USANA's first quarter earnings release reveals major drop in active associate numbers from prior quarter. I do not recall any mention of any quarter to quarter information in any press release. I have put together a 2 year trend of Active Associates and Active Preferred Customers by region. What I notice is a downward spiral. USANA lost a total of 22,000 of their Active Total Customers (Associates and Preferred Customers), yet their stock price actually went up from $35.70 to a high of $38.50 and closing at $36.30... I will break down each of USANA's regions and discuss the various situations in each.
USANA's United States Active Associate and Preferred Customer Results
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| figure 1 - USANA US Active Associates |
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| figure 2 - USANA US Active Preferred Customers |
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USANA's United States territory lost 2000 active associates and gained 2000 active preferred customers.
Seems clear to me where the US is trending. USANA constantly blames the bad economy in the US, yet there are several leading distributors who claim that a down economy is good for MLM business opportunities because more people are out looking for work and are more likely to join MLMs. USANA has also blamed this downward trend on the rampant recruiting in their Greater China territory. USANA claims that US distributors are focusing their attention on business in China, which is hogwash. USANA distributors cannot recruit Chinese Nationals into their downline. Chinese Nationals can only be recruited into BabyCare in a single level marketing compensation plan, which I believe will fail USANA miserably because the incentive to recruit an endless chain doesn't exist. Perhaps USANA is referring to the underground recruiting of Chinese Nationals into USANA's Hong Kong territory, which violates China's Direct Selling laws. I believe with the help of
Utah's Attorney General Mark Shurtleff, USANA is above the law.
USANA's Canada Active Associate and Preferred Customer Results
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| figure 3 - USANA Canada Active Associates |
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| figure 4 - USANA Canada Active Preferred Customers |
USANA's Canada active associates and preferred customers remained unchanged.
Canada too has been suffering a decline in active associates and preferred customers. I guess this must be because of the bad economy in the United States. At least that is what USANA might claim. I believe USANA's reputation of being a recruiting scheme with over priced products that are almost impossible to resell have more to do with this decline than USANA would ever admit. Saturation has also kicked in.
USANA's Mexico Active Associate and Preferred Customer Results
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| figure 5 - USANA Mexico Active Associates |
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| figure 6 - USANA Mexico Active Preferred Customers |
USANA's Mexico territory lost 1000 active associates and 1000 active preferred customers.
I never thought Mexico was a serious territory for USANA. I think this territory has more to do with having
Sanoviv there than having USANA associates running around recruiting each other. It was interesting though during the Swine Flu hysteria because USANA's "Poly C" was being marketed by many distributors as a preventative measure against the Swine Flu. I guess if people simply "believe" something will work, then it probably will - Placebo Effect. Perhaps USANA should simply produce a sugar pill, call it Usanebo™ and give their poor distributors a break and only charge them $0.99 for a 28 day supply.
USANA's S.E. Asia/Pacific Active Associate and Preferred Customer Results
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| figure 7 - USANA South East Asia / Pacific Active Associates |
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| figure 8 - USANA South East Asia / Pacific Active Preferred Customers |
USANA's South East Asia / Pacific territory lost 1000 active associates while active preferred customers remained unchanged.
This territory includes: Australia, New Zealand, Singapore, Malaysia, and the Philippines. Unfortunately, USANA no longer breaks down these territories individually. This is a shame because it gave a much more
detailed view of how bad these territories are actually doing. USANA prefers to through around unspecified percentage growths and declines making it difficult to effectively analyze those territories. Either way, the declining trend of active associates is yet another sign of a saturated market, bad reputation and (cough) the bad economy in the United States. Seriously, the US economy has nothing to do with Australia and New Zealand's declining trends. I can only wonder why analysts don't question USANA on their answers. Instead, analysts simply accept whatever answer USANA gives, as if it satisfied the question. However, most of the time it paints an even more ambiguous picture. So far, USANA's latest quarterly report shows a continued decline of members.
USANA's Greater China Active Associate and Preferred Customer Results
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| figure 9 - USANA Greater China Active Associates |
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| figure 10 - USANA Greater China Active Preferred Customers |
USANA's Greater China territory lost 11,000 active associates and 8000 active preferred customers.
This territory includes: Hong Kong, Taiwan and Mainland China. Are the lemmings jumping overboard? As I have written many times now,
USANA has been recruiting people from Mainland China into their USANA Hong Kong territory. This is in violation of
China's direct selling laws, but don't let that stop anyone. Chinese Nationals are not allowed to join MLM companies. USANA has finally come around and started to mention the
recruitment of Chinese Nationals into USANA's Hong Kong territory. However, USANA has a very interesting way to define these distributors. USANA claims that they are simply people who joined solely so they can personally purchase and consume the product. Really! Why then did they not simply join as preferred customers? I believe USANA is full of crap.
These Chinese National USANA distributors joined so they can participate in the endless recruiting scheme in hopes to make money by recruiting other Chinese Nationals under them. Since everyone is
forced to purchase USANA product to participate in USANA's compensation plan, distributors are essentially paid to recruit. Mainland China is a fresh market and that is why USANA witnessed an explosive growth in their Hong Kong territory over the past couple years.
Now we have a huge decline over the previous quarter. USANA claims it is because of the Chinese New Year, which lasts a couple weeks. If this is true, then it reveals how desperately associates must continue to recruit more associates into the endless chain just to maintain the same number of active associates! However, I believe it has more to do with the fact that most associates realizing they are never going to make a dime and how difficult it is to endlessly recruit people. With the product prices so high and having to import the product from the US, why waste their time and money in actually retailing any product. China has more vitamins brands than Carter has pills. Not to mention the skin care market in China.
And Babycare associates will learn quickly than making money retailing USANA product is not worth their time and energy. Since Babycare associates cannot recruit new associates into a downline (Single Level Marketing is China), there is no way for them to make money off the backs of hundreds below them. The USANA fad in China will wear off unless USANA brings down the distributors cost for the product by a substantial amount.
USANA's North Asia Active Associate and Preferred Customer Results
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| figure 11 - USANA North Asia Active Associates |
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| figure 12 - USANA North Asia Active Preferred Customers |
USANA's North Asia active associates and preferred customers remained unchanged.
This territory includes: Japan and South Korea. This is another joke of territories as was Mexico. Why USANA even bothers to publish these numbers is beyond me. We may see that the next quarterly release, Japan might go up 1000 associates. I believe this could be from USANA associates pushing the sale of potassium iodide as a preventative measure against the nuclear radiation caused by the earth quake and tsunami. But again the amount would be insignificant. This territory is saturated and not going to help USANA in the long run.
These are my opinions based on my research and analysis of USANA Health Sciences. As always, I welcome the harsh criticism. If there are errors, let me know as I finished writing this at 1:30 AM.
