Serving the Direct Selling and Network Marketing Executive Since 2004 Volume 12, Issue 2 • February 2016

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Company Profile

Founded: 1980Headquarters: Irvine, CaliforniaTop Executive: CEO Kay NapierProducts: botanically based personal care and wellness2014 Revenue: $486 millionNorth America 50 ranking: No. 18

Pushing ForwardArbonne Operating with Strength Abroad and at Home by Beth Douglass Silcox

Transformation takes time. It takes tenacity and skill, strategy, and an eye for opportunity. All of which Arbonne has exemplified in the past 18 months.

When Kay Napier took the helm as CEO at Arbonne some six years ago, the company set off on a journey of self-discovery—or rather rediscovery. It strategically reconnected to the corporate roots that once made Arbonne a powerhouse in direct selling. In 2015, Arbonne’s 35th year, the company reemerged stronger, topped growth expectations in the United Kingdom, solidified its 2014 launch in Poland, gained strength in the U.S. and abroad thanks to new products, and was on the verge of breaking into the Asian market.

Arbonne’s entry into Poland in 2014 was, at the time, more opportunistic than strategic, Napier admits. A large and persistent contingent of Arbonne consultants with Polish connections lobbied corporate, promising to do the legwork necessary to launch successfully. Their team effort delivered, and Arbonne had a list of 1,000 Consultants in hand prior to launch.

“The push for this market came from field leaders with a lot of connections to Poland already in downlines. What’s been great to see, as well, is all the people who didn’t have these existing connections and how they’ve been able to develop them. They’ve made a global, Internet-based, social selling business now as our model has evolved,” says Chief Sales Officer Ashley Good.

Making that possible was the re-platform of Arbonne’s entire IT system in March 2015. From the front-end facing the consumer to the back-end, which processes orders and contains compensation genealogy and promotions functions, everything was new. For the first time, some 120,000 Arbonne Consultants linked

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their webpages to the Arbonne corporate site for free. A mobile application and a robust autoship program should follow in 2016.

“We needed to move off our legacy system, which was well over 20 years old and based in very old technology. It had been patched over and we kept it functioning, but we were up against capacity and international expansion deadlines,” Napier says.

While it hasn’t been without its challenges and less-than-perfect performance at times, Napier touts the fact that Arbonne stayed up and functioning when sites like Target.com and NeimanMarcus.com faltered during Black Friday and Cyber Monday in 2015. Plus, she says, “We just closed November with record sales, ahead of a year ago, and ahead of budget.”

Having the capacity of the Internet behind them has bolstered the work of Arbonne’s small team in Poland, the Consultants on the ground and those who traveled to help start downlines. “I think we are about two times the level we budgeted, with a relatively low investment,” Napier says of today’s business status in Poland.

The Polish MarketEuropean consumers approach products and brands very cautiously,

says Napier. With a critical eye, they read and research product ingredients. They want specifics, and a brand has to earn their trust. “We’re very happy that the Polish Consultant and consumer are very discerning around product ingredients. That’s been a home run for us,” Napier says.

“We spent a lot of time before we launched Poland gearing up our science story, our history—both the emotional aspects as well as the real fundamental science that runs throughout our products—to make sure that we were armed with great information and support to speak intelligently about our product lineup,” says Chief Creative Officer Michael D’Arminio.

Products for Poland were aligned with the United Kingdom, and Arbonne made sure that Consultants understood the company’s plan and intentions, as well as the support given those products and their value from an ingredient perspective. That honesty and transparency built great partnerships and trust, as well as significant business, D’Arminio says.

With success in Poland well ahead of Arbonne’s objectives, as well as strong profitability and growth in the United Kingdom, Napier says, “It begs the question: Does Europe become a key footprint for us?”

As such, Arbonne is now looking at its once opportunistic move into Poland through a more strategic lens with views of a larger European marketplace. For many direct selling companies, Poland is simply an adjacency to a European launch that would likely start in Germany, but Arbonne’s established success in Poland flips that prospect.

“We haven’t made a conscious decision to go into Germany, but I think it’s one of the things that we’re looking at. In our minds, it’s become so much more strategic to be looking at Central Eastern

PHILANTHROPY AND SUSTAINABILITY BY THE NUMBERSIn the past 18 months, Arbonne Charitable Foundation has increased fundraising from $500,000 to $3 million and has reached nearly 87,000 teens through 322 foundation grants funding self-esteem programs. Some of those funds came from the sale of commemorative, emerald jewelry items celebrating Arbonne’s 35th anniversary in 2015.

Also during this time, Arbonne won an Association for Corporate Growth Green Award for its work in sustainable and green manufacturing. The company’s manufacturing plant achieved a 75 percent recycled waste target, which led to 185 tons of material kept out of landfills. Also 35 percent, or 6 million gallons of water, was saved in Arbonne’s manufacturing processes in 2014. The company now has created and is proceeding with a three-year roadmap to further its green commitment.

Teens at an Arbonne Charitable Foundation self-esteem building event.

The Arbonne Charitable Foundation supports teen self-esteem.

“I’m excited to take this business into not only new geographies, but new cultures. It’s very reassuring to see that this brand can play anywhere.”

—Kay Napier, CEO

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Europe, as well as Western Europe. Poland has been a very good learning experience for the company,” Napier says.

While skincare and cosmetics passed regulatory muster quite easily in Poland, nutritional product regulations took more time and diligence. There were lessons learned operating in the company’s first non-English-speaking country, as well. But Arbonne’s culture of delivering appealing, botanically pure and beneficial products translated easily, and Napier says, “That was a huge relief to me, and I have every expectation that we’ll be able to do that as we venture into Taiwan as well.”

Opening the Gates to Asia“I’m excited to take this business into not only new geographies,

but new cultures. It’s very reassuring to see that this brand can play anywhere,” Napier says. “I still maintain that Arbonne is as good or better a brand than anything I’ve worked on because not only do you have the product and all the attributes of the product, but you have the holistic approach to life.”

When strolling through department stores in Taiwan recently, Napier firmed up her belief that Arbonne’s brand and positioning will resonate well with Asian consumers when the company launches there in 2016.

In preparation for the Taiwan launch, D’Arminio says Arbonne has strived to understand the customer, their expectations, and the established benchmarks in that country. “We absolutely went in with full disclosure saying we cannot force-fit our existing products locally into Taiwan. Companies who have tried to do that in the past have failed,” he says.

Caucasian skin is quite different from Asian, and Taiwanese skin possesses nuances not seen in Southern Asia or the South Pacific. So Arbonne spent a great deal of time working on product textures and formulations that address the needs of consumers in Taiwan’s high-humidity environment. “We went in knowing that we had to make adjustments on our formulas. We had to make a few modifications and changes on a few ingredients,” D’Arminio says.

Home usage product tests engaged Taiwan consumers and helped Arbonne tweak their formulas, and then the company sought third-party validation in the form of skincare clinical trials specific to Asia. “There’s nothing like facts and figures from an independent lab and

facility to really support and justify your position and your claims,” D’Arminio says.

Going that extra mile, he says, sends the message that Arbonne absolutely believes in its products, not only for Taiwan but also for the larger population, and that the company is in it for the long haul.

As was the case in Poland where they experienced regulatory hurdles with Arbonne’s nutritional products, these products in Taiwan have been a particular challenge for entirely different reasons: taste profiles.

Where the U.S. taste preference leans sweet, Europe is savory and Asia lands somewhere in the middle. “We’re great learners here. We’re open. We absolutely understand that we can’t force-fit product. It has to meet the consumer needs and expectations in order to be successful,” D’Arminio says. So they adapted those formulas to meet the taste profile of Asian consumers.

Ultimately, Arbonne’s Taiwan market will open in the second half of 2016 with a pipeline of skincare, nutrition and color cosmetics products. “We believe we will be able to hit the ground running with a really nice mix and a nice focus,” D’Arminio says.

Give Them What They Want and NeedArbonne’s current Preferred Client to Consultant ratio ranges from

4:1 to 5:1. Napier believes that ratio should be 30:1, and the company’s evolving IT platform will play a large role in meeting that goal. Today, online customers are automatically paired with Consultants, and it is here that the relationship-building process can begin in earnest through prompted email and social media communication.

While the company will never turn its back on traditional, in-person Consultant relationships, online relationships will play a significant role moving forward. New product offerings, which extend Arbonne’s reach into new consumer markets, also will be a major contributor, as will marketing strategies aimed at simplifying both consumer buying decisions and Consultant business growth.

Arbonne operates in three product categories: skincare, nutrition and color cosmetics. But at its core is health and wellness; even beauty includes a combination of skincare and nutrition products. So when the company experienced an uptick in its nutrition business, they revisited a long-tabled idea proposed by the Consultant field to launch a sports nutrition line.

Entering into sports nutrition was an in-house battle of sorts between Arbonne’s team of nutritionally focused field leaders and Napier, who was concerned about inventory overstocks. D’Arminio, who championed the launch of PhytoSport in April 2015, says his gut told him an existing Consultant base that spent time at the gym, participated in competitive sports and ate healthy, gluten-free and even vegan diets would give the product line traction.

Arbonne aligned itself with the Banned Substance Control Group, an international organization that evaluates products and tests for more banned substances than any other. By doing so, the goal

An Arbonne Taiwan Event

European consumers approach products and brands very cautiously. With a critical eye, they read and research product ingredients. They want specifics, and a brand has to earn their trust.

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was to send a clear message: Arbonne is incredibly careful about the ingredients and cleanliness of its products for use by everyone, including competitive athletes.

The three-step PhytoSport system, including pre-workout, hydration and post-workout products with Arbonne’s proprietary botanicals threaded throughout, launched in the U.S. in April 2015 with subsequent rollouts around the world as compliance hurdles were cleared.

PhytoSport is now one of Arbonne’s fastest-growing nutritional lines, is a great Consultant recruiting tool, and has exceeded Arbonne’s forecast by 1,000 percent. It also has built credibility for getting more men into the business.

“It was about really monitoring the forecast and then ensuring that we took a risk, but managed a win. I think as a company we did a really great job as a team,” D’Arminio says. As for Napier, she loved being proved wrong.

SimplificationDirect selling is not an easy business; however, it should be simple,

and that’s what the Arbonne team sees as its focus in products and promotions. By prioritizing simplification, products are easier for Consultants to understand and sell. They’ve bundled what D’Arminio calls “hero” products in their Genius pack, nightly resurfacing pads and nightly resurfacing solution, to create an easy system without overlap of ingredients or benefits. “Coupled together, they tackle all your anti-aging and skincare needs. That has created great resonance and clarity for our Consultants,” he says.

Arbonne also seeks to simplify compensation, incentives and promotions for the Consultant field. “Where I think we lost our

way a bit was that our promotion plans were too complicated. Part of why we’ve been successful at Arbonne is because we didn’t throw everything out and start over,” Napier says. Instead, they worked with a combination of old legacy promotions and newer ones. That, however, is now changing.

Ashley Good, a nine-year Arbonne corporate veteran once in charge of legal and compliance, has become the architect for simplifying field compensation and in November 2015 took on the role of Chief Sales Officer. “She’s on a major crusade to simplify our promotion and comp plan even further and make it even easier for our Consultants to do business,” Napier says.

Good brings a completely fresh eye on the business, according to D’Arminio. “It is much needed and she has already created such great momentum with the field as well as with our colleagues and employees,” he says.

“There are so many things that our field needs to juggle that we really want to make sure as we’re designing incentives, specials for consumers and their clients, and ways to get started in the business, that they align well with our compensation plan and keep motivating the field in the right way. It’s really just doing all the fine-tuning necessary to remove the noise,” Good says.

“We work very hard to, above all else, do no harm, but also be sure that what we create going forward is very sustainable and is built to handle the future for all of our Consultants,” Napier says. DSN

“We’re great learners here. We’re open. We absolutely understand that we can’t force-fit product. It has to meet the consumer needs and expectations in order to be successful.”

—Michael D’Arminio, Chief Creative Officer

“[Our success in Poland] begs the question: Does Europe become a key footprint for us?”

—Kay Napier

A star-studded celebration event during Arbonne's recent Global Training Conference.