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14 Amway (Malaysia) Holdings Berhad (340354 U)annual report 2004

Brands, and we have a few powerful ones, are intangible assets.Developed and nurtured, they can become significant assets. Ourcommitment to creating brand awareness and brand valueunderscores our vision to be more innovative, progressive anddynamic.

brand-building

operations review

Amway (Malaysia) Holdings Berhad (340354 U)annual report 2004 15

During the year, the country’s electoral outcomehad elicited positive overall reaction, consumersentiment was steadily growing and projectedGDP for 2004 was over 7%. These externalfactors helped to provide a conduciveenvironment for Distributors’ retailing efforts.Internally, the Company embarked on severalstrategic initiatives to ensure that Distributorsw e re well-supported to capitalize on thefavourable conditions. In a multi-pro n g e da p p roach, the Company expanded itsi n f r a s t ru c t u re, enhanced its Sales IncentiveProgrammes (SIPs) and Non-Cash Awards (NCAs)to motivate Distributors, rolled-out anunprecedented brand-building campaign for oneof its power brands as well as introduced newproducts and promotions to excite the field. Dueto these initiatives, the Company successfullyachieved its objectives of generating higher sales,producing more Distributors who qualified forincentives and creating more awareness forN U T R I L I T ET M, Amway’s leading brand of foodsupplements. The Company’s thrust behind thesecapital investments was re c i p rocated byincreased Distributor activity and productivity,sending positive signals that these initiativesw e re helping them do their business betteramidst a more competitive environment.

INVESTING IN INFRASTRUCTURE

To bring Amway’s products closer to Distributorsand potential customers, the Company openedtwo more Regional Distribution Centres (RDC) in2004, thus taking the total number of RDCs inMalaysia and Brunei to 12. Distributors fromSibu and Melaka and the surrounding areas werefilled with anticipation and excitement on May10 and July 3 respectively as Amway opened itsdoor and brought the Business Opportunity closerto them. Even leaders from other States lent theirsupport with their presence at the openings, astrong testimony of their loyalty and commitmentto Company events. The new RDCs also saw anincrease in Distributor activities and a revival for

some who were motivated by the physicalpresence of Amway in their midst to build theirbusiness further.

Mere physical presence is not enough. One of themajor components of the Amway BusinessOpportunity is the service level accorded toDistributors. By providing an experience that issecond to none that includes ease in transactionand speed in service, the Company hopes toattract more Distributors through its doors. Thisis the premise upon which the Companyembarked on a series of service-enhancementp rojects to its Petaling Jaya RDC, a larg econtributor to overall sales. Renovations weredone to include a queue system for a moreo rderly environment, waiting lounges were air-conditioned for comfort and night shifts wereintroduced to ensure orders are picked and readyfor delivery to Distributors.

INVESTING IN DISTRIBUTORS

The SIPs and NCAs were developed to rewardDistributors for business growth and consistencyand to help in increasing the productivity andprofitability of Distributors. This in turn, hascontributed to making the Amway Opportunitymore attractive to many Malaysians and this isreflected in the 161,000 strong Core DistributorForce, a rise of 2% from the previous year.

Fiscal year 2004 saw 18 new Diamonds andhigher Qualifiers, consisting of 1 Crown DirectDistributorship, 3 Double Diamonds, 2 newExecutive Diamonds, 4 Founders Diamonds and8 new Diamonds. The Company also saw morequalifiers across the board for the SIPs. There isalso a record number of Distributors who havequalified for the Amway Leadership Seminar(ALS) to Tokyo scheduled for December 2004.With more than 790 Distributors who qualifiedfor the trip, this is a 5% increase over theprevious year’s ALS in South Africa.

operations review


The annual Amway National Convention held inStadium Putra, Bukit Jalil drew 18,000Distributors and their prospects. Demand forticket sales was so overwhelming that the futurechallenge to the Company is to find an indoorvenue that can hold a bigger crowd. This is aclear indication that many people are stillattracted to the Business Opportunity offered byAmway. Even the smaller Regional Conventions inKuantan and Kuching drew crowds of almost1,000 people in each town.

With the increasing number of people joining thebusiness, there is a need for Distributor leaders tounderstand and respond to Distributors’ needsb e t t e r. Through the Relationship Managementtool, the Company is putting in the hands ofthese leaders, segmentised information andreports that will help them do their businessbetter by knowing how and when to approachDistributors with specific needs or wants.

INVESTING IN NEW PRODUCTS AND PROMOTIONS

Product innovation is the key to topline growth.Fiscal Year 2004 saw the introduction of 18 newproducts and product revisions. Coupled withattractive promotions, these went down well withDistributors. Reflecting Distributors’ reception tothe new products and promotions and consistentsupport for NUTRILITETM products, the Nutrition &Wellness core line saw an increase of 17.5% over last year’s sales. Four new products were launched in Fiscal Year 2004 - NUTRILITE

Bilberry Plus, a herbal supplement to improvevision; NUTRILITE Black Cohosh and Soy, aproduct specially formulated with nutrients tonourish the body during menopause; NUTRILITE

Protein Drink Mix (Mixed Berries Flavour), a tastynutritious protein drink and NUTRILITE CoEnzymeQ10 Plus, a product for the optimal supportfor health. NUTRILITE CoEnzyme Q10 Plus, along-awaited product, managed to perform well

Mr Low Han Kee (right) presenting a memento to Dr Sam Rehnborg in appreciation of his presence at the launch, while Mr Paul Yee (left) looks on.

Mr Paul Yee, Dr Sam Rehnborg and Mr Low Han Kee watering a plant, signifying the launch of the NUTRILITETM Brand Building Campaign.

Guests who filled the ballroom on the day of the launch, listening intently as Dr Sam Rehnborg spoke of the rich history behind NUTRILITETM.

Guest of Honour Dr Sam Rehnborg, President of Nutrilite Health Institute addressing guests at the launch.


above expectations as Distributors eagerlypurchased the product and retailed it aggressivelydue to its efficacious effect on health. Threemajor promotions were implemented for Nutrition& Wellness and each managed to exceed forecastsignificantly. Attractive high quality premiumitems were the key factors for Distributors andcustomers in their purchase decision.

ARTISTRYTM, representing the cosmetic and skincare core line, unveiled the much-anticipatedA RT I S T RY TIME DEFIANCET M Intensive RepairSerum, a product that had caused ripples ofexcitement among the Distributors way before itmade its presence in Malaysia because of theresponse to the product in other markets likeKorea and Thailand. When it was launched inMalaysia, first day sales alone reached RM1million. IRS undoubtedly was the best-sellingitem in the ARTISTRY stable of products with salescontributing about 9% to overall ARTISTRY sales.Providing further retail excitement was the yearlyseasonal Colour Collections. The ARTISTRY SpaCollection in December 2003 featured theARTISTRY Christmas Coffret which comprised oftwo deluxe body products with exquisite andre f reshing fragrance. The Christmas Coff re tserved as a wonderful gift during the year-endfestivities. The ARTISTRY Fall Collection, inspiredby Paris fashion trends, comprised a collection of lips, eyes and nail colours which offeredDistributors and customers plenty of glamour andpanache from ARTISTRY. The ARTISTRY “Flights ofFancy” Spring Collection offered early in the yearprovided vibrant, trendy and exciting colours ofspring.

The Personal Care core line was further enhancedlast fiscal year with three further additions to the SATINIQUETM range of salon-quality hair-carep roducts. The S AT I N I Q U E D a n d ru ff Contro lshampoo, Volumising Cleanser and VolumisingDetangler increased the product range whichcontains the exclusive Ceramide Infusion Systemto a total of 12 products to suit various hair typesand lifestyles. These strong additions helpedpush Personal Care sales 7.4% over FY03.

Meanwhile, the Home Tech core line was buoyedby the success of the AMWAYTM Water TreatmentSystem 1 (WTS1) trade-in program which wasbrought back by popular demand for a thirdconsecutive year. It grew 12.5% compared to theprevious year. Additionally, a locally-producedHome Alarm System featuring a wireless securitysystem that can be easily and quickly installedwas introduced to drive sales further in HomeTech.

The Home Care business line saw an addition tothe LOCTM brand of household cleaners. Thelaunch of LOC Plus Kitchen Cleaner was met withstrong sales. Distributors and customers’ pent-updemand for ZOOMTM, a popular but discontinuedproduct, was successfully realised with the LOC

Plus Kitchen Cleaner, a similar product withsignificant improvements in cleaning abilities.

Personal Shoppers Catalogue performed well inthe year under review with 13 promotions and 10Easy Payment Plans (EPPs), which contributedabout 30% to total Catalogue sales. Newproducts and line extensions numbering 31 forthe year contributed another 30% to total sales.Notable new introductions in the October 2003Festive Supplement were the Emma Pagecostume jewellery collection, Fargo water heaterwith pump and Prestige fragrances (Calvin Kleinand Davidoff). From the March 2004 maincatalogue, the Noxxa Induction Cooker and FagorPressure Cooker received good sales. Total salesof mooncakes, a favourite seasonal item,increased marginally from the previous year, withmost of the sales coming in September of thenew fiscal year as the Mid-Autumn Festival fell atthe end of the month.

INVESTING IN BRAND-BUILDING

With a 28-year history in Malaysia, stayingrelevant in a market environment that isconstantly changing will ensure the continuity of that legacy. We have to keep innovating to stay ahead, and the Company’s unprecedented

operations review


brand-building campaign for one of its powerbrands, NUTRILITE, certainly reflects a break-away approach by a direct selling company. Aglobal brand that celebrates its 70th year thisyear and is sold in more than 60 countries andterritories, NUTRILITE has been one of the majorrevenue contributors since the first product wasintroduced in Malaysia in 1979. Over the years,it has grown into a multi-million ringgit businessin Malaysia. This is a testimony to the efficacy of the brand that is time-tested and fully trustedby Amway Distributors and their discern i n gcustomers for its quality and recognized role inenhancing good nutrition and health through itsphilosophy of using the Best of Nature, Best ofScience in its products.

In embarking on an extensive brand-buildingcampaign, Amway wanted to articulate the brandstrengths to connect with Distributors and theircustomers’ experience with the aim of enhancingbrand loyalty. We also wanted to advance ourbrand equity beyond Distributors by extendingthe recognition and demand for NUTRILITE to abroader base of consumers. Officially launched inMay by the President of Nutrilite Health Institute,Dr Sam Rehnborg, the NUTRILITE brand-buildingcampaign set in motion the wheels of creatinggreater awareness for the world’s leading brand ofvitamins, minerals and dietary supplements. Tocapture the imagination of new customers andtake advantage of new forms of communicationfor a non-store brand, an integrated approach ofadvertising, sponsorship and public relations wasused to build a compelling story for NUTRILITE,the brand. From television and outdoor- a d v e rt i s i n gto newspaper pull-outs and article placements inmajor national newspapers to event sponsorships,the whole gamut of branding opportunities wereutilized to elevate brand awareness and createbrand equity for NUTRILITE. Initial feedback fromDistributors showed that they were excited by the Company’s move to publicize the brand as

increased recall from customers and mountingawareness for the brand-name helped them intheir retailing efforts. Going forward, there will bean emphasis on outdoor-advertising as brandvisibility virtually 24 hours a day through thismedium has proven to be very effective increating awareness. Testimony of this is theoverwhelming response from Distributors andtheir customers to the two huge billboard scurrently erected along strategic stretches of theNorth South Highway and the New Klang ValleyExpressway (NKVE). In the pipeline are plans tohave more billboards featuring the NUTRILITE

brand in the rest of the country.

The year also saw the commemoration ofN U T R I L I T E’s 70th anniversary through theNUTRILITE Health Carnival which was held atDataran Merdeka. The Carnival which was kickedoff by Dr Sam Rehnborg and Managing DirectorLow Han Kee with a 5-km jog, attracted 6,000N U T R I L I T E enthusiasts who recognized andcelebrated Optimal Health.

Also for the first time in Malaysia were NUTRILITE

Mini Brand Experiences (MBEs) which were heldin Kuala Lumpur, Penang and Johor Baru .Attended by a total of about 4,000 AmwayDistributors, the MBEs exposed Distributors to the art of marketing and merc h a n d i s i n gNUTRILITE products while educating them ontheir own health and fitness. Trainers from theNutrilite Health Institute were specially flown infor these Experiences which proved so successfulthat plans are in the pipeline to conduct more ofsuch Experiences.

NUTRILITE’s branding campaign is expected toincur an investment of RM10 million over threeyears beginning from Fiscal Year 2004. However,Amway believes that branding will help to createa stronger value for the Company by generatingand securing customer demand, which in turn,will help Distributors in their retailing efforts.


INVESTING IN INFORMATION TECHNOLOGY

Throughout the fiscal year, the Company’s ITinfrastructure was widely upgraded to provide ahigher level of service to Distributors. Manysystems were introduced and upgraded to lendtechnical support to the Company’s operationalinitiatives to help Distributors conduct theirbusiness more efficiently. One such example isthe successful roll-out of certain enhancedf e a t u res to the Amway2u.com e-commerc ewebsite such as the on-line e-debit payment incollaboration with MayBank (Public Bank is theother e-payment partner) and the on-line TNA(Temporarily Not Available) information by RDCs.The Amway2u.com website has been gainingpopularity with Amway Distributors and theMalaysian public, receiving about 198.0 millionhits and web orders valued at RM226.0 millionfor the year, or approximately 50% of annualnational sales, compared to 29% in the previousyear. This clearly reflects the confidence thatDistributors have in performing transactions overthe net for the ease, convenience and round-the-clock accessibility in doing their business.

INVESTING IN OUR PEOPLE

Of all the pathways to growth, investing in peopleis the most important. If our people grow, ourCompany grows. Hence, the Company’s goal is tocontinue attracting, retaining and developingtalents who understand our unique business andembrace our culture and who can help us fulfillour growth potential. That is why the Companyhas invested in a two-year programme focused onenhancing employees’ skills in the areas ofexcellent customer-service. We recognize that adynamic, customer-oriented and results-driventeam of people will take the Company to the nextlevel of growth.

INVESTING IN THE FUTURE

Going forward, we will continue to enhance ouri n f r a s t ru c t u re in areas that will maximize

operational efficiency. There are plans to open anRDC in Alor Setar to bring our BusinessOpportunity to more people. We will continue toexplore opportunities to make our products moreaccessible to Distributors.

The new fiscal year will also see the extension ofNUTRILITE’s brand-building campaign into itssecond year where the NUTRILITE brand-namewill be further enhanced through an integratedapproach of advertising, public relations andsponsorship. We will also roll out a brandingcampaign for ARTISTRY, which has the potentialfor greater growth and market presence. As one ofthe major contributors to overall sales revenue,ARTISTRY is well-positioned as an establishedcosmetics and skin-care brand to create a morevisible presence among women in Malaysia. Inboth the branding exercises, our target is to makeNUTRILITE and ARTISTRY house-hold names in themanner of Amway. Already major contributors tothe Company’s sales revenue, we hope that thebranding exercises will translate into higher salesfor NUTRILITE and ARTISTRY, reinforcing yourCompany’s emphasis in the area of beauty andwellness.

Another key initiative for Fiscal Year 2005 is toincrease the number of Distributors through atargetted approach of attracting more Bumiputraentrepreneurs to the Business Opportunity. Asignificant amount of resources will be allocatedfor this as this segment of the market hastremendous growth potential for your Company.

All these initiatives are investments that theCompany is putting in place to support thebusiness and defend our market share. This willc e rtainly create an upward pre s s u re on ouroperating expenses but this is a necessary moveto strengthen our fundamentals so that we canachieve further growth going into the future.


At its most basic level, corporate social responsibility is aboutcaring for people. By creating, finding and supporting a causethat positively promotes the mental health of children, we areworking to better the lives of children, One By One.

corporate social responsibility

Amway (Malaysia) Holdings Berhad (340354 U)annual report 2004

corporate social responsibility

21

knowledge and skills to achieve “Happy, HealthyMinds”, the theme of the workshops. An officiallaunch in the new fiscal year will spearhead moreof such workshops which we hope will reach moreand more children and parents, includingteachers and care-givers. With staff andDistributor participation as volunteers expectedduring these workshops, we hope to collectivelymake a difference in the lives of children, one byone.

BAG DONATIONS

Apart from promoting children’s positive mentalneeds, the Company also looked into meetingtheir physical needs by donating about 9,000bags to more than 10 schools in East and WestMalaysia. Worth more than RM135,000, the bagswere the Company’s simple and sincere gestureto ease the burden of school-going children andtheir parents.

REACHING OUT ONE BY ONE

Globally, a new community initiative was rolledout in late Fiscal Year 2003. The focus of thecampaign named One By One was children. InMalaysia, our philanthropic legacy has alwaysguided our unwavering commitment to helpingpeople lead better lives. Under the One By Onebanner, the Company deliberated at length beforefinally deciding that it would focus on achildren’s cause that has received prior littleattention but requires a long-term commitment.Based upon that premise and underscored by anation-wide re s e a rch that showed 1 in 5Malaysian children will have a tendency for lowmoods, self-esteem and depression, the thrust ofA m w a y ’s corporate social responsibility isp romoting positive mental health amongstchildren. Working with a team of psychologists,Amway soft-launched a series of workshopsaimed at equipping children and parents with the

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Uniquely embodying our business, the formidable combination ofdedicated staff and determined distributors display the kind ofresolve and commitment that will fertilise the future growth of thecompany.

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