Nature's Sunshine: China project stagnates while Russia, Eastern Europe soar

By Hank Schultz contact

- Last updated on GMT

Related tags: Direct selling, Multi-level marketing

Nature's Sunshine: China project stagnates while Russia, Eastern Europe soar
Network marketing company Nature’s Sunshine is struggling with soft earnings as it strives to get a project for entering the Chinese market on track.

The company, formally known as Nature’s Sunshine Products (NSP), recently celebrated its 45th anniversary​ at an event at company headquarters in Lehi, UT. The company markets a wide array of dietary supplements and meal replacements via a multi-level marketing model.  This form of selling is popular in China as are U.S.-made dietary supplements. But entering the market is not straightforward.

Problems with market entry

Some network marketers selling exclusively nutritional products like Herbalife and Usana have been in the Hong Kong and mainland China markets for years. In the case of Usana, sales in these markets account for the lion’s share of the company’s business. But other MLMs, like NuSkin, have run into problems that have affected other MLMs in the market​.  Direct selling is tightly regulated in China and requires applying for a direct selling license.  The complications of entering the market and obtaining a license have led some MLMs to eschew the model altogether​.

NSP has persevered, but the strain caused by the delay in getting the project up and running is starting to show. CEO Greg Probert said during a recent earnings call with analysts that the company has had to put off some investments in the China project while it waits on the issuance of the license.  He did not give a time frame on when the license might finally come through.

“As we have discussed over the last several quarters, we are in the midst of a significant investment period as we have built a capital and expense infrastructure in China in anticipation of a direct selling opportunity in this promising market. As of today, we have not yet received a direct selling license,” ​Probert said in the call which was posted in transcript form on the site​.

“We are working to manage expense levels during this investment period including delaying incremental expenditures in China,” ​he said.

Soft earnings sink stock

Net sales in the first quarter of 2017 were $83.1 million, up 0.8% from $82.4 million in the same quarter last year. The company is currently strongest in Russia and central and eastern Europe, where sales in increased by 19.8%. As has been noted with other MLMs recently, sales were off in North America.

The stagnant sales and the indeterminate nature of the China project has hurt the company’s stock price.  NSP has declined from a recent high of $16.35 last October to about $8.60 a share today.

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