Mannatech joins network marketing trend where Asia is primary growth driver

By Hank Schultz contact

- Last updated on GMT

Manna
Manna

Related tags: Net sales, United states dollar

Mannatech, a Texas-based network marketing company selling dietary supplements, is becoming part of the trend in the direct selling industry where most of the growth is occurring in Asia.

The company, which sells supplements based on a ‘glycobiology’ marketing message, reported flat earnings in its most recent earnings statement.  Like other such companies, Herbalife and Usana in particular, Mannatech increasingly is deriving most of its income from operations outside the US and particularly in Asia.

Mannatech, with headquarters in Coppell, TX, bases its products on a nutrient mixture it brands as Ambrotose, a mix whose primary constituents are arabinogalactan, a molecule dervied from larch trees, and aloe vera extract. The company touts its many patents on the nutrient mix.

Overall net sales for the second quarter of 2015 were $46.7 million, an increase of 0.9% as compared to $46.3 million in the second quarter of 2014.  These were negatively affected by foreign currency headwinds, a factor that has dampened the results of all US-based companies that have global operations. The US dollar has been stengthening in recent quarters, and China has taken a course of devaluing its currency.  This effect is likely to continue into future quarters, as the Chinese government announced its most recent devaluation only this week.  Mannatech has significant operations in Korea and Japan, and the Chinese currency market has ripple effects throughout the region.

Asia drives the bus

Even taking that currency effect into account, it’s obvious that Asia is Mannatech’s chief growth driver.  Almost 60% of the company’s revenue came from operations outside North America.  About half of the company’s sales in the quarter were realized in Asia, said chief accounting officer David Johnston.

“Asia-Pacific net sales increased by $2.2 million or 10.3% to $23.6 million in the second quarter of 2015 as compared to $21.4 million for the same period in 2014. The number of active associates and members increased, and the revenue per active associated member increased. In constant dollars, the net sales would have increased 21% to $25.9 million. The currency impact was primarily due to the depreciation of the Korean Won, the Japanese Yen and the Australian Dollar,”​ Johston said in an earnings call with analysts.  A transcript of the call, which inlcuded no question and answer session, was posted on the site seekingalpah.com

Sales in North America declined by 10% to $18.8 million. Johnston attributed the decline mostly to a drop in the number of distributors.  As previously mentioned, other network marketing companies selling nutritional products have seen similar softness in the US market, which could be attributed to a number of factors.  Dietary supplement sales in general have seen weaker growth in recent quarters than they have in the past. And the growth in the US job market could be dimming the luster of taking up a network marketing sales job as a primary or secondary source of income. And it’s also possible that Herbalife’s very public tussle with activist investor William Ackman, who has allegedly the company is running an illegal pyramid scheme, has cast a pall on the entire industry in the US.

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