This is not their fathers' Amway

Associated Press/August 4, 2006
By James Prichard

Ada, Mich. -- As recently as the late 1980s, direct-sales giant Amway Corp. did 80 percent of its business in the United States and the remaining 20 percent overseas.

But its aggressive expansion in recent years into such markets as China, India and Russia has flipped those figures around: Now $4 out of every $5 of the company's revenue comes from foreign countries.

"Our whole concept of person-to-person selling is a concept that fits right into the culture in Asia, so we've been able to take that original model and move it into some of those markets," says Steve Van Andel, chairman of Alticor Inc.

Alticor was formed in October 2000 during a corporate restructuring to serve as a holding company for Amway, which now handles foreign sales, and Quixtar Inc., a Web-based business through which domestic sales are made.

The company has provided much of the wealth that is fueling the run for the Michigan governor's office by Republican Dick DeVos, who has given his campaign nearly $13 million so far.

DeVos was president of Alticor/Amway from 1993 until 2002, during which time the company eliminated around 1,400 U.S. jobs - including about 1,000 in Michigan - so it could restructure and move into the global marketplace.

Both moves have come under attack by Democrats, the political party of his campaign opponent, Gov. Jennifer Granholm.

Amway was founded in 1959 by Rich DeVos and Jay Van Andel, two high school friends from Grand Rapids. Jay Van Andel, Steve's father, died at age 80 in December 2004. Rich DeVos, Dick's father, was ranked No. 200 among the nation's billionaires this year by Forbes magazine with $3.4 billion and now owns the Orlando Magic of the NBA.

The founders' business model was to sell products not usually found in stores - back then that included biodegradable cleaning solution - directly to consumers through a tiered network of individual distributors, who typically sell to friends, relatives and acquaintances. The distributors could earn more money by recruiting others to do the same.

Criticism directed over the years at the company's multilevel-marketing system could hurt DeVos in the Nov. 7 election, according to a poll released last month.

In a statewide poll of 600 likely voters conducted July 19-25 by Lansing-based EPIC-MRA, only 17 percent said they had a favorable impression of the direct-sales company, while 41 percent had an unfavorable opinion and 34 percent were undecided.

Asked if DeVos' ties to Alticor would make them more or less likely to vote for him, 21 percent said less likely and 14 percent said more likely. More than half - 62 percent - said it wouldn't influence their decision, and 3 percent were undecided.

The poll had a margin of error of plus or minus 4 percentage points. It was conducted for a consortium made up of The Detroit News and television stations WXYZ of Detroit, WOOD of Grand Rapids, WILX of Lansing and WJRT of Flint.

DeVos took charge of Amway's international division in 1984, when 5 percent to 10 percent of business was done overseas.

He says board members and senior management had concerns about his suggestion to grow international sales, but he felt that it could be done successfully by staying true to the business model while changing or adopting practices to suit local laws, governments and cultures.

DeVos says none of the jobs cut in Michigan under his watch was sent to China.

"We started a company in China. We built a plant in China to make the products in China that we sell in China. So yes, there were Chinese jobs created to support a Chinese business," he told The Associated Press this week.

DeVos says approximately 300 Michigan-based Alticor employees - researchers, accountants and other professionals - work to support the burgeoning Chinese business.

In order to expand into China, the company was required by the Chinese government to arrange for all of its products that will be sold in China to be made in China, DeVos says.

"To be honest, in the United States, it (Alticor's business) has been flat to down, but around the world, especially in China, it's been phenomenally good the last few years," says Ben Rudolph, a marketing professor at Grand Valley State University.

While Amway's early success centered on soap sales, today's Alticor produces and sells about 450 products, with nutrition and beauty products now accounting for nearly two-thirds of its global business.

"Home care - the traditional detergents and laundry components - that's a small part of the business today," says Doug DeVos, Alticor's current president and Dick's brother.

Dick DeVos still is a major shareholder in the privately held company and has shot some of his campaign ads in Alticor plants, but has no active role with it.

He and his wife, Betsy, own Windquest Companies Inc., a Holland company employing 150 people that makes organization and storage systems, and Windquest Group Inc., an investment holding company in Grand Rapids.

Alticor says it has more than 13,000 employees and 3 million distributors worldwide. About 4,000 workers are in greater Grand Rapids, with about three-quarters at the company's 256-acre research and development, manufacturing, logistics and administrative complex in nearby Ada, where it is based.

The company's best-selling brand is Nutrilite, a lineup of vitamins, minerals and other dietary supplements that make up about 35 percent of its business. Another 17 percent comes from cosmetic and skin-care products, led by the Artistry brand, company officials say.

Since the restructuring, the Amway subsidiary no longer does business in the United States. It now operates in more than 80 nations and territories in Asia, Africa, Europe and the Americas. In 2005, Alticor exported $450 million worth of U.S.-made products.

Sales here and in Canada and Puerto Rico are made through Quixtar distributors. About 70 percent of all U.S. orders come through Quixtar's Web site, says Doug DeVos.

Also beneath the Alticor umbrella is Access Business Group Inc., the development, manufacturing and logistics arm serving Amway and Quixtar. Access also serves as a contract manufacturer for outside firms, which brought in more than $125 million for Alticor in 2005.

Another subsidiary is Amway Hotel Corp., which owns the Amway Grand Plaza Hotel in Grand Rapids and operates a Courtyard by Marriott hotel in the city. It also is building a luxury hotel alongside the Grand River in Grand Rapids set to open in fall 2007.

Alticor, which still is owned by the DeVos and Van Andel families, reported revenues of $6.4 billion in fiscal 2005. About $5 billion came from outside the U.S.

The families say they see the company remaining privately held, believing it gives them a strategic advantage in long-term planning. But they didn't rule out the possibility of a change in the future.

"As a family, we look at ourselves as remaining private but we've also learned over the years never say never on anything," Van Andel says.