India is the land of entrepreneurs and reasonably so, the world’s largest direct selling company grabbed this dynamic opportunity to set up and expand its base. For Amway, this 20 years’ journey has been quite enriching. Right from empowering entrepreneurial growth to acing corporate social responsibility and enhancing green supply chain, Amway has achieved it all. My recent trip to its world-class manufacturing facility at Nilakottai near Madurai brought out interesting facets and their aggressive expansion plans in India. Prerna Lodaya reports…
Having started operations on May 5, 1998, direct selling company Amway completed its two decades of operations in India this year and to celebrate the milestone, the company announced an aggressive growth plan for the country during the FAM trip hosted by them at their state-of-the-art facility in Nilakottai near Madurai, Tamil Nadu. Currently, India is the seventh-largest market for Amway. Key products here include the Nutrilite range of protein and vitamin supplements, Glister toothpaste, Artistry range of beauty and cosmetic products, and the Amway Queen cookware.
Amway India currently derives 50 per cent of its revenue from its nutrition and wellness portfolio, and the other half from a cross-section of categories including beauty, personal care and home care. “The push into nutraceuticals, led by a range of herbal products launched in January, is expected to take the contribution of its nutrition and wellness business to over half of its total top line over the next few years,” proudly informed Anshu Budhraja, Chief Executive Officer of Amway India. “Our nutrition and wellness portfolio has a turnover of Rs10 billion now, which we are looking to double by 2025. The herbal range should help us in this regard, given that consumers are increasingly demanding more of these,” he added.
MAKE IN INDIA
Situated at Nilakottai, this is Amway’s third manufacturing plant located outside USA. Amway has spent in India more than 30% of the $335 million allocated for global expansion. The manufacturing plant is one of the first in India, which has achieved LEED GOLD certification by the US Green Building Council (USGBC) and is a zero-discharge waste facility. It has one of the largest solar rooftops in Tamil Nadu. The company is targeting to conserve up to 50,000 cubic meters of rain water every year as well at the site. The world-class green manufacturing facility is designed to achieve energy optimization and operational efficiency.
Currently the company is utilizing approx. 50% of its capacity. The facility has an annual capacity to manufacture 1.2 billion tablets and soft gels, 7 million canisters of drink mixes, 19 million cosmetic jars, bottles and tubes and 60 million tooth pastes.
Good Manufacturing Practices (GMPs) are followed for all the products to ensure safety, proper identification, etc., is being employed during the manufacturing process. Highlighting about the quality conscious spirit of the company, Vinay Kumar, Chief Technical Officer, Amway India, informed, “Quality is an ever-evolving journey, which includes lot of elements in the qualification process before any material entering the plant, be it technology, development of raw materials and packing materials used. Through a Supplier Quality Development Programme, we qualify these suppliers. The incoming materials are tested for meeting regulatory and international standards. The specifications are developed for components without compromising on safety and potency of materials used in our products as we are like any other FMCG company. That’s one differentiation where we don’t compromise upon.”
While taking a round of their manufacturing facility, one is sure that the testing machines & equipment which have been deployed at the India plant are state-of-the-art and resembles a global facility. As he added, “We invest the most on Quality by Design philosophy, be it technologies adopted, critical equipments or processes that we deploy. We pride ourselves in sharing with you that latest technologies across the globe are being adopted even in India too. Man, Material, Machine and processes are what define us to be the best in class.”
Amway is quite tech savvy the way it manages its business be it processes, products and even marketing. QR code is the most recent technology that has been implemented by Amway, which precisely helps consumers in tracing the specific lot (it could be roots or leaves or bark, etc.) of all the ingredients that have been used to make a particular product. End benefits of the products as well as raw materials are also brought to the fore so that a consumer can understand and experience the benefits of the quality and ingredient story while selling their products. “We have made significant investments in ensuring the organic roots of our Nutrition business. We have devised NurtriCert program and insist on high quality ingredients for our supplements. We grow plants in our own certified organic farms, and we rely on our NutriCert™ certified partner farms for plant concentrate, extracts and botanicals used in Nutrilite Range,” Kumar elaborated.
Amway has ambitious plans to scale up organic farming and source ingredients for its foods supplements brand Nutrilite for both global and Indian operations. It has already tied up with various state governments such as Government of Andhra Pradesh and is in discussion with suppliers to increase organic farming to enhance sourcing of different ingredients, like Holy Basil, Turmeric, Marigold, boswellia, pomegranate. ginger. The company, which has four company-owned farms spread over a total of 6,000 acres in Brazil, Mexico California and Washington State, and is currently sourcing ingredients in India from nine third-party owned farms certified under its Nutricert program from 6 states in the country. These farms supply many of its ingredients not only for India but also for global manufacturing.
SUPPLY CHAIN PROWESS
By now, it’s quite evident that the company places great emphasis on each and every part of the value chain, so one can imagine how precisely they must have designed their supply chain for the wide & varied market like India. It was quite interesting to catch up with Diptarag Bhattacharjee, Chief Operating Officer, Amway India, during the visit and learn about the nuances of supply chain at Amway. As he mentioned, “From the time we have established this manufacturing unit in India, our major emphasis has been on increasing the localization of our products. We are proud to say that today we are sourcing around 95% of products locally and only Artistry range is being sourced from abroad. In that sense, there has been a sea change in our supply chain strategy. Having said that, in order to reduce our carbon footprint, we are making sure that we find suppliers in the 200Km radar of our facility.” Agreed Kumar, “During the journey, we have developed so many suppliers in the country. We have 60-70 per cent local suppliers. It has been a truly evolutionary journey for us since the time we started 20 years back. On an annual basis, we have consciously made efforts to maximize our local sourcing expanse.”
Bhattacharjee added, “As you know that we are highly quality driven, our sourcing decisions are mainly based on the quality of products. For instance, Salmon fish oil is being procured globally from Norway because that’s the best quality we are looking for. Secondly, we invest a lot on R&D as far as packing materials are concerned. This also has been taken care by the parent company on a global level.”
Seconded Kumar, “packaging plays a key role in the entire business strategy. For instance, the bottle has to be consumer-friendly. We have designed and patented technology, which is unique for our Nutrilite bottles. We have invested in injection blow moulding technology at our suppliers’ end. To carry forward the growth momentum, we believe in growing with our partners. We are proud to say that 95% of the packaging material is sourced locally. We have also started running pilot projects with the industry veterans as well as the government because we feel that sustainable growth is only possible if the entire industry takes charge.”
Talking about the nitty-gritties involved in direct selling business, Bhattacharjee averred, “What’s enigmatic in direct selling is that in India, some geographies are quite entrepreneurial in nature. We need to be quite region specific in planning our distribution strategy because no two regions would require the same set of SKUs always. Depending on the demand patterns, we have to adopt our supply chain strategy. As you know that in direct selling, the feedback is quite instantaneous unlike when the goods are sold on the shelf. This has been quite decisive factor for us to improvise our products & processes as per our customers’ requirements.”
Managing national demands almost daily can be quite a task but they have no qualms about it as he proudly shared, “We serve 11,000 pincodes nationally and that’s a real big number. I can vouch for a fact that e-commerce marketplaces would also not be having such a reach. We procure from suppliers who are qualified by us. Our selection criteria is extremely stringent and is followed globally. Once being onboard, they follow a certain quality process. Hence the procurement is an adherence to our global quality benchmark. Before setting up this plant, our bottles were coming from North but today owing to cost consideration and a close adherence to green practices don’t allow us to do so as we want to ensure that we consume lesser fuel, thereby leaving a green footprint.”
Notably so, quality consciousness and a highly aggressive expansion plan in place, the company would be having stringent norms for selecting 3PLs too… Bhattacharjee stated, “We have also started doing one day home delivery to our distributors in India and that requires a very critical 3PL service provider who has greater reach and can fulfil our desired expectations. We do branded home delivery wherein vehicles with our own brand deliver goods to our partners as well as end consumers. To our credit, we are the only FMCG player who offers this unique service. Today we are omnichannel. We have our own experience stores. We have our own website through which we get a lot of traction and then we are having a physical connect through our partners. In such a scenario, we need partners who are able to give us value for money; have the bandwidth to offer one-day delivery option; and ultimately have a great reach.”
In order to enhance traceability in the entire value chain, Amway recently tied up with FarEye to help increase the visibility of deliveries of customer orders. As soon as the customer or direct seller places an order for a product, the warehouse team prepares a ready-to-ship package and digitally notifies one of the multiple 3PL partners using FarEye’s platform. Based on the customer’s location and an assigned drop-code, the 3PL partner organizes delivery to the customer or direct seller location seamlessly.
As part of its digital drive, Amway has also on-boarded JDA Software, Inc. to standardize warehouse operations and increase order fulfillment effectiveness, resulting in a superior customer experience. Among its many achievements since beginning its digitalization push, Amway has implemented 50 strategic warehouse locations across the globe with JDA, and in the last few months alone, 28 warehouse sites went live in record speed in India. During an announcement made on a global level, Marc van Pruijssen, director, supply chain development & innovations, Amway, stated, “These launches are a result of seamless collaboration between India Operations, global supply chain centre of excellence and the regional supply chain support team, and will contribute to an improved order fulfillment experience for distributors and customers in India.”
ADDING NEWER DIMENSIONS TO GROWTH
Buoyed by increasing opportunities, Amway is looking to triple its turnover to Rs60 billion in seven years from Rs 18 billion now, on the back of its push into nutraceuticals, durables and digital channels markets. This target will also take the local unit of the direct-seller into the top three after the US and China. With the increasing demands for the Vitamins and Dietary Supplements (VDS), which has the current market size of Rs8400 crore, is poised to grow at 10% in the next 5 years. Currently the Indian market only comprises of 2-3% of the global market, which offers immense growth potential.
Amway plans to invest around Rs100 crores over the next 2-3 years in India in R&D, manufacturing and digital initiatives. The company will continue its focus on digital tools to enhance customer experience and benefit from its strong sales force of Amway direct sellers. As part of its customer outreach and engagement plan, a significant portion of the investment is committed to launching Amway XPP stores in India. The company will be adding 25 more Xpress Pick & Pay (XPP) stores across India during 2018.
With so many exciting things happening and company’s turn towards omni-channel retail, it would be interesting to see how this US based business further creates deeper footholds in India.