Global Growth and Local Development: The Case for Tupperware

There are some industries which manage to hold their own whatever the macro-economic backdrop, one of these being durable household products. Perhaps one of the best-known household names, Tupperware (NYSE: TUP  ) has a very strong position in this industry. A defensive stock, it has been growing earnings at a steady clip over the last few years, boosted by strength in emerging markets, where the company is contributing to local development. This earnings strength could allow the stock to continue its impressive run.

Stock basics
The company is probably best known for the plastic kitchen containers to which it owes its name. It has branched out to offer a wide variety of kitchenware, beauty and personal care products. These products are marketed in nearly 100 countries worldwide. Despite its fairly low 1.12 beta, the stock has rallied almost 50% over the last twelve months, and additionally, it offers a handsome 3% dividend yield.

Innovative business model
Most producers of household wares rely on retailers and wholesalers to market their products. Tupperware is famous for having employed a different approach. Instead of selling its products through intermediaries, the company uses a very large independent sales force consisting mostly of women, nowadays totaling around 2.8 million.

The bulk of sales are still derived from the somewhat euphemistically named "Tupperware Parties," informal get-togethers where independent merchants display and market their products . Although this business model goes back to the end of World War II, its resilience and flexibility has translated into formidable bottom-line growth, even in today's economy. Tupperware's annual earnings per share has increased from $2.25 in 2007 to $4.99 in 2012.

While innovative, Tupperware's business model is not unique. Avon Products (NYSE: AVP  ) , which competes with Tupperware in house-ware and beauty products, also relies on direct selling and independent representatives. However, Avon isn't doing nearly as well, with its annual EPS dropping since 2009. Its latest report showed considerable softness in Asia, with China revenue plummeting 27 %. Analysts are expecting a 3-5 year growth rate of around -15%.

Newell-Rubbermaid (NYSE: NWL  ) is the other prime competitor, although it functions with a traditional sales model and is, as such, a little more difficult to compare. A tremendously diversified company, Newell-Rubbermaid offers all kinds of products for the home and office. A comparison would probably be best made with the company's home solutions segment, which saw segment sales increase 2% and 3.5% overall. The company still relies on the United States for the vast majority of its income, so it's hard to see Newell-Rubbermaid putting up the same kind of growth figures as Tupperware .

Emerging markets and development
While Tupperware's brands continue to perform well in its more established markets, growth in emerging markets propels the company forward nowadays. A truly global company, it derives 90% of its sales from outside the US, and some 65% from emerging markets. In the last report, established markets were down 1% compared to 2012, and emerging markets sales grew by a whopping 14 %.

As is the case for many international companies, Asia is the place to be. Indonesia is not only the world's largest Tupperware market, but also the fastest growing, with a staggering 36% increase in sales. China and India are also providing growth in the double digits, both above 20%. Overall, the company increased sales by 8% year over year for the second quarter .

Strength in emerging markets is not only good for the company, but beneficial for local development as well. According to a recent article in the Herald Tribune, Tupperware's business model has contributed to the economic empowerment of women in places like India. The business model allows Indian women to do business from their homes, avoiding India's often poor sales infrastructure.

As the company's sales force in developing markets consists largely of poorly educated women, Tupperware gives underprivileged females a shot at economic independence. But more than 'just' allowing women to better provide for their families, economic independence contributes to the social development of females in India, a place in which this process is so sorely needed. This need has become particularly apparent in recent stories coming out of the subcontinent. Whether or not this is the company's intention, it is actually contributing to social change .

Valuations and metrics
Tupperware currently trades at 17.63 times trailing earnings, which isn't too bad at all compared to the 22.15 industry average. Avon trades at a negative ratio, and Newell-Rubbermaid at 19.6. The stock has a very healthy return on equity of 64.4% and its operating margin is way ahead of the competition, as is its quarterly revenue growth. Its debt is more or less under control, with a long-term debt-to-equity ratio of 86.50.

The bottom line
There's a lot to like about Tupperware. The iconic company is able to grow its top and bottom lines regardless of the macro-economic backdrop, and its stock has performed very well. But what separates Tupperware from most companies is the important work it does empowering women across the globe by allowing them to pursue economic independence. As such, it is not only an economically profitable company, but it appears to be a morally justifiable investment as well.

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