Amway has had a difficult ride in India with regulatory uncertainty over direct selling. Despite its former India head getting arrested over lack of clarity on what constitutes direct selling, the company continues to be bullish over investing in the country.
The company set up a manufacturing plant in Tamil Nadu last year and wants to achieve a billion dollars in sales in the country. BusinessLine met Douglas L DeVos, President, Amway Inc, on the sidelines of Make in India to discuss the company’s roll-out plans.
Are you convinced about the Make in India story?
Yes. It is gaining momentum. I think the Make in India event here is a pretty solid demonstration of the commitment. The leadership this government is showing is very encouraging.
In 2013 you made a statement that a lot of stuff that is going on in India is very unfair to you. And this was in the context of the arrest of your CEO at that time. Do you think from then to now things have changed?
I think so. There are a lot of changes. That was a very tough time. But since that time, what we have found is a direction that seeks to understand our business model. So since that time we believe the progress has been encouraging.
Are there any other further concerns as far as regulations are concerned?
We are concerned because it is still not final. It is still in the process. We are encouraged that it is making progress. Still, there is some uncertainty in the market. The Indian Institute of Corporate Affairs within the Ministry of Corporate Affairs has issued a comprehensive report or white paper on direct selling and the entire recommendation has been taken on board by the Parliamentary standing committee on finance.
Apart from that we have got an inter-ministerial committee on direct selling under the leadership of the Ministry of Consumer Affairs, and what we understand is that it is about to publish the draft guidelines. They have worked actively with all the key stakeholders, including the industry, and I think in the next quarter we do expect those draft guidelines to come and they will also be issuing those to the state governments so there is a reference for the state governments in terms of what legitimate direct selling companies stand for. So those are two big structural movements in the process towards moving towards a legislative environment.
How do you compare India versus China or Brazil?
Every market has strengths and weaknesses. It is important for India to look around just like we as a company look around to see what are the best practices to encourage more foreign direct investments, what investors are looking for. Everyone is willing to take risks, but they expect infrastructural support.
For Amway, where does India figure? Is it already in the top five or top 10?
It’s in the top 10 markets around the world and we believe next year we will see double-digit growth. We have slowed down because of some challenges and confusion in the market place. But we see strong dynamic growth and are expecting that it will become one of the top five markets for us probably in the next five years.
Is India growing faster than the top five countries are?
Japan is growing at about 2 per cent and Korea is growing at little close to 5 per cent, Thailand has been flat. Malaysia has good double-digit growth. Taiwan has double-digit growth. India is among the top four in growth rate. We had some double digit growth in Brazil, Mexico, and other markets in America but India will be a top tier growth market for us. Over the last couple of years we hit flat growth and that is because of uncertainty in the environment, whether in terms of the guidelines of legislations.
For any business to grow, you certainly need certainty and that’s why you also need security. Beyond that, India probably is one of the biggest markets in the world for entrepreneurship. In many of the markets around the world to grow you may have to go for market share, but out here it’s more about expanding the market. In India, from our turnover perspective, the goal is to become a billion dollar company in the next 10 years. We are close to about three hundred million right now and we expect some break-out categories such as vitamins, minerals and dietary supplements and we are the market leaders in that.
So the overall gloom in the global economy does not concern your business?
We are not concerned. We believe that the consumption of such sectors of the economy is strong and we see that generally, globally, there are a few markets that are struggling. And we feel that looking around there is a huge opportunity. Whether it is westernised wellness or Ayurveda wellness or a combination of those two, but I see people around generally interested in health and wellness that goes beyond just popping supplements because it’s got to be a lifestyle and we contribute to that.
What’s your strategy for selling online?
Our strategy is to integrate technology into our model and we have been doing it for decades so we are already doing that online offline. 30 per cent of our volume is conducted online in India and in other markets it would be 70-80 per cent in the US or South Korea.
Are you thinking about relying totally on online sales?
No, we are not. We believe that our model is better than a traditional e-commerce model. We believe that having people is key and then empowering them as entrepreneurs as a salesforce with technology is a better model.
You have dealt with entrepreneurs in different markets. Are there differences in the way Indian sellers/direct sellers operate compared to Chinese sellers?
There are differences and similarities. Similarities are that the entrepreneurial spirit is alive around the world. People around the world want to create a better life for themselves and their families. The difference is about what are the products we are going to offer in this market, what is the physical location we need and things like that.
What is the roadmap in terms of bringing in new products?
We are launching a huge range of home tech products, cookware systems. I would say that the broad strategy is that whatever is relevant for India and is unique, and truly differentiating, we are more than happy to bring here. I would say things like herbal stuff, Ayurvedic, etc, are close to the Indian culture and something people can relate to. We also see opportunity around air quality and water quality. We need to get into the right technology because water purifying may be different here than in the other markets.
Are you developing a product which is completely for the Indian market?
Yes, in fact we had a beautycare range called Attitude. So this year we are also heading towards the energy drink and the other is weight management.
But some of the energy drink makers had a huge challenge with FSSAI?
So ours is going to be an absolutely compliant product. Right now we are developing the formulation and the good thing having manufacturing in India and investing in research and development makes sure that you do all such changes in the market because 98 per cent of what we manufacture in India and that kinds of gives us leverage and we will be fully compliant when we introduce this to market.
Do you use M&A as a strategy to get into categories in the market or do you believe in having your own products and bringing it.
Very selectively. That’s not a key part of our strategy. Our key part is to internally innovate.