How Tupperware Keeps Business Fresh and Profits High
Trendy companies like Apple and Facebook may dominate the headlines, but a lot of traditional businesses that have been around for decades have been successfully navigating the bumpy economy and finding new ways to make money. One such business is Tupperware Brands, the direct-selling firm based in Orlando, Fla. has been peddling housewares and other types of gadgets since the end of World War II.
Though its business model is still centered on quaint-sounding "Tupperware Parties," where the hosts and attendees are mostly women, Tupperware is a $2.6 billion global firm with 13,500 employees in nearly 100 countries. Its stock price has risen 168 percent over the last five years, compared with virtually no gain for the stock market as a whole. I met with recently with CEO Rick Goings in New York City, where he demonstrated some of the company's latest products, discussed changing consumer tastes and offered ideas about what's wrong with the U.S. economy.
Tupperware has been doing well, even during the recession. Why?
Over the last seven years we've had record growth. We've contemporized our business model. The biggest Tupperware market isn't the United States, it's Germany. We're also strong in France and other parts of Europe. In India and Indonesia, we're seeing 50 percent growth. Our business in China, South Africa, Russia and Turkey is growing like a weed. The way we structure our business is to have international people running it. We look at it through an international mindset.
But there's been a recession or a slowdown in many parts of the world, especially in Europe. Why are you still doing well there?
Because of the flexibility that we give our local leaders to do what's necessary. If you're the president of our French business, you decide on the product line, the selling method, the sales force structure, everything. Because the French are not the same as the Swiss or the Americans.
We are also extremely counter-cyclical. During difficult economic times, most Tupperware parties are based around how to entertain at home. Guacamole parties. Leftovers. Germans and Americans throw away about 25 percent of their food. We'll show how to create meals out of that. If the economy were booming, we wouldn't be doing leftover parties, we'd do more romantic kinds of things, like how to make decadent, delicious deserts.
How are consumers in Europe different from those in America?
Our best-selling U.S. products range from around $15 to $18. Our best-selling product in France? A $140 microsteamer. French women are a new generation. She's not the old country woman who bakes. Fifty-one percent of the babies born in France are born to women who don't even get married. She doesn't want to cook but she still needs to eat. So we offer her a product that turns her microwave oven into $3,000 steam oven. She doesn't have a lot of time, so it only takes 15 minutes to make dinner. She has a glass of wine, and it's ready.
In Germany, it's a combination of things. They appreciate the quality of our product line. It's a wealthy population, and they're very disciplined, so when we show them how to do something, they do it really well. We've done better in France and Germany because of consumer attitudes there. They appreciate quality. America has become more of a commodity market. Use it once and throw it away. But we're growing nicely in the United States. Actually, we're vastly underpenetrated in the U.S.
How does a weak labor market like we have now affect the company?
Does it make it easier to find people to host parties? When unemployment is higher, it means we can recruit more people. That opens to us a tier of women who never would have thought of us before, who are better educated and might come take a look at us because she can't find a job or she lost her job. But I also have to spend more of our promotional dollars incenting women to come to a party. And the typical consumer spends less. When the economy gets better, we have to spend more money on recruiting, because the recruiting pool gets smaller. But we can sell more exotic products. I'd rather have good economic times.
Where do new product ideas come from?
The marketing teams in each country give feedback. It's not a democracy, it's a benevolent dictatorship. We have design centers in Europe, the United States, South America and Singapore. They'll take that input and say, "Here are the new products and programs that are coming."
How do you see the U.S. labor market changing?
Think of the bookends of the population. We have this older population, the gray brigade. I see people who are 70, and they're not like 70-year-old people used to be. At the turn of 20th century, the average life expectancy was 47. Now it's 78. These people want money, sure, but they also want opportunity. They want social stimulation, a feeling of belonging. Disney is good at this. They used to have 19- and 20- year-old guides when you went to a Disney park. Now you're finding these older people with great life skills and great people skills.
For Tupperware, what we can give them, without a fixed cost, is a way to satisfy some of their needs. The point is, quit treating the U.S. labor market like it's one mass market. It's segments. Start to satisfy those segments based not only on financial needs but also on psychological needs.
What about the other bookend?
Younger workers today don't want the life their parents had. My daughter said to me, "Dad, I didn't get all this education so I could spend my life in a cubicle working 9 to 5." Kids don't want to passively sit there watching something. They want something interactive. Young people today have watched their parents basically live these boring, structured lives. They don't want that.
We can take a woman like that and get her off the clock, get her off the meter. At Davos, they call it the Tupperware effect, because we've taken down some of the barriers to starting a business. We provide a bit of financing. Then a fast-track training program. Third, we'll give her a mentor, a coach. I can show a woman how she can do five Tupperware parties a week and make $40,000 a year--and be home every day.
Still, there a lot of displaced workers in this economy. We've got a big skills mismatch and a lot of other problems. Do you see ways to solve that?
There's a growing level of understanding that the government can't afford to solve this for us. And European socialism doesn't work. We need a new social contract, the emergence of more companies like ours that give the power to women.
One group that's really receptive to this are recent immigrants. The beauty business--think of nail salons--has been taken over by the Vietnamese. Hispanics are the fastest-growing segment and also the most entrepreneurial. Those people lead the parade, and they're starting to bring along some of the others.
I got to know Fareed Zakaria from Davos, and he says it's not the decline of the United States, but the rise of the rest. More and more women in the United States are beginning to see that the pattern of the past will not be the pattern of the future. We could have a second great wave, a renaissance for the United States, but we've got to get back to an environment of entrepreneurship. You cannot solve this quickly.
Is Washington helping at all, or making the problem worse?
I'm mostly a federalist. Not a Republican or a Democrat. I want Washington to get out of the way. A European president said to me recently, "You guys get to print more money all the time. You're irresponsible." We have just got to stop it.
The level of regulation and bureaucracy and one-size-fits-all stimulus—it's got to be much more simple. Radical systemic change. We've got to go in there and cut things. We've got to be able to say, we don't need this department any more. You can't keep piling it this high. We've got to get spending in line.
Are you optimistic about the U.S. economy?
I'm optimistic about the American spirit. But it will be different. Just as the 20th century was America's, the next century is going to be Asia's. It's going to be a high quality of life here in the United States, but we're going to have to make changes under the surface.
Right now, we have too much centralization. We can't solve it all at a national level. I don't want a one-size-fits-all solution for 50 different places. It gets people disengaged, and makes people think, they're going to take care of all this for me in Washington. We need to get back to more solutions happening on a local basis. We can have a centralization of our operating philosophy, but localized empowerment. Our problem now is, the structure of government that we have doesn't match the strategy or the spirit of most Americans.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success, to be published in May. Follow him on Twitter: @rickjnewman
Source from : usnews.com
