-ageing benefi performance n health Bonely Flavon Group works o disase na ducts: berries and guara +Acai Berry, +Ganoderma, +Berries, fruits lar pro popu+Baoberry, s, caffein and vegetables cum Guarana Guarana iotiSpirulina, Noni, ts: a n ti o x id a n ts , preb Cordyceps, Componen e product in the same timCoffee DXN: 5 „star” +Aloe Vera,t Mos Guarana +Naturally protective antioxidants, enzymes, aminoacids, polysaccarids +Naturally protective antioxidants, prebioticums, caffein +Naturally +Naturally protective protective antioxidants, antioxidants enzymes, rink germanicum,nergy d g”; e agein verages: „anti- polysaccaridesvon) be v itamines d with jam (Fla DXN) an : anaged groups M ( ng with coffee Targeti +Naturally protective antioxidants, prebioticums, caffein Source: Own research, 2013

Old Champion FLP Pioneer BionX Paratrooper MonaVie East Wind DXN Graashoppe r Flavon G. Immune Immune Immune Mental health Health and function al function function Physical well-being Physic on + Gastrointestinal e functi n Gastroin ageing scopes: Same Mental healthimmuPerformance healthealth ardio h+C intestinal Cardiovascular Musculo- al intestin rmance + Gastrosceletal disase, Perfo disase Physical Perfor- one h. health cele musculo-smancetal d., b inst: uggest agajoints Physical MonaVie s ts. Cardiovascular with anti-ageing benefi performance n health Bonely Flavon Group works o disase na ducts: berries and guara +Acai Berry, +Ganoderma, +Berries, fruits lar pro popu+Baoberry, s, caffein and vegetables cum Guarana Guarana iotiSpirulina, Noni, ts: a n ti o x id a n ts , preb Cordyceps, Componen e product in the same timCoffee DXN: 5 „star” +Aloe Vera,t Mos Guarana +Naturally protective antioxidants, enzymes, aminoacids, polysaccarids +Naturally protective antioxidants, prebioticums, caffein +Naturally +Naturally protective protective antioxidants, antioxidants enzymes, rink germanicum,nergy d g”; e agein verages: „anti- polysaccaridesvon) be v itamines d with jam (Fla DXN) an : anaged groups M ( ng with coffee Targeti +Naturally protective antioxidants, prebioticums, caffein Source: Own research, 2013

Building a trust: positioning map /Berke, 2013/ /Determinate the quality: GMP, HACCP, ISO, Halal, Kosher, etc./ 31.050 HUF Price: in 1000 HUF 15 12 9 6 3 1 2 3 4 5 Scale of Certificates Source: own research and -figure Quality: Number of the Communicated Certifications: 1….5 Scale (Only Perceived quality!) Price: calculated to recommended monthly slice; non member`s prices; to the main product

Building a trust: positioning map /Berke, 2013/ /Determinate the quality: GMP, HACCP, ISO, Halal, Kosher, etc./ 31.050 HUF Price: in 1000 HUF 15 12 9 6 3 1 2 3 4 5 or ep a Scale of Certificates e ng C hSource: own research and -figure ing q. Che un r ic nd i u m L o quality) d ge m (Perceived u l it a Certifications: v e r p rScale 1….5 HQuality: Number of thei t a n Pre ha p H Communicatede r a v O A Price: calculated to recommended monthly slice; non member`s prices; to the main product run

Building a trust: positioning map /Berke, 2013/ /Determinate the quality: GMP, HACCP, ISO, n c a Halal, Kosher, etc./ 15 12 9 6 3 mind we Price: in 1000 HUFt u m e r ` s31.050 HUF s n the co I between f rrelation d co levels o foun and the fications ty. certi d a u oli egariqn campanies w or medium prices er o a v p0% cfe ihun lo and using 5 – ? rtifications D high prices! e strategy N Has not c uce lity A tion/prod g low qua unica Or usin e comm iqu Is it a un !! us Dangero age ellent im ue to exc ent urs style segm er 30%: p Ov lthy life East W roup: hea arget g inds. T 1 2 3 Winne r strat 4 egy. 5 or ep a Scale of Certificates e ng C hSource: own research and -figure ing q. Che un r ic nd i u m L o quality) d ge m (Perceived u l it a Certifications: v e r p rScale 1….5 HQuality: Number of thei t a n Pre ha p H Communicatede r a v O A Price: calculated to recommended monthly slice; non member`s prices; to the main product run

2.2.2. Look at the product placement

Most critical point: zest of customer adoption and market development. First goal to catch it quickly! „STORM ZONE” ing nd recruit tion a ompensa fect c ome eeds: per N onthly inc m y plans and g” strateg cruitin „Turbo re Needs: 00 rderline: 3 Bo net llion HUF mi rcome/yea in e rant surviv g After 2 years 8 fallen to the gap. „Black Hole” – only 2 will survive Source: Narayanan, 2010

The 4 recruiting strategies High Promotion (salespeople does) Low Mostly with „binary” or „hybrid” compensation plans High Rapid skimming Slow skimming Rapid penetration Slow penetration Price of packs Low Mostly with „classic” or seldom „hybrid” compensation plans Source: Gage, 2012, Kotler, 2008 and own data

The 4 recruiting strategies High Promotion (salespeople does) Low Mostly with „binary” or „hybrid” compensation plans Paratroopers, Pioneers High Price of packs Low Old Champions ~ 70.000 – 640.000 Ft Rapid skimming Fastest way to bring new sales. Keywords: success, earn money „Headhunters” strategy. ~ 70.000-150.000 Ft Slow skimming Keywords: product und success Grasshoppers East Winds ~ 30.000-70.000 Ft Keywords: success, hungarian (or Rapidother) origin penetration ~ 5.000-70.000 Ft Keywords: product, value for your money, and nowadays: success Slow penetration Mostly with „classic” or seldom „hybrid” compensation plans Source: Gage, 2012, Kotler, 2008 and own data

The 4 recruiting strategies High Promotion (salespeople does) Low Mostly with „binary” or „hybrid” compensation plans Paratroopers, Pioneers High Price of packs Low Old Champions is a ~ 70.000 – 640.000 Ft gistration pack ~ 70.000-150.000 Ft s: Re rtant. Rapid skimming s. VeSlow oskimming Fastest way to bring new sales. impproduct und success They say ry Keywords: s sale Keywords: success, k. It money stoc earn i „Headhunters” strategy. Grasshoppers ack i a n pEasts Winds ti o d R :Ft egistra uct. Spen ~ 30.000-70.000 hey says ~d5.000-70.000 Ft T r pro enjoy ouKeywords: product, value for your Keywords: success,ce to n hungarian (or hly with us. chaorigin Rapidother)is money mont money, and nowadays: success penetration Slow penetration th Mostly with „classic” or seldom „hybrid” compensation plans Source: Gage, 2012, Kotler, 2008 and own data

2.2.3. Vertical integration: grants competitive advantage trol lity con y t qua pan er stric Und the com e by lely don so    Excellent rate to quality/price Competitive prices To be an advantage: – to have native growing place – Base first on the local consumer behavior

2.2.3. Vertical integration: grants competitive advantage phy philoso Main t: trol lity con y Concep t qua pan er stric Und ragon the com e by „One D e Market lely don so n ies dO borator n la wExcellent rate to quality/priceOne Worl  ” O s e Mind rm On Own fa s  Competitive prices factorie em and Own yst  wn sales s advantage: O To be anclub s to ers native le co–tumhaveespeopgrowing place l illion sa ip 5 m Base firsteonhthe local consumer behavior – mb rs e re Single m the futu out ab hinking d doing T n gether a to s busines -

2.2.4. Tools in marketing communications in direct selling

It is a special mix…         Classic tools: corporate design, corporate behavior, indoor corporate communications, website, price strategy Make a focus on: product ingredients/scopes Intranet services Product design (goes to „hand to hand”) Type of a recruiting pack and a compensation plan Event marketing The salespeople itself Not using ATL communicaton tools = over 1 billion USD income. Source: Own research, 2009-2013

Short examples: product design and valorisation East Wind Using only product! „Low-low” budget Keywords to valorisation: Clear. Day to day. Refresher.

Short examples: product design and valorisation Graashopper Keywords to valorisation: Success. Prestige. Maximum.

Introducing the health scopes of a product in advertisements. Thye show the components!

Popular tactic: its all in there! Not a unique strategy… but it works. MonaVie

3. General conclusions       Niche segment – slowly, but growing continuously Its well-being, anti-ageing, flavonoids time, and costumers like direct selling Hungarian companies: most of all wrong or weak strategy, few succesful firm Role of vertical integration DSC use specific strategy- and tactic tools, e.g. recruiting plans, compensation plans, autoshift in self consumption, event marketing. Race: some of the biggest „classic functional foods” companies broken into this market: e.g. „Yakult Lady System”, 2012 (2,9 billion USD income)

Recommendations to the companies „Risky is the new safe.” /Randy Gage, 2013/ „Stay hungry. Stay Foolish.” /Steve Jobs, 2005/ „Consume every day natural functional foods 2 times. If you make it, then all normal foods will be only a food supplement! /Lim, 2012/ KINDLY R YOUR YOU FO THANK NTION! ATTE

websites: mlmcoffee.dxneurope.eu biokaffee.dxneurope.eu cafe.dxn.es wellnesscaffe.dxnitaly.com mlmcoffee.dxnnet.com marketing.cafeaganoderma.ro berkeszilard.dxn.hu szilard.berke@gmail.com

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