The Canadian Press: Direct-seller Amway angling for a comeback in United States

ADA, Mich. — Once a household name and reputedly the key to great fortune for modern salesmen hoping to live out a Horatio Alger myth, the Amway brand faded from the American market years ago, tarnished by legal and regulatory problems.

The direct-seller of everything from health and beauty items to household cleaners repeatedly fought allegations that it was a pyramid scheme. The company also paid $20 million in fines in a Canadian criminal fraud case in 1983.

In 2000, after Amway become part of an umbrella company called Alticor Inc., the Amway name was dropped in the United States and Canada. The hope was that the company could emerge wholly remade in the world of online sales under a new moniker: Quixtar.

Now, as Amway’s 50th anniversary approaches in May, Alticor is retiring the inert Quixtar label and pouring millions of dollars into reviving the Amway brand in North America with market research, national television commercials and ads in newspapers and magazines and online. The company will use a transitional name, Amway Global, before reverting in about a year to Amway.

“We thought, well, if we’re going to build a brand, build the brand that everybody knows already,” Alticor president and co-CEO Doug DeVos said in an interview with The Associated Press. “It’s going to be much more successful and cost a lot less and happen a lot faster.”

Despite predictions of continuing economic gloom, Alticor executives hope to repeat in the United States the kind of growth they’ve seen abroad in the past – and to revive the mystique that helped the company spread throughout the Midwest and, by the mid-1960s, the rest of the U.S. Amway’s hundreds of thousands of distributor dreamed of getting rich by selling cleaning products and by recruiting their acquaintances to join the fold.

Still operating on that basic model, including prices that tend to be higher than those of their competitors, Amway saw global sales revenue top $7.1 billion in its 2007 financial year. The company predicts another $1 billion increase this year. And most of its recent growth, in such developing Asian markets as China, India and Russia, has been under the Amway name.

“In the late 1980s, about three-quarters of our business was here in the U.S.,” says Steve Van Andel, Alticor’s chairman and co-chief executive and – like DeVos – the son of one of Amway’s founders. “Now about 80 per cent of it is outside the country.”

The company is gambling that consumers at home, where sales have been flat for years, will remember the days when Amway was known less for scandal and more for unrelenting pitches from well-scrubbed and optimistic door-to-door salesmen.

Marketing experts say that, despite the baggage attached to the brand, the company is doing the right thing by bringing Amway back to North America in a campaign that launched in March and first made a splash in October with sponsorship of a Tina Turner concert tour that concludes in April.

“My sense is that many of the negative associations of Amway have now begun to fade,” says Tridib Mazumdar, a marketing professor at Syracuse University.

Daniel Howard, a marketing professor at Southern Methodist University, says each term he asks his students whether they have heard of Amway, and each term “the vast majority” respond affirmatively.

“Branding is what marketing is all about, and the decision to do away with Quixtar was an excellent decision,” he says. “The Amway name is already fairly well established in the minds of the American consumer.”

The Quixtar name simply never caught on, company executives say.

“The research said Quixtar had a recognition (rate) of three per cent; Amway had a recognition of 76 per cent, as I remember,” says DeVos, referring to a study Alticor that commissioned in 2006.

Van Andel’s and DeVos’ fathers, Jay Van Andel and Rich DeVos, founded Amway – an abbreviation of American Way – in 1959, offering the promise that anyone who worked hard could operate their own successful business.

Amway focused at first on household cleaners, then expanded its product line in the 1970s to include more nutritional products and, a decade later, more cosmetics. The company manufactures all its own products.

The U.S. Federal Trade Commission examined Amway’s business model during the 1970s, concluding in 1979 that it was not an illegal pyramid scheme because compensation is based on retail sales to consumers and because sales people are not paid for recruiting new colleagues.

Still, it continues to draw critics and government scrutiny, including recent investigations in England, India and China.

Van Andel and DeVos have brought in two key marketing executives to help revitalize the Amway brand in North America.

One is Steve Lieberman, managing director of Amway Global, who spent much of his career at S.C. Johnson & Son Inc., which makes such household products as Windex window cleaner and Ziploc plastic storage bags. The other is Alticor chief marketing officer Candace Matthews, who has worked at The Coca-Cola Co., Procter & Gamble Co. and L’Oreal SA.

Matthews says her job is to “bring the discipline of marketing to an organization that’s been really sales-driven.”

Lieberman came aboard after hearing from a recruiter about an opening at Quixtar.

“I said, ‘Quixtar? I’ve never heard of Quixtar.’ So I went on the Internet and went, ‘Oh, it’s the old Amway company.’ I didn’t know they still existed,” he says.

His two-pronged attack consists of rebuilding the Amway brand and educating distributors and customers. The new ads phase out the Quixtar brand by showing it gradually decreasing in prominence over the course of the ad campaign.

The Amway Global logo modifies the Amway logo that has been used throughout the rest of the world since 2000. Directly below the blue Amway name on a white background now lies the word “Global” in smaller letters, with a thin, red swoosh separating the words.

Officials declined to say how much Alticor is spending on marketing, but Lieberman said it’s spending about as much as other large direct-sales companies, such as Mary Kay Inc., Herbalife International Inc. and the industry’s top-seller, Avon Products Inc.

“Before, our spending was relatively non-existent,” he says.

The privately owned company, based in Ada, about 10 miles east of Grand Rapids, still makes and sells the L.O.C. household cleaners that made Amway famous, as well as food, apparel, baby-care items and jewelry. But the new push focuses on Nutrilite vitamin supplements and Artistry skin care products.

Amway does business in most of the world, except northern Africa and the Middle East because expanding there would be “too complicated,” Van Andel says. The most logical move was to reinvent Amway in the U.S.

“We’ve got to take a look at the markets that we’ve been in a while, like the U.S., that are mature, that have been kind of just kind of stable and going along but haven’t had any huge growth spurts,” Van Andel says. “We’ve got to take a look at what we can do now to get those markets up and moving again.”