Nu Skin operates in nine reportable segments: seven geographic Nu Skin Segments, Manufacturing and Grow Tech. Its Manufacturing and Grow Tech segments account for roughly 5% of the company's sales.

The segments consist of the manufacturing and controlled-environment agriculture businesses within its Rhyz strategic investment arm.

Geographic Reach

Headquartered in Provo, Utah, Nu Skin has distribution and manufacturing centers in Shanghai, China and Draper, Utah. Mainland China is its largest market, accounting for around 30% of total sales. Other major markets and segments include Americas/Pacific (nearly 15%), South Korea (almost 15%), and Southeast Asia (over 10%). The remainder of sales are generated from Japan (more than 10%), Hong Kong/Taiwan (over 5%) and EMEA (over 5%).

Sales and Marketing

Nu Skin relies on person-to-person and social media marketing, rather than traditional media advertising or direct marketing campaigns, to sell its personal care and other products.

The company's distribution channel is composed of two primary groups: its consumer group, individuals who buy products primarily for personal or family consumption and share products with friends and family; and its sales network, individuals who personally buy, use and resell products, and who also find new consumers, and recruit, train and develop new sellers.

However, Nu Skin employs a different business model in China where it has a hybrid business model that utilizes retail stores, sales employees, independent direct sellers, and independent marketers to market its products.

Nu Skin's spent $16.3 million, $19.1 million and $15.6 million of advertising cost for the years 2019, 2018, and 2017 respectively.

Financial Performance

Nu Skin has posted mixed results in the past five years, with revenues fluctuating year to year. Its annual revenues have risen by about 8% since 2015. Net income also grew 30% over the same period.

Revenue fell to $2.4 billion in 2019, an approximately 10% decrease from the year prior. The decline in revenue was partially due to sales meeting restrictions and negative media scrutiny in Mainland China, along with the lack of a major product launch in 2019, which the company believes may have caused some decreased engagement in its sales force.

Net income was $173.6 million in 2019, a rise from $121.9 million in fiscal year 2018 due to a decrease in general and administrative expenses to $616 million compared to $662.3 million the prior year. The decrease primarily relates to decreases in labor expense due to decreased employee headcount during 2019, primarily as a result of its restructuring program in the fourth quarter of 2018.

Cash provided by operating activities was $177.9 million in 2019, while investing activities used $71.4 million. Financing activities used another $154.8 million. The company ended fiscal 2019 with $335.6 million in cash and cash equivalents. Nu Skin's primary cash uses in 2019 were for payment of cash dividends and long-term debt payments.

Strategy

Nu Skin's innovative approach to product development and distribution provides the company with a competitive advantage in personal care and nutritional products and direct selling. To that end, Nu Skin is implementing strategies that cater to its primary product categories, including products under its Nu Skin and Pharmanex brands.

Nu Skin has a strategy for its products categories of Personal Care and Wellness. The strategy for its personal care products is to leverage its distribution channel to strengthen Nu Skin's position as an innovative leader in the masstige and premium personal care markets. Its personal care products also include innovative skin care devices. In 2019, its top-selling products by revenue in this category were two of its innovative skin care devices and related consumables: ageLOC Spa systems and ageLOC LumiSpa treatment and cleansing device.

The strategy for its wellness category is to continue to introduce innovative, substantiated products based on research and development and quality manufacturing. Direct selling has proven to be an effective method of marketing its high0quality wellness products because its sales force can personally educate consumers on the quality and benefits of its products, differentiating it from its competitors' offerings.

Company Background

Brigham Young University graduate Blake Roney and his sister, Nedra, came up with the idea for Nu Skin in 1984 while pondering the amount of fillers in personal care products. They compiled a list of beneficial ingredients, came up with $5,000 (from friend and present SVP Sandra Tillotson), and found a manufacturer to make their product -- and Nu Skin International was born. Roney was dead-set against incurring debt, so he decided to use multilevel marketing to push the products. Such marketing systems are often accused of being illegal pyramid schemes, and Nu Skin has drawn the attention of many attorneys general across the US.