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Herbalife eyes China market

By Ding Qingfen (China Daily)
Updated: 2009-10-10 14:57

Michael O. Johnson

Herbalife, one of the world's top five direct-selling companies, said on Friday that it was investing in China a lot more aggressively than before in order to increase the size of its business from its current fourth place to become the largest in the Asia-Pacific region in its sector within four years.

Michael O. Johnson, chief executive officer of the US personal care and nutritional products maker, which is listed on the New York Stock Exchange, made the remark during a three-day China visit to Nanjing, Jiangsu province.

"We have an interest in expanding (in China). We will continue to invest, but thoughtfully and carefully the investment will grow rapidly," said Johnson, who refused to be specific about numbers, only saying the volume would be "larger" than in previous years.

The company's China investment has amounted to $38 million so far. The majority, $31.25 million, went to its Suzhou factory, one of its two manufacturing plants worldwide whose products have been mainly sold in China.

"Naturally, in four to five years, maybe sooner, China will be the largest (market) in Asia," said Johnson.

Future investment will be injected into three major areas, including expanding the output capacity of the Suzhou factory to cover a floor area of over 7,000 sq m, setting up a research and development (R&D) unit and establishing a training system.

The Suzhou factory, which will contain not only the manufacturing base but also R&D and training centers, will be the model for all Herbalife's global businesses, said the CEO.

Part of the investment will be used to apply for licenses to conduct business in more regions around China.

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"We are and will push for license opportunities in other regions," said Johnson.

Companies cannot get involved in direct selling in any region of China without first obtaining license approval from the government region by region.

Since 2006, a slew of direct selling companies including Herbalife, Amway, Avon and Nu Skin have been awarded licenses.

Currently Herbalife is reported to have direct selling businesses in 11 regions, with plans to get licenses for another 20 regions including those beyond the first- and second-tier cities.

Worldwide, Herbalife and Amway are among the top five direct-selling companies.

Johnson said Herbalife was not aiming for size in China, but intended to sell "the best products the most incredible and sustainable products".

In 1998, China announced a ban on direct-selling businesses of any kind in a move to eradicate illegal pyramid selling which was running rampant at the time. In 2005, China issued direct-selling management rules, marking a new start for the industry.

Sources said Herbalife's China sales have doubled over the past four years with a higher-than-expected growth rate and a better performance than its rivals, including Amway.

"China will be our number one market eventually," said Johnson.