Word of the Day 7/7/07: "Acclimate"
\uh-KLY-mit; AK-luh-mayt\, transitive and intransitive verb:
To accustom or become accustomed to a new climate, environment, or situation.
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FAST FACTS
Herbalife acclimates to Jamaica, opening successful friendly Nutrition Clubs in convenient locations islandwide
The Wellness Industry and Western Culture usually clash!
However, Herbalife actually provides Nutritious "Fast Food", made quickly. The Core Products, a Soy Shake and Herbal Concentrate Green Tea served together, is an ideal meal replacement. We can confidently testify that this cellular nutrition program provides numerous benefits because of the positive results experienced by countless nutrition club members. ShapeWorks (TM) and other Herbalife Products are available from distributors and Nutrition Clubs all across Jamaica.
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EXCITING ANNOUNCEMENT
100 Day "Heroic" Health Challenge / "ReShape" Contest
Lose or Gain 25 lbs by National Heroes Day! At least 100 Persons Wanted for Healthy Sustainable Weight Change, Totalling over 2000 lbs.
Extrinsic Goal: Attain & Maintain Attractive Shape!
Intrinsic Goal: Reduce Risk of Lifestyle Diseases.
(N.B. When you're overweight, losing even 5-10% of your weight can improve your health significantly.)
Body Composition analysis, weight and waist measurement, as well as digital pictures taken of all contestants, every three (3) - four (4) weeks until contest ends. For example, Shekira could be analyzed on Day 0, Day 28 (4 weeks), Day 56 (8 weeks), Day 77 (11 weeks), and Day 100.
Prizes & Surprises
Open to Qualified Participants only. Conditions Apply.
Surprise for contestant with largest healthy percentage (%) change in body weight. "Dinner for two" for most deserving "ReShaping" contestant who has become lean and/or added muscle, as desired.
Entry dates: 07/7/7 - 07/7/31 (International Date Format y/m/dd).
Expected date of announcement of contest winners: 07/11/11.
Notice: Participants with any serious health challenge(s) or who are over forty (40) years should see a physician before starting any exercise or weight loss/ gain program.
Short Hike & Games "Bashment" on Heroes Day for all ReShape contestants: Monday, October 15, 2007. Location and Arrangements to be announced.
Referral Benefits in kind.
Call SAM (876) 810-1234 or email 4nrg2b@gmail.com for more details.
SAM lost twenty pounds (20 lbs) easily using Herbalife products; as a certified personal trainer, she is competent to coach others who are serious about applying proven principles of sustainable fat loss. She is a strong advocate of ShapeWorks (TM) products and increased physical activity (including resistance training).
Newspaper Ads posted in Sunday Gleaner starting July 8
and in the Star starting Thursday July 12 2007.
Challenge / Contest updates in future blog entries.
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A PERSONAL REFLECTION
It was easy to acclimate to Herbalife products, despite my initial skepticism. Daily I would drive for a break from my teaching job to a nutrition club to enjoy the social environment, read the paper and appreciate a delicious shake and tea. However, the nutritional supplements required that you remember to take them at the suggested intervals. Since NRG (Nature's Raw Guarana) tablets improved my alertness, I started to carry the bottle in my bag everywhere I went. And I used my tablet box for other supplements including Herbalifeline (fish oil) and Tang Keui (Chinese herbs). Sometimes I forgot to refill my supply; a new habit requires some amount of "stick-to-it-iveness" so I eventually modified my behavior. And, since I lost weight easily, the only major adjustment needed "after" Herbalife was in my clothing....
However, to be frank, I still find it difficult to acclimate to the culture of Herbalife Jamaica, despite my success in using so many of the products and retailing to almost twenty (20) customers to date. I've been trying to understand why this is the case.
My first (1st) problem was getting past the latent suspicion in my head that most Multi-level Marketing companies are pyramid schemes. It's all about the difference between short-term duplicity (which is unethical) and long-term duplicability (which utilizes the concept of leverage brilliantly).
Scam artists who start pyramid schemes are full of duplicity, wanting to deceive unsuspecting persons to spend their funds on a faulty marketing plan that is dependent on finding a chain of naive investors who find others in a pyramid structure that eventually collapses since no value is added to the marketplace.
Successful Multi-level marketing (MLM) companies want proven systems that can be easily duplicated so that new distributors will be quickly able to retail and recruit well. A sustainable MLM or network marketing company must offer excellent products to keep customers coming back for more and more. But to retain distributors, a T.E.A.M. approach is required: Training, Excellence, Attractiveness and Mentoring.
Herbalife Jamaica has the highest retention rate within the sixty-four countries offering Herbalife products as of June 2007. (Zambia, the 65th country to join the Herbalife family, will start distributor sales later in July 2007.) The retention level is relatively high because many Herbalife distributors in Jamaica are successful in their marketing efforts to some degree; as such, Jamaican folk tend to maintain their status within Herbalife as a distributor or move up to supervisor. Moreover, the annual product sales in Jamaica increased by 80% from 2005 to 2006. The major reason for this growth is the inception of Nutrition Clubs throughout the length and breadth of this island. Home-based and Commercial Nutrition Clubs are successful because we offer nutritious products and friendly service in a community setting.
Herbalife Jamaica demonstrates TEAM work in tangible ways.
Training opportunities abound, including Success Training Seminars, QuickStart, Personal Development, and Nutrition Club trainings;
Excellent products are available readily from the Jamaican warehouse in Kingston;
Attractive Marketing Plan provides the opportunity for persons to work hard to achieve their desired level of success, given their personal constraints;
Mentoring is available from your sponsor; moreover, uplines provide helpful advice to newbies to encourage and teach, where necessary.
Ultimately, there is no "Anancy" duplicity in the business model of Herbalife Jamaica. Don't forgot that results vary - for weight loss and for earning levels. As Dr. Steven Komadina says, one size does not fit all. Solutions are personalized for each customer; moreover, tools are selected by each distributor based on their preferences. Each distributor is instructed to plan a personal Daily Method of Operation (DMO) that includes at least three tools each for both Retailing and Recruiting. My favorite tool conceptually is the Total Plan, which I have not yet executed to date. My three most successful tools to date has been flyers, referrals and hosting a Wellness Seminar last Saturday June 30.
In my opinion, this is really a great time to be involved in the business of Herbalife Jamaica since growth is likely to be exponential at this juncture.
My second (2nd) problem in acclimating to the culture of Herbalife Jamaica is to accept and be proud to be a sales agent of Herbalife products. I was initially very turned off by the presumably "ignorant" zeal of some Herbalife distibutors. Worse yet, I never ever wanted to be a mere re-seller of any products, no matter how superb. Now, as a "PHD", a Professional Herbalife Distributor, I am much more than this: I am a weight-loss and wellness coach for my clients, helping to facilitate their optimal health. My individual goal is to build a team within my organization that works smart rather than too hard, to achieve SMART (Specific, Measurable, Attainable, Realistic and Time-bound) goals; in this team, I would help support my downline distributors using my training as a certified fitness trainer and my ongoing online study in nutrition. In case you're interested, I will continue to do this on a part-time basis....
What is wonderful is that my involvement will directly improve national health as my team helps to reduce the incidence of obesity. Unfortunately, obesity is the largest underlying cause of morbidity (death) in the Caribbean today, no pun intended. I learned this from a physician speaking on "Your Issues Live" on TVJ recently. I was actually at the live broadcast at University of Technology, Jamaica; I enjoyed asking three (3) pertinent questions near the end of the program. Interestingly, two (2) articulate UTech students spoke as well: Karl Wilkinson, the outgoing student president whom I taught, and a young female student from the small dietetics program, who later thanked me for reminding the audience that physicians are not very knowledgeable about nutrition.
My third (3rd) problem in the transition process has been finding additional coaches, mentors and heroes in Team Herbalife. I learned recently that I can be helped significantly by sideline and crossline distributors as well as using the traditional assistance from uplines (and downlines) that is available. I am still trying to identify the person(s) at the "Millionaire Team" level in Jamaica that I can actively call or email for guidance in my quest to aspire to that level of the Marketing Plan. (Well, I may not need that right now anyway at my present level....) Moreover, I have already co opted persons at the Global Expansion Team (GET) and World Team level that I can learn much from in the months to come.
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I need to acclimate to wizardry required for the "simple" task of creating a blog with a "WOW" factor. Note: Only the first two (2) videos on the right in "Herbalife Success Revealed" can be played; please watch. The last two (2) pictures of a crowd and a smiling woman should be deleted in the near future. I'm still trying to work out technical difficulties since I'm new to blogging. After some investigation, some videos don't work anymore and others don't show because its creator doesn't allow embedding into other web sites. I should be able to delete them and keep the other video clips but I can't figure out how yet..... Forgive my ineptitude!
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By the way, I was inspired to write this entry because I saw the erroneous(?) use of duplicity instead of duplicability in an article on a web site that is copied in part below:
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What is the most important word in MLM – money, greed, positioning, recruiting?
Those are all key considerations, but they are afterthoughts to the word that is most critical to success in network marketing – duplicity. People initially get involved with MLM because of money, greed, positioning and recruiting, however most will not succeed and become long standing participants in your opportunity unless they are provided a duplicable system that will guide them in their business building efforts.
The MLM ethos is dominated by personalities; super recruiters and "heavy hitters" that represent the ideal of what a distributor can be. In reality, super recruiters and heavy hitters are few and far between. While they do exist, they are far fewer than people who represent themselves to be in that category.
Much more common, and the group that will likely comprise the majority of your distributor base, are average, everyday people. There are many more people – your neighbor, grocer, co-worker, etc. – that become involved with MLM on a part time basis.
These people may have little to no experience with sales. In fact, your MLM company may be their first introduction to selling.
This group also tends to be loyal to your company so long as they believe in your product or service, are treated fairly and are able to realize a part time (even if modest) income from your opportunity.
Source: mlmcorporate.com
http://www.mlmcorporate.com/press/templates/mlmcorporate.aspx?articleid=5&zoneid=1
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Food for thought? Looking forward to your comments.
"ReShape" Contest
It takes only 90 days to develop a new habit.
Start your ShapeWorks (TM) program today to attain and maintain the shape you want. It really works! [Results vary.]
This "Heroic" Health Challenge involves prizes and surprises. Obtain more info on Contest page in this blog. Let me help coach you; email 4NRG2B@gmail.com or leave a message at (876)810-1234 ASAP. Create your own simple web site blog to track your progress regularly until (Jamaican) National Heroes Day, e.g. myh3rbalif3.blogspot.com/. Don't forget to fill out the Poll in the side bar on the right to indicate your level of interest in the income opportunity. ReShaping your body can help improve your bottom-line in more ways than one! Ask SAM to learn how.
Wonderful Weight Loss Video
Press "Play" button in middle of the fuzzy picture above to start video.
Saturday, July 7, 2007
Subscribe to:
Posts (Atom)
Countdown until "ReShape" Contest Complete
Why Wellness Industry
Isn't time you cashed into the wellness industry?
Interview with Author of "Wellness Revolution" book
Hear Paul Zane Pilzer talk about his research on the growing wellness industry on this video.
Herbalife MarketWatch Info
10-Q: HERBALIFE LTD.
Last Update: 5:31 PM ET May 1, 2007
(EDGAR Online via COMTEX) -- Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations
[Graphs not shown below. See link at end of article.]
Overview
We are a global network marketing company that sells weight management, nutritional supplement and personal care products. We pursue our mission of "changing people's lives" by providing a financially rewarding business opportunity to distributors and quality products to distributors and their customers who seek a healthy lifestyle. We are one of the largest network marketing companies in the world with net sales of approximately $1.9 billion for the year ended December 31, 2006. We sell our products in 64 countries through a network of over 1.5 million independent distributors except in China, where we sell our products through retail stores and an employed sales force. We believe the quality of our products and the effectiveness of our distribution network, coupled with geographic expansion, have been the primary reasons for our success throughout our 27-year operating history.
We offer products in three principal categories: weight management products, nutritional supplements which we refer to as "Targeted Nutrition" and personal care products which we refer to as "Outer Nutrition(R)". Our products are often sold in programs, which are comprised of a series of related products designed to simplify weight management and nutrition for consumers and maximize our distributors' cross-selling opportunities.
Industry-wide factors that affect us and our competitors include the increasing prevalence of obesity and the aging of the worldwide population, which are driving demand for nutrition and wellness-related products and the recruitment and retention of distributors.
The opportunities and challenges upon which we are most focused are: retailing of our products, recruitment and retention of distributors and improving distributor productivity, new markets, further penetrating existing markets including China, globalizing successful distributor methods of operation (such as Nutrition Clubs), introducing new products, developing niche market segments and further investing in our infrastructure.
In July 2006, we changed our geographic units from four to seven units as part of our on-going realignment for growth efforts. These changes are intended to create growth opportunities for our distributors, support faster decision making across the organization by reducing layers of management, improve the sharing of ideas and tools and accelerate growth in our high potential markets. Under the new geographic units we report revenue from:
North America, which consists of the U.S., Canada, Jamaica and the Dominican Republic;
Mexico and Central America, which consists of Mexico, Costa Rica and Panama;
Brazil;
South America and Southeast Asia, which includes New Zealand and Australia and excludes Brazil;
EMEA, which consists of Europe, the Middle East and Africa;
Greater China, which consists of China, Taiwan and Hong Kong; and
North Asia, which consists of Japan and Korea.
Historical information presented related to our geographic units has been reclassified to conform to our current geographic presentation.
A key non-financial measure we focus on is Volume Points on a Royalty Basis, or Volume Points, which is essentially our weighted unit measure of product sales volume. It is a useful measure for us, as it excludes the impact of foreign currency fluctuations and ignores the differences generated by varying retail pricing across geographic markets. In general, an increase in Volume Points in a particular group or country directionally indicates an increase in local currency net sales.
Volume Points by Geographic Unit
For the Three Months Ended March 31,
2006 2007 % Change
(Volume points in millions)
North America 130.7 162.3 24.2 %
Mexico & Central America 136.4 154.7 13.4 %
Brazil 44.7 40.3 (9.8 )%
South America & Southeast Asia 56.7 75.5 33.2 %
EMEA 148.9 140.4 (5.7 )%
Greater China 31.9 44.7 40.1 %
North Asia 30.7 32.8 6.8 %
Worldwide 580.0 650.7 12.2 %
Number of New Supervisors by Geographic Unit as of Reporting Period
Another key non-financial measure on which we focus is the number of distributors qualified as new supervisors under our compensation system. Distributors qualify for supervisor status based on their Volume Points. The growth in the number of new supervisors is a general indicator of the level of distributor recruitment, which generally drives net sales in a particular country or group.
As of March 31,
2006 2007 % Change
North America 7,616 9,013 18.3 %
Mexico & Central America 8,299 7,176 (13.5 )%
Brazil 5,087 4,108 (19.2 )%
South America & Southeast Asia 6,366 8,858 39.1 %
EMEA 9,132 7,642 (16.3 )%
Greater China 2,833 5,314 87.6 %
North Asia 2,284 2,115 (7.4 )%
Worldwide 41,617 44,226 6.3 %
Number of Supervisors and Retention Rates by Geographic Unit as of Requalification Period
Our compensation system requires each supervisor to re-qualify for such status each year, prior to February. In February of each year, we delete from the rank of supervisor those distributors who did not satisfy the supervisor qualification requirements during the preceding twelve months. Distributors who meet the supervisor requirements at any time during the year are promoted to supervisor status at that time, including any supervisors who were deleted, but who subsequently requalified.
Number of Supervisors Supervisors Retention Rate
2006 2007 2006 2007
North America 45,778 54,375 41.2 % 43.1 %
Mexico & Central America 38,344 62,622 57.4 % 55.2 %
Brazil 27,318 28,974 29.0 % 28.8 %
South America & Southeast Asia 30,846 46,393 31.6 % 33.9 %
EMEA 66,103 64,862 45.0 % 46.2 %
Greater China 19,447 25,868 34.7 % 34.7 %
North Asia 15,736 15,697 48.6 % 43.0 %
Worldwide 243,572 298,791 41.5 % 42.5 %
Supervisors must re-qualify annually. The requalification period covers the twelve months starting in February and ending the following January. The number of supervisors by geographic unit as of the reporting dates will normally be higher than the number of supervisors by geographic unit as of the requalification period because supervisors who do not re-qualify during the relevant twelve-month period will be dropped from the rank of supervisor the following February. For the latest twelve month re-qualification period ending January 2007, approximately 42.5 percent of our supervisors re-qualified. Since supervisors purchase most of our products for resale to other distributors and consumers, comparisons of supervisor totals on a year-to-year, same period basis are good indicators of our recruitment and retention efforts in different geographic units.
The value of the average monthly purchase of Herbalife products by our supervisors has remained relatively constant over time. Consequently, increases in our sales are driven primarily by our retention of supervisors and by our recruitment and retention of distributors, rather than through increases in the productivity of our overall supervisor base.
We provide distributors with products, support material, training, special events and a competitive compensation program. If a distributor wants to pursue the Herbalife business opportunity, the distributor is responsible for growing his or her business and personally pays for the sales activities related to attracting new customers and recruiting distributors by hosting events such as Herbalife Opportunity Meetings or Success Training Seminars; by advertising Herbalife's products, by purchasing and using promotional materials such as t-shirts, buttons and caps; by utilizing and paying for direct mail and print material such as brochures, flyers, catalogs, business cards, posters and banners and telephone book listings; by purchasing inventory for sale or use as samples; and by training, mentoring and following up (in person or via the phone or internet) with customers and recruits on how to use Herbalife products and/or pursue the Herbalife business opportunity.
Presentation
"Retail Sales" represent the gross sales amounts on our invoices to distributors before distributor allowances (as defined below), and "Net Sales", which reflects distribution allowances and handling and freight income, represent what we collect and recognize as net sales in its financial statements. We discuss Retail Sales because of its fundamental role in our compensation systems, internal controls and operations, including its role as the basis upon which distributor discounts, royalties and bonuses are awarded. In addition, it is used as the basis for certain information included in daily and monthly reports reviewed by our management. However, such a measure is not in accordance with Generally Accepted Accounting Principles in the U.S., or GAAP. You should not consider Retail Sales in isolation from, nor as a substitute for, net sales and other consolidated income or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity. A reconciliation of Net Sales to Retail Sales is presented below under "Results of Operations. "Product Sales" represent the actual product purchase price paid to us by our distributors, after giving effect to distributor discounts referred to as "distributor allowances," which approximate 50% of retail sales prices. Distributor allowances as a percentage of sales may vary by country depending upon regulatory restrictions that limit or otherwise restrict distributor allowances.
Our "gross profit" consists of net sales less "cost of sales," which represents the prices we pay to our raw material suppliers and manufacturers of our products as well as costs related to product shipments, duties and tariffs, freight expenses relating to shipment of products to distributors and importers and similar expenses.
"Royalty Overrides" are our most significant expense and consist of: royalty overrides, and production bonuses which total approximately 15% and 7%, respectively, of the Retail Sales of Weight Management, Targeted Nutrition, Outer Nutrition(R) and promotional products; the Mark Hughes Bonus payable to some of our most senior distributors in the aggregate amount of up to 1% of retail sales of Weight Management, Targeted Nutrition, Outer Nutrition(R) and promotional products; and other discretionary incentive cash bonuses to qualifying distributors.
Royalty Overrides are generally earned based on retail sales, and approximate in the aggregate about 22% of retail sales or approximately 36% of our net sales. Royalty Overrides together with distributor allowances represent the potential earnings to distributors of up to approximately 73% of retail sales. The compensation to distributors is generally for the development, retention and improved productivity of their distributor sales organizations and is paid to several levels of distributors on each sale. Due to restrictions on direct selling in China, our full-time employed sales representatives in China are compensated with wages, bonuses and benefits instead of the distributors earnings, distributor allowances and royalty overrides. Because of local country regulatory constraints, we may be required to modify our typical distributor incentive plans as described above. Consequently, the total distributor discount percentage may vary over time. We also offer reduced distributor allowances and pay reduced royalty overrides with respect to certain products worldwide.
Our "operating margins" consist of net sales less cost of sales and royalty overrides.
"Selling, General and Administrative Expenses" represent our operating expenses, components of which include labor and benefits, sales events, professional fees, travel and entertainment, distributor marketing, occupancy costs, communication costs, bank fees, depreciation and amortization, foreign exchange gains and losses and other miscellaneous operating expenses.
Most of our sales to distributors outside the United States are made in the respective local currencies. In preparing our financial statements, we translate revenues into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from our suppliers generally are made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on our reported sales and operating margins and can generate transaction losses on intercompany transactions. Throughout the last five years, foreign currency exchange rates have fluctuated significantly. From time to time, we enter into foreign exchange forward contracts and option contracts to mitigate our foreign currency exchange risk.
Summary Financial Results
For the three months ended March 31, 2007, net sales increased 11.5% to $508.1 million from $455.8 million for the three months ended March 31, 2006. The increase reflects the continued retailing success from distributors using the Nutrition Club operating method in Mexico and the U.S. The growth in the two markets accounted for 55.1% of the overall increase in net sales. Venezuela and certain other South American countries also experienced significant sales growth due in part to the opening of Peru during the first quarter of 2007, while net sales in Brazil declined. Net sales for the three months ended March 31, 2007 in EMEA and North Asia, were flat when compared to the same period in 2006.
Net income increased for the three months ended March 31, 2007 to $41.2 million, or $0.55 per diluted share, from $38.7 million, or $0.53 per diluted share for the same period in 2006. The net income increase was driven by revenue growth primarily in Mexico and the U.S. markets and lower interest expense following a debt refinancing in July 2006. Net income for the three months ended March 31, 2007 included a $1.0 million unfavorable after tax impact in connection with the Realignment for Growth plan and a $3.6 million charge for an increase in tax reserve. Net income for the three months ended March 31, 2006 included the impact of a $3.7 million tax benefit resulting from an international income tax settlement.
Results of Operations
Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods, which depend upon numerous factors, including our ability to recruit and retain new distributors, open new markets and further penetrate existing markets and introduce new products and develop niche market segments.
The following table sets forth selected results of our operations expressed as a percentage of net sales for the periods indicated.
Three Months Ended
March 31, March 31,
2006 2007
Operations:
Net sales 100.0 % 100.0 %
Cost of sales 20.1 21.1
Gross profit 79.9 78.9
Royalty overrides 36.3 35.5
Selling, general & admin expenses 29.6 29.4
Operating income 14.0 14.0
Interest expense 1.3 0.4
Income before income taxes and minority interest 12.7 13.6
Income taxes 4.2 5.5
Net income 8.5 % 8.1 %
Three months ended March 31, 2007 compared to three months ended March 31, 2006
Net Sales
The following chart reconciles Retail Sales to net sales:
Sales by Geographic Region
Three Months Ended March 31,
2006 2007
Handling Handling Change
Retail Distributor Product & Freight Net Retail Distributor Product & Freight Net in Net
Sales Allowance Sales Income Sales Sales Allowance Sales
Income Sales Sales
(Dollars in millions)
EMEA $ 232.3 $ (111.3 ) $ 121.0 $ 20.5 $ 141.5 $ 234.1 $ (112.7 ) $ 121.4 $ 21.8 $ 143.2 1.2 %
Mexico & Central America 141.5 (68.7 ) 72.8 11.2 84.0 161.3 (78.4 ) 82.9 13.0 95.9 14.2 %
North America 140.9 (67.7 ) 73.2 13.9 87.1 168.5 (80.3 ) 88.2 16.3 104.5 20.0 %
SAMSEA 73.3 (34.6 ) 38.7 4.8 43.5 94.4 (45.5 ) 48.9 6.9 55.8 28.3 %
Brazil 59.0 (28.3 ) 30.7 4.8 35.5 54.2 (25.7 ) 28.5 4.8 33.3 (6.2 )%
Greater China 45.9 (20.2 ) 25.7 2.9 28.6 62.6 (25.4 ) 37.2 3.5 40.7 42.3 %
North Asia 58.2 (26.7 ) 31.5 4.1 35.6 56.1 (25.3 ) 30.8 3.9 34.7 (2.5 )%
Worldwide $ 751.1 $ (357.5 ) $ 393.6 $ 62.2 $ 455.8 $ 831.2 $ (393.3 ) $ 437.9 $ 70.2 $ 508.1 11.5 %
Changes in net sales are directly associated with the recruiting and retention of our distributor force, retailing of our products, the quality and completeness of the product offerings that the distributor force has to sell and the number of countries in which we operate. Management's role, both in-country and at the corporate level is to provide distributors with a competitive and broad product line, encourage strong teamwork and leadership among the Chairman's Club and President's Team distributors and offer leading edge business tools to make doing business with Herbalife simple.
Management uses the distributor marketing program coupled with educational and motivational tools and promotions to incentivize distributors to increase recruiting, retention and retailing, which in turn affect net sales. Such tools include company sponsored sales events such as Extravaganzas and World Team Schools where large groups of distributors gather, thus allowing them to network with other distributors, learn recruiting, retention and retailing techniques from our leading distributors and become more familiar with how to market and sell our products and business opportunities. Accordingly, management believes that these development and motivation programs can increase the productivity of the supervisor network. The expenses for such programs are included in Selling General & Administrative Expenses. Sales are driven by several factors, including the number and productivity of distributors and supervisors who continually build, educate and motivate their respective distribution and sales organizations. We also use event and non-event product promotions to motivate distributors to increase recruiting, retention and retailing activities. These promotions have prizes ranging from qualifying for events to product prizes and vacations. The costs of these promotions are included in Selling, General & Administrative Expenses.
The factors described above have helped distributors increase their business, which in turn has driven growth in our business. The following net sales by geographic unit discussion further details some of the above factors and describes unique growth factors specific to certain major countries. We believe that the correct business foundation, coupled with ongoing training and promotional initiatives, is required to increase recruiting and retention of distributors and retailing of our products. The correct business foundation includes strong country management that works closely with the distributor leadership, unified distributor leadership, a broad product line that appeals to local consumer needs, a favorable regulatory environment, a scalable and stable technology platform and an attractive distributor marketing plan. Initiatives such as Success Training Seminars, World Team Schools, Promotional Events and regional Extravaganzas are integral components of developing a highly motivated and educated distributor sales organization that will work toward increasing the recruitment and retention of distributors.
Our strategy will continue to include creating and maintaining growth within existing markets while expanding into new markets. We expect to increase our spending in Selling, General & Administrative Expenses to maintain or stimulate sales growth, while making strategic investments in new initiatives and in new markets.
In addition, new ideas and distributor business methods, or DMO's, are being generated in our regional markets, either by distributors, country management or corporate management. Examples are the Nutrition Clubs in Mexico, the Total Plan in Brazil, The Wellness Coach in France, The Sampling Program in the U.S., and Generation Herbalife, or GenH, in many of our markets, as described under "Net Sales" below. Management's strategy is to review the applicability of expanding successful country initiatives throughout a region and where appropriate, financially support the globalization of these initiatives.
North America
Net sales in North America increased $17.4 million, or 20.0%, for the three months ended March 31, 2007, as compared to the same period of 2006. In local currency, net sales increased 20.2% for the three months ended March 31, 2007, as compared to the same period of 2006. The fluctuation of foreign currency rates had an unfavorable impact of $0.1 million on net sales for the three months ended March 31, 2007. The overall increase was a result of net sales growth in the U.S. of $18.3 million or 22.5% for the three months ended March 31, 2007, as compared to the same period of 2006. In the U.S., we expanded our branding efforts with AEG by entering into an exclusive sponsorship agreement with the LA Galaxy soccer team. We also agreed to a major sponsorship agreement with an AVP Volleyball tour athlete, Karch Kiraly.
The increase in net sales in the U.S. was a result of a number of factors, including supervisor growth, up 19.7% at March 31, 2007, as compared to the same period of 2006, the continued strong relationship between the U.S. country management team and the distributor leadership, continued branding efforts such as sponsorship of the 2007 Amgen Tour of California bicycle race and the growth of the Nutrition Club DMO amongst our Latino distributors. To further support the retailing and recruiting efforts of our distributors, we opened a new sales center in Phoenix, Arizona in April 2007 and introduced a new flavor, Pina Colada, into our top selling Formula 1 shake line in the U.S. In January 2007, our Kickoff Supervisor Trainings attracted over 6,700 Distributors across 16 cities.
We believe that 2007 net sales in North America should continue to show positive year over year growth primarily as a result of the expected continuation of strong momentum in the U.S., the continued success and expansion of the Nutrition Club concept and increased focus on the Lead Generation/ Sampling.
Mexico and Central America
Net sales in Mexico and Central America for the three months ended March 31, 2007 increased $11.9 million, or 14.2%, as compared to the same period of 2006. In local currency, net sales for the three months ended March 31, 2007 increased 18.6%, as compared to the same period of 2006. The fluctuation of foreign currency rates had an unfavorable impact of $3.8 million on net sales for the three months ended March 31, 2007. The overall increase was primarily a result of net sales growth in Mexico of $10.5 million or 12.6% for the three months ended March 31, 2007.
The increase in net sales in Mexico was primarily driven by very strong sales in the re-qualification month of January 2007 and strong supervisor growth, up 56.2% at March 31, 2007, as compared to March 31, 2006. The 2007 retention rate . . .
May 01, 2007 (c) 1995-2007 Cybernet Data Systems, Inc. All Rights Reserved
N.B. Graphs not shown above. Link to original article:
http://www.marketwatch.com/news/story/10-q-herbalife-ltd/story.aspx?guid=%7B397DF597-257F-49FB-961E-10354D2E7188%7D
