USANA Health Sciences on Direct Selling in China (USNA 3Q05 Conf Call Quotes)

In September the Chinese government issued new regulations regarding direct selling in China. The ban on direct selling is expected to be lifted in December. However direct selling compensation programs employed outside of China will not be allowed. Nutritional, personal care and weight management products company USANA Health Sciences (ticker: USNA) is one of a number of foreign companies including Avon (ticker: AVP), Nu Skin Enterprises (ticker: NUS) and Herbalife (ticker: HLF) that is hoping to capitalize on direct selling opportunities in China. USANA VP of International Development Bradford Richardson and CFO Gil Fuller had the following to say during management's Q3 2005 earnings results conference call:

We continue to take a deliberate approach with regard to our entry into China. The initial drafts with the Direct Selling Legislation have been issued but there is still considerable negotiation being carried out with regard to the final regulations. Through our lobbying efforts with the Direct Selling Association and the U.S. Government, we hope to see a further liberalization of the market in China for direct selling.

USANA believes there is an opportunity to be successful in China due to our strong product focus and success in other markets with large ethnic and Chinese concentrations. We will make the changes required in our business model to enter the China market and continue to be open to any future liberalization which allows us to operate in a manner consistent with our global model.

I can't even apply for a license from what I understand until December 1. The granting of that license is probably going to take three to six months or so.

There is also the product regulatory filings that are underway and will be additional efforts being undertaken to get products registered and approved and that will take some time.

(Quotes are from the CCBN StreetEvents transcript.)

USNA chart.

Related

• Law Seeks to Regulate Direct Selling Practice (From the China Daily).
• China Is Lifting Ban on Direct Sales.
• Nu Skin Enterprises Provides Update on Third-Quarter Operations.
• Avon Reduces 2005 Earnings Expectations.
• Herbalife Executes Pre-Sales-License Strategy (HLF 2Q05 conf call quotes).
• Nu Skin CEO Talks Direct Sales with Chinese Government Minister (NUS 2Q05 conf call quotes).
• Stocks Covered by The China Stock Blog.

Comments

[terrihamel1:]

USANA: Straight Up

If you're not aware of the recent 'controversy' surrounding USANA Health Sciences, you've been missing an interesting series of articles. I am writing here as someone who has been taking the products for nearly a decade, so I'm not unbiased. I've recovered my costs in marketing USANA vitamins to friends and family, but have yet to make a serious stab at the business. I don't know if having consumed their products is supposed to disqualify me from making comments or asking questions, but I'm going to take a stab at it anyway. In spite of the fact that I'm not a stock analyst, self-proclaimed or otherwise, I'd like to share my perspective from an 'inside' point of view. I'll keep it simple, so even the most intelligent can grasp it. Don't look for technical brilliance, but I think it's a story worth hearing.

I'm a teacher. If you know anything about schools, they're germ factories. For a variety of reasons, genetic and otherwise, I've never had a strong constitution. Plainly put, I used to catch everything the kids brought into the building, and then some. One day I was visiting my older sister, and noticed a product catalog for a nutritional supplementation company sitting on her coffee table. Everything in it was footnoted and referenced back to long-term, placebo-controlled, double-blind studies published in mainstream medical journals. Having completed six years of university, I was curious, and asked her about it. She told me flat out that the people next door, who had left her the catalog, were pushing a pyramid scheme. I nodded knowingly, having no idea what that was supposed to be, waited until they left the house, hightailed it over to the neighbors' place and banged on the door.

They were happy to see me (you probably guessed that already). I sat down with them for over an hour as they told me their story. Their daughter had been suffering from a certain health problem that traditional medicine hadn't been able to help. Someone told them about the products. Their daughter took them and, over the course of several months, her health dramatically improved. Causation or correlation? I didn't care. What was there to lose? Not my health, that was for sure. There was one catch, however. These people wouldn't sell me any product. They wanted me to sign up with them in their business.

Big mistake. I've since learned that this goes against on of the most important aspects of building a network marketing business, which is to have a solid base of preferred customers (these people were not following the company's compliance protocol: USANA is relentless in emphasizing the importance of bringing in loyal product users. I wanted the product badly enough, however, that I signed up with them to get my initial order. Once it arrived, I quit... but I had my vitamins).

Within a matter of weeks, taking the product religiously, I experienced a profound change in my health. Colds didn't seem to stick. I slept better and had more energy. Did taking the product cause, or merely correlate with, the changes in my health? Who cared? All I knew was that I wasn't getting sick all the time.

Then I ran out of vitamins. Not only did I run out but, before too long, I was catching colds again. Seriously. By this time, I'd twigged onto the fact that ordinary people could actually sell this stuff. Now I was curious about the whole enchilada. I somehow ended up in Vancouver, British Columbia at a marketing seminar led by one Michael Oliver (google away for more). I sat in the back of the room with a bucket of school assignments and starting grading them as he began to speak. Fifteen minutes later I put up my hand and told the group that I was putting the bucket away. I'm sure there were people in the room who thought I was a plant. The fact was that his seminar was complete devoid of hype. I'm proud to say that Michael Oliver eventually became a deeply respected friend, but that's another story.

Six months later, I chose a different person with whom to sign up. Any teacher can explain why I never did get around to building much of a business. Evenings and weekends were recovery time. I loved my job, as well as my students, but I simply didn't have time for anything else. Ironically, I now realize that, during those years of taking the product each month but doing little to sell it, I was one of thousands who were dragging down the company's distributor earnings ratio. You see, I qualified as an associate but, as far as USANA's computers knew, I might as well have been out there trying to build a business and failing miserably (if it was truly a pyramid scheme, I might have been raking in some money simply through my position on the totem pole). The truth was that I wasn't getting paid (much) because I wasn't doing the business (much).

Last year I moved from Canada to the United States, having met (at the 1999 USANA convention, of all places) and married the man who became my best friend, a wonderful American whose story closely parallels mine. I've recently been training with some of the most successful people in USANA (it's free, and available to all associates), and I'm planning on giving the business a serious go this time. But I'm under no illusions that anyone's going to do this for me. "If it's to be, it's up to me." (I understand that some people, having ignored USANA's Business Development System and tried to reinvent the wheel, haven't done so well and are now jumping on the lawsuit bandwagon).

One thing: I've yet to read a posting where one of your analysts, citing the allegations of Barry Minkow (a convicted felon, no less) has approached USANA's founder, Dr. Myron Wentz, for his response to such allegations as, for example, the alleged inaccuracies in product labeling. It's curious, given that Dr. Wentz's ongoing work continues to be published in mainstream medical journals, that your commentators are relying on the words of a convicted felon rather than going to the source and asking for documentation. That would require a bit more work, but don't you think it makes sense (particularly when you learn that USANA is affiliated with the Linus Pauling Institute, that Dr. Wentz just picked up the Albert Einstein award in Jerusalem, and that the company has garnered numerous other accolades of which they could rightfully boast)?

But then, I'm not a stock analyst. Nonetheless, I still think a teacher should be allowed to express an opinion. And stories are the backbone of life.

Terri

CatchingWaves@excite.c...

2007 Jun 29 07:06 PM

[anonymous1:]

Thank you for this great bit on info. It is clear to see that the media is quick to print but often does not do their research when they need an article to get ratings. It is also important to state Minkow financialy gained by defaming USANA, something he admitted to the Feds.


On Jun 29 07:06 PM terrihamel wrote:

> USANA: Straight Up
>
> If you're not aware of the recent 'controversy' surrounding USANA
> Health Sciences, you've been missing an interesting series of articles.
> I am writing here as someone who has been taking the products for
> nearly a decade, so I'm not unbiased. I've recovered my costs in
> marketing USANA vitamins to friends and family, but have yet to make
> a serious stab at the business. I don't know if having consumed their
> products is supposed to disqualify me from making comments or asking
> questions, but I'm going to take a stab at it anyway. In spite of
> the fact that I'm not a stock analyst, self-proclaimed or otherwise,
> I'd like to share my perspective from an 'inside' point of view.
> I'll keep it simple, so even the most intelligent can grasp it. Don't
> look for technical brilliance, but I think it's a story worth hearing.
>
>
> I'm a teacher. If you know anything about schools, they're germ factories.
> For a variety of reasons, genetic and otherwise, I've never had a
> strong constitution. Plainly put, I used to catch everything the
> kids brought into the building, and then some. One day I was visiting
> my older sister, and noticed a product catalog for a nutritional
> supplementation company sitting on her coffee table. Everything in
> it was footnoted and referenced back to long-term, placebo-controlled,
> double-blind studies published in mainstream medical journals. Having
> completed six years of university, I was curious, and asked her about
> it. She told me flat out that the people next door, who had left
> her the catalog, were pushing a pyramid scheme. I nodded knowingly,
> having no idea what that was supposed to be, waited until they left
> the house, hightailed it over to the neighbors' place and banged
> on the door.
>
> They were happy to see me (you probably guessed that already). I
> sat down with them for over an hour as they told me their story.
> Their daughter had been suffering from a certain health problem that
> traditional medicine hadn't been able to help. Someone told them
> about the products. Their daughter took them and, over the course
> of several months, her health dramatically improved. Causation or
> correlation? I didn't care. What was there to lose? Not my health,
> that was for sure. There was one catch, however. These people wouldn't
> sell me any product. They wanted me to sign up with them in their
> business.
>
> Big mistake. I've since learned that this goes against on of the
> most important aspects of building a network marketing business,
> which is to have a solid base of preferred customers (these people
> were not following the company's compliance protocol: USANA is relentless
> in emphasizing the importance of bringing in loyal product users.
> I wanted the product badly enough, however, that I signed up with
> them to get my initial order. Once it arrived, I quit... but I had
> my vitamins).
>
> Within a matter of weeks, taking the product religiously, I experienced
> a profound change in my health. Colds didn't seem to stick. I slept
> better and had more energy. Did taking the product cause, or merely
> correlate with, the changes in my health? Who cared? All I knew was
> that I wasn't getting sick all the time.
>
> Then I ran out of vitamins. Not only did I run out but, before too
> long, I was catching colds again. Seriously. By this time, I'd twigged
> onto the fact that ordinary people could actually sell this stuff.
> Now I was curious about the whole enchilada. I somehow ended up in
> Vancouver, British Columbia at a marketing seminar led by one Michael
> Oliver (google away for more). I sat in the back of the room with
> a bucket of school assignments and starting grading them as he began
> to speak. Fifteen minutes later I put up my hand and told the group
> that I was putting the bucket away. I'm sure there were people in
> the room who thought I was a plant. The fact was that his seminar
> was complete devoid of hype. I'm proud to say that Michael Oliver
> eventually became a deeply respected friend, but that's another story.
>
>
> Six months later, I chose a different person with whom to sign up.
> Any teacher can explain why I never did get around to building much
> of a business. Evenings and weekends were recovery time. I loved
> my job, as well as my students, but I simply didn't have time for
> anything else. Ironically, I now realize that, during those years
> of taking the product each month but doing little to sell it, I was
> one of thousands who were dragging down the company's distributor
> earnings ratio. You see, I qualified as an associate but, as far
> as USANA's computers knew, I might as well have been out there trying
> to build a business and failing miserably (if it was truly a pyramid
> scheme, I might have been raking in some money simply through my
> position on the totem pole). The truth was that I wasn't getting
> paid (much) because I wasn't doing the business (much).
>
> Last year I moved from Canada to the United States, having met (at
> the 1999 USANA convention, of all places) and married the man who
> became my best friend, a wonderful American whose story closely parallels
> mine. I've recently been training with some of the most successful
> people in USANA (it's free, and available to all associates), and
> I'm planning on giving the business a serious go this time. But I'm
> under no illusions that anyone's going to do this for me. "If it's
> to be, it's up to me." (I understand that some people, having ignored
> USANA's Business Development System and tried to reinvent the wheel,
> haven't done so well and are now jumping on the lawsuit bandwagon).
>
>
> One thing: I've yet to read a posting where one of your analysts,
> citing the allegations of Barry Minkow (a convicted felon, no less)
> has approached USANA's founder, Dr. Myron Wentz, for his response
> to such allegations as, for example, the alleged inaccuracies in
> product labeling. It's curious, given that Dr. Wentz's ongoing work
> continues to be published in mainstream medical journals, that your
> commentators are relying on the words of a convicted felon rather
> than going to the source and asking for documentation. That would
> require a bit more work, but don't you think it makes sense (particularly
> when you learn that USANA is affiliated with the Linus Pauling Institute,
> that Dr. Wentz just picked up the Albert Einstein award in Jerusalem,
> and that the company has garnered numerous other accolades of which
> they could rightfully boast)?
>
> But then, I'm not a stock analyst. Nonetheless, I still think a teacher
> should be allowed to express an opinion. And stories are the backbone
> of life.
>
> Terri
>
> CatchingWaves@excite.c...

2008 Apr 30 08:57 PM