Amway eyes expansion prospects

Global direct-selling giant Amway said it will expand its production capacity to 25 billion yuan (US$3 billion) in China, which will soon open its direct-selling industry.

The company, experiencing an especially good performance in China, will complete its expansion in April this year, according to Audie Wong, president of Amway (China) Co Ltd.

The current production capacity of Amway (China) is 16 billion yuan (US$1.93 billion).

The expansion of Amway's capacity is in line with its skyrocketing sales revenue in China.

Although detailed figures for 2004 have yet to be published, Wong estimated the annual growth will be as high as 50 per cent.

Amway's sales in China reached 10 billion yuan (US$1.21 billion) in 2003, rising from 6 billion yuan (US$725 million) in 2002.

Although Wong said it would be difficult to forecast this year's growth, all indications pointed to this staying in the fast lane.

Besides increasing its production capacity, the company will open between 40 and 50 new stores in China this year in addition to its current 140, he said.

Substantial investment will be made this year in advertising and other brand-building activities.

The firm's 2005 budget will be 250 million yuan (US$30 million), according to Wong.

Related spending in 2004 totalled nearly 150 million yuan (US$18 million).

Nutrilite, a brand in Amway's nutrition food series, continues to be an important part of this, while Artistry, a brand for skincare products and cosmetics, will have a greater presence in Amway's brand-building efforts in China.

Artistry is expected to play an important part in increasing Amway's China business, said Wong, adding the company hoped Nutrilite and Artistry could develop in a balanced way.

Nutrilite currently accounts for more than half of Amway's sales in the Chinese market, while Artistry has a share of less than 20 per cent.

Amway's moves come as China prepares to lift its ban on direct-selling.

China will soon issue rules on the direct selling business although it missed the deadline of December 11 last year, which it promised to the World Trade Organization.

China imposed a ban on direct sales in 1998, saying it was hard to differentiate these from so called "pyramid sales," which had led to widespread fraud, consumer losses and social instability.

Ten foreign-funded direct-selling companies, including Amway, were allowed to continue their operations in China after 1998, but they had to changed their sales mode by selling goods through retail outlets and "non-employee" sales representatives.

"We have made good preparation for the opening," said Wong.

Source: China Daily



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