Multi-level marketing companies generate sales from their web of sales representatives who strive to sign up other sales reps to drive sales.
This business model of direct sales represents a small portion of the U.S. overall retail market as person-to-person sales generate about 1% of total retail sales in the U.S. or about $40.5 billion in direct sales in 2022, according to the U.S. Direct Selling Association.
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Several of these multi-level marketing companies are American household names like Amway, Herbalife, Mary Kay, and Tupperware.
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The industry leader of multi-level marketing companies is family-owned Amway, which started in 1959 and is based in Ada, Mich. The company, which is a subsidiary of privately owned Alticor, sells cleaning products, beauty products, energy drinks, multivitamins, and air treatment systems.
Herbalife, founded in 1980 and based in Los Angeles, produces and sells nutritional products. The company has been fined by regulators several times over the years for various violations, including $67 million paid to the Securities and Exchange Commission to settle violations of the Foreign Corrupt Practices Act and a $55 million criminal fine in a parallel action from the U.S. Justice Department and U.S. Attorney's Office, both in 2020, according to an SEC statement.
The fines were related to the company's China subsidiaries paying Chinese officials in meals, gifts, and other benefits in exchange for obtaining sales licenses, ending Chinese government investigations, and removing negative media coverage from Chinese state-owned media, according to the SEC.
Privately owned Mary Kay Cosmetics, based in Addison, Texas, was founded by Mary Kay Ash in 1963 and has grown to one of the largest skincare and color cosmetics companies worldwide. The company's CEO is Ash's grandson Ryan Rogers, who took the helm from his father Richard R. Rogers in 2023.
Iconic housewares retailer Tupperware (TUP) , known mostly for its air-tight food storage containers, was founded in 1946 by chemist Earl S. Tupper in Massachusetts. Tupper introduced a ground-breaking marketing method in the 1940s to sell its air-tight food storage containers at Tupperware home parties through an army of sales representatives.
Related: Iconic restaurant chain ready to file Chapter 11 bankruptcy
The marketing plan would lead to the creation of the Tupperware Parties Inc. division, led by the creator of the party, Brownie Wise. Tupper sold his company to Rexall Drugs Corp. in the 1950s.
Tupperware Brands and nine affiliates filed for Chapter 11 protection on Sept. 17, seeking a sale of its assets and to prevent an ad hoc group of three lenders from acquiring the company through an out-of-court foreclosure on certain company assets, including the Tupperware brand name.
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Tupperware was hampered by about $811 million in funded debt obligations primarily from a single, first-lien credit facility, and by inadequate sales.
The company began a marketing process in April 2023 to seek a buyer for its assets but did not produce any offers acceptable to its term loan lenders. The company tried again to sell the company just before the July 4, 2024, holiday weekend, but those efforts failed as well.
The debtor proposed obtaining debtor-in-possession financing and selling the company to an ad hoc group of its prepetition lenders, but the lenders balked and indicated that they were planning to acquire the company's name and certain assets through an out-of-court foreclosure, according to court papers.
The lender's intentions forced Tupperware to file for bankruptcy protection to allow it to negotiate a sale instead of facing foreclosure.
The debtor and lenders, however, have finally reached an agreement for a sale of the company outside of a bankruptcy auction.
Tupperware reaches a sale agreement with lenders
Tupperware Brands Corp. is heading for a sale hearing on Oct. 29 seeking a sale of its assets to an ad hoc group of its lenders for about $23.7 million in cash, a credit bid of $63.8 million in prepetition revolving and term loan debt, and assumption of $22.3 million of revolver debt as a new first-lien credit agreement.
Judge Brendan Linehan Shannon of the U.S. Bankruptcy Court for the District of Delaware on Oct. 23 signed an order approving the debtor's bidding procedures, canceling a bankruptcy auction, and scheduling a sale hearing for Oct. 29 to approve the sale. Objections to the sale are due by Oct. 28.
If Shannon approves the sale, the transaction is set to close on Oct. 31, according to court papers.
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