Nu Skin China

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Truman Hunt, Nu Skin's president and chief executive, said he could not read newspapers without reading mentions of China everyday. "There is always China, China, China in the paper and I know it is right for Nu Skin to choose China as the focus of its global business expansion," he said.

Hunt has decided to expand the presence of Nu Skin, the global direct seller of skincare and health products, to northern China. The first store in Beijing is expected to open by the end of this year. "Then the sales network in the region will be knitted together step by step," said Hunt. In 1998, Nu Skin Enterprises established its wholly owned affiliate in China Shanghai Nu Skin Daily Use & Health Products Co Ltd. Nu Skin had invested more than US$80 million in China. This investment includes two significant research and development facilities, two state-of-the-art manufacturing facilities, and more than 100 retail stores in Shanghai, Jiangsu, Zhejiang, Guangdong and Fujian. Nu Skin's expansion in China has been not only driven by a swelling market share but also upcoming legal recognition of the business mode in China, Hunt said.

China has agreed to allow the practice of direct selling before December 11 this year in line with its commitments to the World Trade Organization (WTO). A rule governing direct selling is being drafted by the Ministry of Commerce (MOFCOM) and the State Administration for Industry and Commerce (SAIC). China imposed a ban on direct sales in the country in 1998, saying it was hard to differentiate direct sales from so-called "pyramid sales," which had led to fraud, consumer losses and social disorder. Ten foreign-funded direct selling companies were allowed to continue their operation in China after the 1998 crisis, but they had to change their sales mode to selling goods through retail outlets and "non-employee" sales representatives. But Nu Skin, which arrived in China after the crisis, was not on the list of 10 and had to change its mode to pure retail. "We are happy that China made the opening in time and it will be a tonic to companies like us," he said. Hunt said the share price of the New York-listed company surged by US$1.50 on one day in April and was pleased that its performance was recognized by investors. "I know it is a reaction to a report about the visiting Chinese Vice-Premier Wu Yi who said China would open the direct selling sector soon," Hunt said.

Despite the coming lifting of the ban, Nu Skin would not abandon its current business mode in China or stop openings of fixed stores. Corey Lindley, the Nu Skin executive vice president who oversees the company's China business, said Nu Skin has paid dearly to find its way in the Chinese market.

After a series of false starts, the company is hitting its stride through a chain of retail stores, a move going against the very principles on which it was founded, he said. "China has different market conditions and a unique culture. We need to adapt a different mindset to adapt to the way the country works," he said. He said Nu Skin will continue to increase the number of its fixed stores and would increase investment to its manufacturing bases in China.

He said Nu Skin would open 200 fixed stores by the end of this year from the current 115. And the company hopes that the number will be 500 by 2006. The company is also preparing to introduce its line of health products to China. Health products account for almost half of the company's global sales. "Participation of this important wing will generate great power for the China business," he said. Nu Skin sells personal care and nutritional products in 35 countries, but its biggest markets are in Asia. Sales hit nearly US$1 billion last year, more than half of which came from operations in Japan. But the bright spot in Nu Skin's future is China and sales there hit US$39 million in 2003 - much higher than management's expectations of US$25 million.

In the first quarter, the company posted a 20 per cent gain in revenue, helped by strong sales in China, Japan and the United States. The direct seller said revenues for the quarter that ended March 31 rose to US$264 million from US$219.6 million a year ago. Revenues in the Chinese mainland and Hong Kong grew 78 per cent to US$47.6 million in the first quarter from a year ago, while the number of executive and active distributors in the region soared 112 per cent and 105 per cent respectively because of China's growth.

Shanghai Nu Skin Daily Use and Health Products Co. Ltd. is a wholly owned subsidiary of Nu Skin Enterprises, a leading marketer of world-class personal care and nutrition products. The company is registered on the New York Stock Exchange under the ticker symbol "NUS." Nu Skin Enterprises primarily markets world-class personal care and nutritional products.

Through the Nu Skin line of innovative personal care products, the company enhances the way people look. Through the Pharmanex line of scientifically based nutritional supplements, the company improves the way people feel. And through other initiatives, such as the Nu Skin Force For Good Foundation?, Big Planet products and services, and the Nourish the Children? Initiative, the company helps people live better. The mission of Nu Skin Enterprises is to be a force for good in the world. Today, Nu Skin Enterprises employs more than 5,000 people around the world, operates in 34 markets, has annual revenue approaching $1 billion, and has more than $600 million in assets that it uses to accomplish its global mission. Nu Skin Enterprises is a strong and stable enterprise.

As a New York Stock Exchange listed company (NYSE:NUS) it provides detailed financial information regarding its operations. This information can be accessed through the company's website at http://nuskinenterprises.com.

Additionally, the company currently enjoys a Dun and Bradstreet rating of 5A1, which rating is reserved for only the most stable and respected companies. Nu Skin was founded in Provo, Utah, USA in 1984 by Blake Roney, who currently serves as Chairman of the Board. Blake, then a recent college graduate, researched the marketplace and found that most leading personal care companies only included one or two good ingredients in their products. They then used fillers and sometimes even harmful ingredients, such as mineral oil, wax, and harsh alcohols, to improve the look and feel of the product but not the efficacy. Blake and his sister Nedra determined that there was a market opportunity for a new type of skin care product-one that contained only beneficial ingredients.

The initial company's philosophy "all of the good, none of the bad" remains as Nu Skin's guiding principal for developing new products today. The company soon found a great demand for its newly developed product line. Consumers would flock to the small company's office to get their jars refilled as soon as new shipments would arrive. As new shipments were sold, additional products were produced. All growth was funded without incurring any debt for the company. The company grew and expanded quickly moving from warehouse to bigger warehouse until in 1991 the company completed construction of its world-class warehouse and distribution facility in Provo, In 1992, Nu Skin introduced a line of nutritional products which are currently marketed throughout the world under the brand name Pharmanex. These products built upon the concept of the advanced personal care line by building "beauty from the inside out." While sales of this line of products was successful, the line took on an entirely new scientifically based focus upon the acquisition of Pharmanex in 1998.

With that acquisition, the company purchased research and development facilities in China (in Shanghai and in Beijing) as well as a raw material extraction facility (in Zhejiang Province). In 1996, Nu Skin took a big step forward in gaining world-class recognition status by going public under the New York Stock Exchange ticker symbol NUS. The successful IPO was one of the year's most sought-after stock offerings.

Since becoming public, the company has reported detailed financial and business information regarding its operations each quarter. Over the last several years, the company's global expansion and market share penetration have continued. This growth in the Nu Skin brand has been based primarily upon the company's focus on excellence and its desire to help people achieve their best.

That's why Nu Skin Enterprises chose to become an Official Olympic Sponsor of the 2002 Olympic Winter Games and the U.S. Olympic Team in 2000, 2002, and 2004.

Nu Skin markets in Asia, including Korea, Thailand, and Taiwan, have also sponsored their local Olympic teams. Key dates in Nu Skin's development include: 1984 Nu Skin International opens for business with eight products 1990 International expansion begins with the opening of the Canada market 1991 Asian expansion begins with the opening of the Hong Kong market; corporate warehouse completed 1992 Nutritional products introduced; opening of the Taiwan market 1993 Opening of the Japan, Australia, and New Zealand markets 1995 The Force for Good campaign is introduced; operations commence in Europe 1996 Opening of the South Korea market 1997 Opening of the Thailand market 1998 Pharmanex is acquired; Big Planet is launched 1999 The Nu Skin Center for Dermatological Research at Stanford University School of Medicine is established 2000 Opening of the Singapore market 2001 The Nu Skin China Personal Care Manufacturing Facility in Shanghai opens; opening of the Malaysia market 2002 Salt Lake Olympic sponsorship; the Nourish the Children? Initiative is launched; Nu Skin and Stanford win Gold Triangle Award 2003 Retail business is opened in mainland China