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To great fanfare and sometimes wild applause, Usana Health Sciences on Thursday unveiled changes to its compensation plan for its army of independent distributors.
The changes were announced to about 6,000 people at EnergySolutions Arena in Salt Lake City during the nutritional and personal-care company's international convention. They are aimed at attracting and keeping independent distributors who buy and sell the company's products.
Usana is a multilevel marketer in which distributors can earn commissions from sales to other distributors they recruit into the business and continue to earn them down through multilevels of recruits. Usana says about 45 cents of every dollar of revenue is paid to its distributors, claiming that rate is the highest percentage of profitable companies in the industry who report their financial results publicly.
Usana reported in its latest quarterly earnings report that it had lost 8,000, or 12.3 percent, of its distributors in the United States from July of this year and 3,000 or 20 percent in Mexico compared with a year ago. But the company said it still had 210,000 distributors total in the world — a 5 percent increase over July of 2009.
Usana President Fred Cooper acknowledged some frustration among distributors with the compensation plan and introduced changes that make it easier to earn checks and bonuses more quickly.
In the rah-rah atmosphere in which the crowd cheered the health benefits of Vitamin D, Cooper said Usana "is committed to be the highest payout of reporting profitable companies ever."
Active customers, those who sign up to buy the products only for themselves, were down 8.4 percent in North America, though the Asia-Pacific region showed a 20 percent increase, according to the company's latest quarterly earnings report.
Despite the drop in distributors and customers, Usana reported it had earned a $20.4 million profit in the six months that ended July 3, a 24.5 percent increase over the same period of 2009. But the increases slowed a bit the past quarter, when the company reported a profit of $10.7 million versus $8.7 million for the same period of 2009, or an increase of 18.7 percent.
Earlier this month, Usana Health Sciences said it had purchased a company from China that will give it the ability to jump-start its operations in that potentially huge market.
CFO Jeff Yates assured the crowd Thursday that Usana was financially "rock solid" and "poised for breakthrough growth."
The convention's 6,000 participants are expected to contribute $6 million to Salt Lake County's economy.
Of course, any increase in compensation to distributors means decreased profits for the company unless the changes lead to a recruitment of more distributors. Usana's shares fell 15 cents Thursday to finish the day at $39.93.