The famous Swiss skincare line known as Arbonne has officially filed for Chapter 11 in the state of Delaware. Several reports have estimated that the company is in upwards of $800 million dollars in debt.
Now I want to make it clear that this does not necessarily mean that Arbonne will close its doors for good. Many times companies will do this as a means to restructure their finances; however this typically leads to being owned by the bank. For an MLM company, this is not a good thing.
I personally know several Arbonne reps and overall it’s a devastating blow to the network marketing community as a whole. The company itself has been around for 30 years and the future at this point is uncertain.
Here is the report from Reuters:
The company plans to borrow up to $20 million to fund operations during its bankruptcy, known as a debtor-in-possession loan.
Lenders owed approximately $530 million will end up owning 85 percent of the reorganized company’s equity under the restructuring plan. They will also have a new term loan worth $125 million. Lenders owed about $216 million under a separate loan will be allocated warrants that will allow them to purchase up to 5 percent of the equity in the reorganized company.
Harvest Partners LP, a New York private equity firm, owns the prebankruptcy equity in Natural Products Group and it will be wiped out.
Harvest formed Natural Products Group in 2004 to buy Arbonne International LLC, a direct marketer of personal care products, and Levlad Inc, which owns the Nature’s Gate line. Harvest, with other investors, provided $93 million of equity for the acquisitions.
Natural Products Group, based in Irvine, California, said in court documents that it grew rapidly in 2005 and 2006 as Arbonne added a large number of direct marketing contractors, providing an unsustainable boost to revenue.
The company’s net sales began to fall in 2007-2009 due to a loss of direct marketers and downturn in the economy.
My View Of Arbonne
As a company I have always viewed Arbonne, from their marketing to their distributors as a more contemporary, vibrant, “sexier” (if you will) version of Mary Kay or Avon. I know that in the world of skincare and especially in network marketing, Arbonne really has created a niche and culture to the way they promoted their product line. I believe that many of their distributors will ride it out and “see what happens.”
The difficulty does come in the form of media and integrity. As I have written article in the past, negative internet content does hurt the process of prospecting and sponsoring, and although it can be overcome, it does take time. That particular article that I mentioned does deals more with the ignorance and ‘pyramid-type’ objections. In the case of Arbonne, it’s mainly a company financial issue which is much worse.
Public – 1 , Private – 0
This leads me to my next issue; I have on several occasions been told by distributors of many private companies that their company is “debt-free.” It is widely-known that many Arbonne distributors up until this announcement (and may continue for those that have not heard the news, eeek) are claiming theirs is a debt-free company as well!
Although publicly-traded companies have their own challenges, finances are generally left open and quarterly reports are mandatory. So I would suggest that distributors stop claiming company revenue and “debt-free” status unless it is public information! Logical right? This again is one positive aspect of a publicly-traded company as the “rug can never be swept beneath you.”
I believe in loyalty. I believe that Arbonne has really created a legacy in the past 30 years and I respect the many loyal Arbonne distributors that will ride this one out to the very shall I say…”end.” As mentioned above, Chapter 11 bankruptcy does not mean the company closes its doors. I believe it’s similar to a major knee injury to a professional athlete …you can have an operation and possibly recover from it, but your career will be cut short and you will never really be the same both mentally and physically.
In network marketing, as a distributor, it is your name as much as it is the company that you represent. Your integrity is one that needs to be upheld. As a leader, it’s important that you foster your downline and always stay one step.
“Opportunity often comes in disguised in the form of misfortune, or temporary defeat.” –Napoleon Hill