Looking at the executive summaries of reports from Euromonitor, direct selling companies, also known as multi-level-marketing companies, comprise the majority of supplement sales in Chile, Peru, Ecuador, and Mexico.
They also have expansive presence in Brazil and in Colombia. For the latter, direct selling companies together accounted for around one-fifth of supplement sales by value.
According to the World Federation of Direct Selling Associations, Brazil ranked fourth for direct selling sales (the US and China tie at the top spot, Korea and Germany tie for the second spot, and Japan is third), while Mexico ranked fifth in 2016.
“Direct sellers thrive in Latin American countries because the societies rely on communities and social networks,” Evelyn Rodriguez, Research Analyst at Euromonitor International, told NutraIngredients-USA.
“The personal advice from the direct sellers reps are highly valued by consumers.”
In contrast, leading dietary supplement brands in Canada and the US are retail brands like Jamieson Laboratories and Valeant Pharmaceuticals for Canada and NBTY in the US.
To Rodriguez, this is a trend often analyzed in developing markets. “[Direct selling] isn’t only a source of extra income, but an opportunity to get products to consumers living far from cities who are also interested in improving their health,” she said.
It’s a trend replicated in other industries, like beauty and personal care, where direct sellers account for 20 to 50% of sales across Latin American countries, she added. “In times of crisis, direct selling becomes an employment option for a vast number of women with no other formal option.”
High brand awareness in soccer leads to credibility
In addition to a greater emphasis on social networks, Rodriguez added that direct sellers benefit from a ‘first mover advantage,’ meaning “they were the first ones introducing these products in a formal and reliable way.”
A look at Amway’s Nutrilite in Latin America
According to Norma Cavazos Guzman, regulatory policy Latin America manager at Amway, sales within the region continue to increase based on Amway’s 2017 results, and the Nutrlite division, its dietary supplement and wellness arm, is “faring quite well in terms of sales” in Latin America.
“Brazil is one country where sales are growing strongly. Key drivers for increased sales across Latin America include a growing awareness for healthier lifestyles and greater involvement among consumers in health and lifestyle, more generally.”
“In Mexico and Colombia, Amway’s nutrition sales are larger than its personal care and home care business counterparts. In Mexico, new regulatory efforts have focused on reducing obesity, with the government implementing various health and educational programs for self-care and health.”
“In Brazil, a number of new players are launching affordable nutrition and wellness products, which are also contributing to the sales growth in the country. A greater awareness for improved health and wellness is being applied to all age groups and genders, with many new products being introduced to address the specific needs of different consumers at different stages of life.”
Fatima Linares, a research manager at Euromonitor, based in Chicago, added that there are other local players, “but direct sellers were the first ones investing seriously on the development of this category as a whole.”
And there’s no better example of ‘investing heavily’ than Herbalife’s ubiquity on soccer jerseys in the region (the company has sponsored or is a sponsor to the national teams of Colombia and Panama), as well as the prevalence of world famous soccer players like Cristiano Ronaldo in Herbalife's advertising.
Heavy marketing investment in a sport that forms a major part of Latin American cultural identity has contributed to the familiarity and credibility of the products, giving direct selling an advantage over other channels for dietary supplements.
“There are across the region, some local or traditional products that have a longstanding presence in the market but their sales are small compared to those of the direct sellers brands,” Linares added.
“Local laboratories have some very popular products, but they competed only in one category, as their priorities were OTC or prescription products. There were few companies focused only in the dietary supplements industry, and in that scenario illegal or counterfeit products accounted for a big portion of the offer.”
Regulatory landscape for MLMs and supplements
There are multiple ways in which governments regulate multi-level marketing companies, if at all. Norma Cavazos Guzman, Amway's manager of regulatory policy in Latin America, is familiar with the systems in Colombia, Mexico, and Brazil—three of the largest markets for dietary supplements in the region.
“Colombia has a multi-level marketing law. In Brazil and Mexico, there is no legislation specific to multi-level marketing companies,” she said
“However, there are laws and regulatory guidance on supplements and the way products are advertised, the framework, ingredients allowed, market entry, use of claims and GMPs (good manufacturing practice), among others, in the three countries.”
Rodriguez from Euromonitor added that direct sellers associations in the region, even in the smaller countries, are relatively very active compared to other world regions.
“These associations are very active in terms of communicating their members initiatives, success stories, inform consumers about legally established companies in each country, and so on,” she said. “They are also responsible for ensuring their associates comply with the Global Code of Ethics of the World Federation of Direct Selling Associations (WFDSA).”
"Direct selling is expected to still be the main distribution channel," Rodriguez added.