Health is a matter of science at USANA Health Sciences. The company makes nutritional, personal care, and weight management products, selling them through a direct-sales network marketing system of more than 220,000 independent distributors (or associates). USANA Health Sciences also sells directly to 64,000 customers deemed preferred. USANA's associates operate throughout North America, as well as the Asia/Pacific region. The company's products portfolio includes nutritional supplements (76% of sales) and foods (12%) sold under the USANA brand and a line of skin and hair care products (9%) marketed under the Sensé label. Chairman Myron Wentz owns more than 50% of the company he founded.
USANA operates its business through one reportable business segment. The direct seller, which has operations in 15 markets worldwide, makes the majority of its products at its facilities in Utah. It manufactures all of its tablet products and its beauty products in-house. It also develops capsules, drink mixes, nutrition bars, and personal care items. Previously, USANA served as a third-party manufacturer for a limited number of body care companies. At the time, contract manufacturing accounted for a larger share of the company's sales. However, once the Sensé line took off, USANA sold its third-party manufacturing business and devoted its manufacturing capacity to its own products. In keeping with its emphasis on developing science-based products, the company has a collaboration with the Linus Pauling Institute at Oregon State University to research the role of vitamins and minerals in human health.
Mergers and Acquisitions
As North America's sales slipped in recent years, USANA has focused on extending its reach to other markets, specifically into the Asia/Pacific region. To this end, it acquired a small manufacturing facility in China and entered new markets including Malaysia, the Philippines, and Thailand. The company acquired Beijing-based BabyCare Ltd. in 2010 for $45 million to get its foot in China's direct-selling door. BabyCare manufactures and sells infant nutritional products in some 15 Chinese provinces.
USANA looks to grow its business through efforts overseas. In 2012 it entered the Thailand market with a dozen products, consisting of four key nutritional supplements and eight skin-care products. The company has its eye on expanding its operations into France and Belgium, as well. Through its BabyCare business, USANA in 2011 launched a handful of Optimizer and Sensé products in China as it chases after the adult supplement market and offers up more sales opportunities for its associates to existing and prospective Chinese customers.
The company builds sales by getting its associates to manage their own business groups by recruiting and training others to sell the company's products. Sales associates are paid on sales generated by those groups. They might also receive compensation by purchasing products at wholesale prices and reselling them at retail prices. USANA attempts to recruit sales people who are looking for a second income and want to start a home-based business.
Sales growth in its Asia Pacific region helped USANA log a 12% increase in net sales in 2011 vs. 2010. The results represented a full year of contributions from its China business. Offsetting gains were decreases in local currency in North America due to lower product sales volume from fewer associates. Net income also rose 11% in 2011 as compared to 2010 as a result of rising gross profit margins on higher net sales. These gains were tempered, however, with increased associate incentives and higher selling, general, and administrative expenses.
Sales and Marketing
USANA intends to fight sagging sales by increasing brand awareness and acquiring more associates and preferred customers in North America. Along with direct selling, USANA sells its products in natural health food retailers, via mail order and the Internet, and in drug stores and supermarkets.
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