According to The Street, Multi-level marketing (MLM) companies generate sales through a network of sales representatives who strive to recruit additional representatives to increase sales. This direct sales business model constitutes a small portion of the overall U.S. retail market, accounting for about 1% of total retail sales—approximately $40.5 billion in direct sales in 2022, as reported by the U.S. Direct Selling Association. Some of the most recognized names in this industry include Amway, Herbalife, Mary Kay, and Tupperware.
Industry Leader: Amway
Family-owned Amway, established in 1959 and based in Ada, Michigan, is the leader in the MLM sector. A subsidiary of privately owned Alticor, Amway offers a range of products, including cleaning supplies, beauty products, energy drinks, multivitamins, and air treatment systems.
Herbalife’s Nutritional Products and Legal Issues
Founded in 1980 and headquartered in Los Angeles, Herbalife specializes in nutritional products. Over the years, the company has faced several regulatory fines, including a $67 million settlement with the Securities and Exchange Commission (SEC) for violations of the Foreign Corrupt Practices Act and a $55 million criminal fine in a parallel case from the U.S. Justice Department in 2020. These fines stemmed from payments made by Herbalife’s China subsidiaries to Chinese officials in exchange for sales licenses, as well as efforts to end government investigations and suppress negative media coverage.
Mary Kay Cosmetics: A Family Legacy
Mary Kay Cosmetics, founded by Mary Kay Ash in 1963 and based in Addison, Texas, has grown to become one of the largest skincare and cosmetics companies worldwide. The company is currently led by Ash’s grandson, Ryan Rogers, who succeeded his father, Richard R. Rogers, in 2023.
Tupperware: A Pioneering Brand Facing Bankruptcy
Tupperware, known for its airtight food storage containers, was founded in 1946 by chemist Earl S. Tupper in Massachusetts. The company introduced a revolutionary marketing strategy in the 1940s, selling its products at Tupperware home parties through a vast network of sales representatives. This marketing plan gave rise to Tupperware Parties Inc., led by Brownie Wise, the creator of the home party concept. Tupper sold the company to Rexall Drugs Corp. in the 1950s.
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Recently, Tupperware Brands and nine affiliates filed for Chapter 11 bankruptcy protection on September 17, aiming to sell its assets and prevent a group of lenders from acquiring the company through an out-of-court foreclosure. The company faced approximately $811 million in funded debt obligations, primarily from a single first-lien credit facility, alongside insufficient sales.
Efforts to Sell Tupperware
The company began seeking buyers for its assets in April 2023, but initial offers did not meet the expectations of its term loan lenders. Attempts to sell the company before the July 4, 2024, holiday weekend also fell short. The debtor proposed obtaining debtor-in-possession financing and selling the company to a group of its prepetition lenders; however, lenders indicated their intent to acquire the company’s name and certain assets through foreclosure, prompting Tupperware to seek bankruptcy protection to facilitate a sale negotiation.
Sale Agreement with Lenders
Tupperware Brands Corp. is set to hold a sale hearing on October 29, with plans to sell its assets to an ad hoc group of lenders for approximately $23.7 million in cash, a credit bid of $63.8 million in prepetition revolving and term loan debt, and the assumption of $22.3 million in revolver debt under a new first-lien credit agreement. Judge Brendan Linehan Shannon of the U.S. Bankruptcy Court for the District of Delaware approved the debtor’s bidding procedures on October 23, canceling a bankruptcy auction and scheduling the sale hearing. Objections to the sale must be submitted by October 28.
If Judge Shannon approves the sale, the transaction is expected to close on October 31.
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