Direct selling supplements giant Herbalife aims to expand its manufacturing footprint dramatically over the next two-to-four years as it steps up plans to make more of its products in-house.
The firm, which posted a 35.3 percent surge in net profit to $111.18m on net sales up 27.7 percent to $879.65m in the second quarter (three months to June 30), said producing more product in-house would enable it to reduce gross margins or reduce selling prices in some markets.
In a conference call with analysts yesterday, chief executive Michael Johnson said he was “looking at Brazil, somewhere in south east Asia, probably India, and eastern Europe” as the site for manufacturing facilities as part of the company's wider plan to produce 80 percent of its wares itself by the end of the decade.
China: Don’t expect too much too soon
Herbalife, which is also building a new Chinese botanical extraction facility, said volumes had dipped a little in China during the quarter as the market made the transition to its daily consumption model – as reflected in sales ordering patterns (smaller, more frequent orders).
However, it remained very optimistic about its long-term prospects there, said president Des Walsh.
“We are very pleased with our progress in China but we remain cautious about expecting too much too soon from this market."
The strongest performance came from India, where volumes leapt 121 percent, Mexico, where volumes surged 26 percent, and Asia Pacific, where volumes grew 27 percent in the second quarter, said Walsh.
“But there is also tremendous opportunity for growth in the US, where net sales grew 11 percent and volumes grew 7 percent.”
Group net sales for the full year are expected to rise 22-24 percent compared with the firm’s previous guidance of 18-20 percent, revealed Walsh.
Herbalife is on a mission to triple volumes by 2020 as it ramps up its presence in emerging markets and expands its distributor base in mature markets through new concepts such as sports nutrition range Herbalife24.
The Los Angeles-based firm - which occupies a unique position in the market by selling its nutrition and weight management products direct to consumers via a global network of independent distributors - also plans to increase its manufacturing footprint significantly in the coming years.
Speaking to NutraIngredients-USA in late June, Walsh said Herbalife had a clear advantage over rivals during tough economic times owing to its direct relationships with consumers.
Founded by entrepreneur Mark Hughes in California in 1980, Herbalife markets and sells its products through a network of more than 2m independent distributors in more than 70 countries.
Click here to read our June 27 interview with Des Walsh.