Amway Corp. plans to reach sales of US$100 million in Vietnam within the "next two, three years," as the nutritional products and cosmetics maker sets up a second factory in the nation, said President Douglas DeVos.
The second factory is being built because of capacity constraints at Amway's first plant, DeVos said in an interview. The $20 million plant is set to open in the southern province of Binh Duong by 2015, according to the company. Michigan-based Amway plans to make nutritional products at the new plant and may use it for regional exports, he said.
"We're really trying to fit it into the global supply chain," DeVos said in Ho Chi Minh City on April 16.
Amway has benefited from economic growth in Vietnam that averaged about 7 percent over the last decade and is forecast by the World Bank to expand 5.2 percent this year. Amway's revenue in Vietnam has risen more than 20 percent annually in recent years, reaching about $70 million last year, with 46 percent made up of nutritional products, DeVos said. Alticor Inc., the parent of Amway, had global sales of $11.3 billion last year.
"You're not going to maintain those rates for very long," DeVos said. "We would see those starting to come down into more of a 10-15 percent sort of range, but we see it having the potential to stay in the double-digit range for a while."
The existing plant in the southern province of Dong Nai has an investment capital of $14.8 million, said Dang Ngoc Thu Ha, Amway's public affairs manager in Vietnam.
Herbalife Ltd., which uses a similar direct-selling model for its nutrition products, is fighting accusations from Bill Ackman, founder of New York hedge fund Pershing Square Capital Management LP, that it uses inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme. Herbalife has repeatedly denied the allegations.
"Herbalife is an honorable company that's been part of our industry for many years," said DeVos. "They'll move through it."
In a 1979 case, the US Federal Trade Commission found that Amway's sales plan was not a pyramid scheme, according to a 1998 statement posted on the FTC website.
"We've been reviewed up one side and down the other, and we've been very transparent with how our business works," DeVos said. "The compensation structure is always based on the sale of a product."