I guess that the best consumer stocks in terms of margins, historical growth numbers as highlighted by a nice article by a contributor, (inclusive of Amway) are MLM based companies. Those are strong reasons to purchase a stock which is quite right.
It seems to me along with Amway, Zhulian and Hai-O are really doing well as MLM companies. While Zhulian, Hai-O have done well, many more MLM companies have closed down. Hence, these are the survivors and have succeeded. But my problem is that I could not kick off my mind (or am blocked mentally) of figuring out how MLM companies will perform in the future. Perhaps I am wrong as I have never believed in the products, pricing, methods of selling and the way I was approached before.
I have always felt that if I would have wanted to buy the necessities, I would have drove to AEON or Tesco or Giant, and get my shampoo by P&G, diapers by few companies including NTPM, Coke or even F&N, Nestle's Milo, tissue paper from NTPM and Kimberley, milk by Dutch Lady, infant milk by Mead Johnson and distributed by DKSH etc etc. If the price is right, I will buy. If it is not right, I won't. Many times, MLM purchases are not done through this way. It is the obligation to a friend or a family member that purchases are made.
I am probably among the few that have felt that products distributed by Amway are way too expensive and I would have bought Breeze rather than the detergent by Amway.
If I am to buy clothes, Gap, Uniqlo, perhaps some from Padini, products by Bonia. Thank god there is NO MLM there, in selling clothing.
Frankly, I could not have figured out how a company like Zhulian which is associated with jewellery can be selling cookware, Hai-O, a chinese medicinal products company selling expensive coffee. They are not so focused. As long as the products can be expensive, with high margins - the line of products will be pushed through the channels. It is about the rich - MLM promoters taking opportunities of the poor whom have to look for a second job selling MLM products.
These MLM method of selling are the same as the way most of the life insurances are being sold in which case they have channels and down liners. I am just not convinced of products being sold this way. Life insurance which is a good product and concept - should not be sold through the direct selling method and its sales force getting motivated to do more sales than helping friends.
As an investor who is thinking of value, I have to look at companies that provide value. This does not mean that companies that compete have to be fair. Competition is never fair. But as a value investor, it is not just the shares that provide value - the products have to have value - a good product is to be sold at above average price - not exorbitant price.
In support of Amway, Zhulian and Hai-O
Based on the numbers and dividends that are paid out to shareholders, frankly they have done the right thing - giving the excess cash to the shareholders. These are companies that have provided value to shareholders both on terms of capital appreciation and good dividends. Amway, Zhulian and the rest of the MLMs have trained a lot of people into becoming very good motivational speakers as well as sales people. These are people out of the need to survive, will have to put up with their guts and a thick face into approaching friends, families and colleagues. That is a very important part of training for one's life adventure.
On the other hand however, if I were the shareholder, I would have hoped that the money that I have made is not made out of people whom are buying the products out of feeling sorry towards the family members or friends.
I have bought products from MLM companies and paid thousands of ringgit, and those products were left in the shelf until it past expiry. To me, those purchases did not really enrich my friend (and in the process made me poorer) but rather helped the MLM company. Again, look at the margins that they have made.
Probably it is the morality aspects of it which I am thinking of. Read this on MLM.