Amway CEO Milind Pant said manufacturing plants in Ada and California are being used to help meet increased demand in China. Courtesy Russ Climie/Tiberius Images
As financial markets tumbled Feb. 24 and 25 over fears stemming from the global economic impact of the coronavirus, the West Michigan business community heard from Amway CEO Milind Pant on how the company is addressing supply chain disruptions and offering relief in its largest market: China.
Pant spoke to the Economic Club of Grand Rapids Monday, Feb. 24, at the JW Marriott in downtown Grand Rapids following the release of 2019 sales figures earlier in the day.
Amway saw a $400 million, or 5%, drop in sales in 2019, with revenue falling from $8.8 billion in 2018 to $8.4 billion in 2019.
Pant said in a media Q&A after his Econ Club talk that the sales decline last year was almost entirely due to a nationwide 100-day campaign China’s government regulators launched in January 2019 to clean up its health and wellness products market, which had been plagued by illegal practices, including in the direct-selling segment, according to a 2019 report from China Daily.
“We partnered fully with the government there, and as a result, while the industry declined 42% in China in 2019, we declined 8%, grew our share and (went) from the No. 3 to the No. 2 player in China,” he said. “But it was a tough year.”
During the Econ Club audience Q&A, Spectrum Health President and CEO and discussion moderator Tina Freese Decker asked Pant to describe the impact of the coronavirus on Amway’s business so far this year. He responded that Amway has been working to address the supply chain challenges posed during the outbreak, as well as offering philanthropic relief in China.
So far, Amway China has donated more than $1.4 million in products to the Red Cross and The Wuhan Charity Foundation, and Amway business owners (ABOs) in China have donated more than $600,000 for medical support in highly impacted provinces, according to a Feb. 25 statement from Amway to the Business Journal.
While Pant said Amway’s primary focus is on keeping employees, ABOs and their families safe from the virus, he said the company also has directed attention to keeping manufacturing and distribution functions running to meet the rising demand for its products.
Pant said Amway’s strong reputation in China — as well as the Chinese government’s belief that the products in the Nutrilite portfolio may be part of a long-term solution for building immune system defenses — led the government to grant Amway a special dispensation in January to keep its manufacturing campus in Guangzhou, China, open while China was shutting down other production operations throughout the country to curb the spread of the virus.
While its Guangzhou manufacturing operation remained open, Amway still has struggled to meet demand while its suppliers of raw materials and packaging based in China have been offline — and while last-mile delivery operations also have been temporarily suspended.
Part of this is because during the outbreak, Pant said customer demand spiked “multiple times” for the Nutrilite products Immunity Echinacea, Bio-C Plus, and Garlic and Peppermint, which are marketed as having immune-boosting properties.
Orders also have increased for the company’s home air treatment systems and cleaning products during the outbreak, Amway said.
Pant said the spike in demand is not because of any additional marketing efforts on Amway’s part. He believes it is attributable to families’ “heightened consciousness” of the need for healthy home and healthy living products during the coronavirus crisis.
Amway is working to compensate for the blockages in the China supply chain by ramping up production at its plants in Ada and Buena Park, California, Pant said.
Another impact of the coronavirus in China is that ABOs are having to change the way they do business, Pant said.
“Amway business owners traditionally do business through face-to-face meetings — get together groups of people and explain products and get prospects — but in China they’re now doing it all online through virtual meetings,” Pant said.
He said it’s too early to predict the impact of the coronavirus on sales in the China market — which comprises nearly a third of the company’s global revenue. It’s also too soon to estimate impacts on sales in other countries where the virus is spreading.
Pant said he is thankful all of Amway’s ABOs, employees and distributors in China — which he thinks of as “family” — thus far are safe from the coronavirus.
“We feel for our colleagues, distributors and entrepreneurs in China and other parts of the world. We’re going through tough times.”