Company Spotlight
May 2011
Oriflame UK and Ireland - Legendary skin care brand bounces back
Oriflame UK and Ireland has been under new ownership since 2008 and has gone from strength to strength ever since, with the legendary skin care brand attracting a whole new generation of customers. Features writer Madeline Clark caught up with Managing Director Eric McClenaghan to find out more about the company’s amazing success story. 
When entrepreneurs Eric McClenaghan and Kevin Kelly took over Oriflame UK and Ireland three years ago, the company had been in decline for more than a decade.
But in a very short span of time its new owners began to turn the business around, with company growth exceeding all expectations.
In the first six months the business grew by 3 per cent – its first growth in 15 years. Further growth followed rapidly, with figures reaching 18 per cent in 2009 and a healthy 28 per cent in 2010.
Today the company is riding the crest of a wave, with latest figures showing business is up 40 per cent that of 2010. “The business is clearly enjoying a new lease on life,” said Managing Director Eric McClenaghan. “When you think that it hadn’t experienced growth for a decade, and half these figures are really a major achievement.
Fact FileOriflame has just launched its first cosmeceutical range of products, offering the very latest skincare technology to soothe and alleviate serious skin problems. The new Bioclinic range is an advanced performing skincare solution, incorporating unique Cell-Innov technology. Inspired by aesthetic medicine, this exclusive premium range captures the best of advanced science to free skin from everyday common complaints such as reduced elasticity or dilated capillaries. The first two treatments to be launched are Bioclinic Lifting Power Concentrate Day and Bioclinic Lifting Power Concentrate Night which calm signs of inflammation at the cellular level and reinforce the skin’s own defences. Unlike creams, Bioclinic is highly concentrated, so Oriflame has developed state of the art packaging to protect the formula and ensure it arrives in perfect condition. It also comes with an airless pump to protect the active ingredients from exposure to air and UV light. |
“Now our goal is to see 40 per cent growth per annum for the next five years. Anybody who has been with a business that grows at that pace will tell you it is an amazing experience. Meanwhile, my personal aspiration is also to grow our sales force to 25,000 within five years, with an annual turnover of £25 million.”
Oriflame UK and Ireland has a long history, going back to the 1960s, when it was the first subsidiary of Oriflame Sweden, founded in 1967, and immediately became a runaway success story in the party plan business.
Its success continued throughout the 70s and 80s. But in the mid-80s Oriflame – by now a household name across the world – switched strategies and became a catalogue-based business, with a multilevel marketing plan.
However, this fundamental shift in operations didn’t suit the UK, and very soon Oriflame UK went into decline, with reductions in sales and huge losses year after year.
Then five years ago Eric, who had a reputation as a trouble shooter, was contacted by the company’s Managing Director, Paul Southworth, who had been called in on a year’s contract to try and fix Oriflame UK’s problems.
At that time Eric was Chief Executive of Newcastle-based Premier Direct Group PLC, a big shopping at work business, which had already completed several successful acquisitions. Paul thought Eric’s group might be interested in taking over the company, and shortly afterwards this is what happened, with Premier Direct ending up buying Oriflame UK for a token sum in the hope of turning the business around.
The person Eric dealt with throughout this transaction at Oriflame was none other than his current partner, Kevin Kenny, the company’s Chief Financial Director, who had been with the company for more than 30 years.
But the ink on the contract was barely dry when Premier Direct itself went bust at the start of the credit crunch, with Oriflame UK and Ireland ending up in Receivership.
Meanwhile, Eric and Kevin – who had forged a friendship during the earlier sale of the company – felt strongly that with the right business plan, Oriflame UK could still have a bright future. They decided to turn their friendship into a 50/50 partnership and buy the company back from the Receivers; and the rest is history.
“I think when a company is in a bad state and has a very wealthy parent company, if it is constantly receiving money from that parent company, it never stands on its own two feet,” explained Eric. “I think this is what happened with Oriflame UK before we took over.
“The first thing we did was to point out to our employees that we were not a charity and we were not spectacularly wealthy people. We told them we intended to do everything we needed to do with our own money, so there would be no bank debt.
“We basically said to them: ‘Please work hard but please understand that we don’t have a rich parent, so we will be careful with the money we spend and have to justify everything we do’. That simple change – that simple recognition that we were not a charity and had to stand on our own two feet – was one of the most significant changes we made.
“What that brought to the company was a sense of pride, a sense of belonging and a sense of family. It was like we were all pulling together. People liked being part of the turnaround and seeing the company start to become successful again.
“The key to this was hard work and a degree of austerity, rather than big handouts from a parent company. To Oriflame’s credit, they recognised it needed a change of culture and spirit to turn around what was going on in the UK. They didn’t want Oriflame UK and Ireland to fail, but they also recognised it needed something a bit more entrepreneurial and less corporate to effect that cultural change.”
Oriflame UK is based at Milton Keynes, where many of its employees have worked for 10 years or more, with one employee recently celebrating her 30th anniversary with the company. “These are people who have been with the business through its formative years, its fabulous success and all the period of decline and have stuck with it because Oriflame has always been a very decent and very honourable employer,” Eric pointed out.
The company employs around 30 people and currently has just over 6,000 Consultants across the UK and Ireland.
Like Kevin, Eric has many years of experience in the direct selling industry. He was Chief Executive of the Premier Direct Group for six years. Before that he was Sales Director of Betterware for two years and Managing Director of Vorwerk UK for eight years.
Before moving into the direct selling industry Eric was an industrial chemist. He first became involved with the industry as a trouble shooter, when he helped pull another failing business out of trouble. “I thoroughly enjoy the challenge of mending broken businesses and turning things around,” he says.
“Oriflame products have always had a good reputation, and that is a great advantage to our business,” Eric pointed out. “These are great products which, unfortunately, missed a whole generation of people when the company went into decline. I think many people during this period thought the company had gone out of business.”
He added: “We are now going all out to recruit from and sell into that missing generation. We are using all the modern communication techniques, such as the internet, Facebook and Twitter, alongside good, old-fashioned direct selling methods which have stood the test of time.”
Around 90 per cent of Oriflame UK and Ireland’s business is person-to-person catalogue selling. The other 10 per cent comes from party plan (8 per cent) and door-to door (2 per cent).
But Eric maintains that one-to-one remains the company’s ideal business model, mainly through recommendations and family connections, with most Consultants supplying anything from 10 to 25 customers on a regular basis.
“Our success plan – which is our management and career path and how we pay our people – is, I think, the best in the direct selling industry in the UK,” he enthused. “Our Consultants earn between 23 and 35 per cent discount, which I think is the highest in the industry. I think our closest competitor is 30 per cent, and we pay a further 25 per cent of sales value to the management structure, depending on the level people are at. With Oriflame UK you really can earn a meaningful income.
“I think the philosophy within our company is summed up in our strap lines. One reads: ‘Look Great, Make Money, Have Fun’. Another says: ‘Earn Money Today and Fulfil Your Dreams Tomorrow’.
“This is not about getting rich quick or building ridiculous pyramid-style structures. It is about having fun, enjoying the products, enjoying demonstrating the products and having fun building a steady, long-term business.”
Oriflame UK and Ireland Consultants are mainly part-time but those who go on to become Regional Managers are usually full-time, while around 15 per cent of the sales force is made up of men or couples. The company also offers children’s and men’s products.
“Though our main ranges are the skincare and beauty ranges, we also provide products for the whole family,” said Eric. “Customers don’t have to spend any more than they would at their local supermarket. We encourage people to try our products, from toothpaste to mascara and, as they become comfortable with each product, they gradually try other ranges. That is how our business grows.
“Swedish products have such a good reputation because they are natural and simple. They don’t use synthetic ingredients. They try to use plant extracts as main ingredients.”
Eric is determined the company will build upon its current success by keeping up to date with all the latest in communication technology. “We recognised very early on that we didn’t understand social media so we went to Warwick University and brought in a technology student and said: ‘come and look at our business and please tell us what people of your age group buy, how you buy and how you make informed decisions and help us to appeal to the younger age group’.
“We have brought in younger people who live in that virtual world of the internet and who are comfortable with it. Without a doubt, this is something positive we have done, which has really helped the company to get off to an excellent start. The internet probably accounts for 50 per cent of our turnaround.”
Eric believes good training is also at the heart of any company’s success. “There is training going on every day of the week in various parts of the country,” he said. “We change our catalogues every four weeks so we have to teach our Consultants about each new product and how it works. We also run management training academies and anyone who can’t get to a conference can click onto one of our Webinars – a system which works in a similar way to Skype.
“Our recipe for success is hard work and lots of energy but also a lot of honesty and integrity. We are a very caring organisation with both our Consultants and our staff. We have been honest with people from the day we bought the company. We told them we do not have the vast resources of global Oriflame and people really appreciate that honesty and integrity.”
Oriflame is currently sponsoring the Women’s Tennis Association as part of a two-year partnership, in which the company’s Perfect Body range will be promoted at WTA events across the world.
