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US network marketer targeting European supplement sector

24-Jan-2005

Reliv International, a US-based firm using network marketing to distribute its supplement products, is hoping to make significant inroads into the European market, with plans to start business in Germany later this year.

The company, which has seen sales growth of more than 20 per cent for 10 consecutive quarters, makes and distributes a broad range of vitamin and nutritional supplements, diet management products, soy-based functional foods and sports drink mixes.

It already sells its products in the UK and Ireland, as well as seven other markets outside the US. Germany is expected to offer significant returns for the firm that cites figures from the US-based Direct Selling Association showing that Germany is one of the top five direct selling markets in the world with a market in excess of $4 billion.

"Europe represents a significant and untapped market for Reliv and we look forward to the potential positive growth impact our entry into Germany will have," said Stephen Merrick, senior vice president of international development for Reliv .

The company plans to start operations in Germany in the second half of 2005, expanding into surrounding countries during 2006.

Network marketers of dietary supplements have seen strong growth in the UK in recent years. According to the Direct Selling Association, nutritional supplements sold through this type of sales channel were worth £73.5 million (€105.7m) in 2002, up from only £18.4 million in 1993. It has 21 members operating in the sector in the UK, mostly from the US.

Mike Hughes, director of operations in the UK, said the growth can be explained by the strong increase in awareness of healthcare products and the support offered by direct marketers, in contrast with a lack of customer advice in health food stores.

However Euromonitor OTC healthcare analyst Kathrin Jungbeck notes that direct sales still only had a 5.5 per cent share of the vitamins and dietary supplements market in western Europe in 2003.

"The European market is really competitive because it is quite mature and growth is coming from premium branded products," she told NutraIngredinets.com.

"Direct sellers don't have the same reputation as they do in Asia or North America and may not have the same impact as the established names," she said.

Pharmacies currently make 34 per cent of all supplement sales in Germany, while 24 per cent comes from drug stores and 16 per cent from grocery outlets.

However Scott Montgomery, senior vice president of worldwide operations for Reliv claims that "our distributors have expressed more interest in Germany than in any other new market we have entered. With this enthusiasm, and the momentum of our continued success here in the United States, we are anticipating wide distributor participation in this effort."

Reliv reported a 76 per cent increase in profits during 2003 to $4.4 million. For the first nine months of 2004 it has seen a 33 per cent increase in earnings.

Early last year, it announced that it was investing $1 million in an upgrade of its manufacturing plant designed to double the facility's throughput and increase production capacity. It said that production volumes increased by more than 45 per cent between 2002 and 2003.