Tupperware (NYSE:TUP) sold off Thursday and early Friday following some downbeat news that, for investors, might be sounding a little stale. Specifically, while the overseas Tupperware and North American BeautiControl businesses continue to perform, the domestic Tupperware business struggles.
Tupperware, a household staple for years, counts largely on its legendary "Tupperware Party" to drive sales. A network of "independent contractors" -- including dealers, distributors and managers -- working with, but not technically for, Tupperware, cross the world moving product through these parties and other methods.
Tupperware's products are proven winners, and the company is the kind of long-term business Fools should admire. (Matt Richey took a look this summer, highlighting several interesting points.) But Tupperware is still transitioning its North American sales force to a new business model, and this has played into its recent US sales weakness.
The new model essentially relieves distributors from distributing product -- sales are made directly to the sales force, with distributors getting a commission, leaving them to concentrate on managing and recruiting sales teams. This means higher up-front revenues for Tupperware, but also adds an extra step at the corporate level.
The changeover on the ground, meanwhile, hasn't been completely smooth. Apparently, some sales people feared that the new model would mean more work and less money -- not a dynamic a company dependent on direct sales wants spreading throughout its sales force.
A distribution deal with Target (NYSE:TGT), meanwhile, was immensely popular with customers, but not with the sales teams who felt threatened. (Developing new channels always challenges Tupperware for this reason, but the company seems to have the right idea in allowing its representatives to run their own sales websites.)
These factors no doubt hurt recruiting -- something the company said yesterday was the prime factor for its flagging U.S. performance.
Still, Tupperware is battling. The changeover appears to be on schedule and should be complete this year as planned. (About 70% of the North American sales force had switched at the end of the first quarter, the last period for which such figures were easily available.) The Target deal was scrapped. A renewed focus on recruiting has shown good indications this month. And a more interactive-party strategy called "Taste of Tupperware" has the company optimistic.
A return to strong top-line growth at Tupperware would help make this solid company a great one. That will require improved North American sales, something the company is working to produce.
