We are a direct seller of skin and body care products, color
cosmetics, fragrances and other personal care products. We sell our Jafra brand
products through a multi-level direct selling network of over 400,000
independent consultants, who market and sell our products to their customers.
Our largest markets are Mexico and the United States, which together contributed
approximately 90% of our total net sales in 2002 and are among the world's
largest direct selling markets. We have a leading market share as a direct
seller of skin care products, color cosmetics and fragrances in Mexico, where
Jafra is among the most recognized cosmetics brand names. We introduce new
products each year in many of our product categories to motivate and excite our
consultants. In developing and introducing new products, we employ a "fast
follower" strategy to minimize research costs and focus our development efforts
on products that have proven successful in the marketplace. Our independent
consultant base grew 14% to 401,000 in 2002 over 2001, and 4% during the nine
months ended September 30, 2003 over the comparable period in 2002. During the
year ended December 31, 2002, we generated net sales of $382.6 million, of which
$251.6 million represents sales in Mexico, $92.1 million represents sales in the
United States and $38.9 million represents sales in Europe and other markets. We
also generated Consolidated EBITDA, as defined in the indenture governing our
10 3/4% Senior Subordinated Notes due 2011, or our 10 3/4% Notes, of
$63.6 million for the year ended December 31, 2002 and $45.7 million for the
nine months ended September 30, 2003.
We believe that the global direct selling market provides substantial
sales opportunity and has robust growth prospects. The World Federation of
Direct Selling Associations estimates that in 2002, global direct selling was an
$85.6 billion industry, as measured by the retail value of all products and
services sold. Globally, direct selling increased at a compound annual growth
rate of approximately 5% from 1991 to 2002. In 2002, total consumer goods direct
sales in our largest markets, Mexico and the United States, were $1.2 billion
and $28.6 billion, respectively. These markets ranked fourth and first,
respectively, in terms of largest markets for total direct sales in 2002.
Consumer goods direct sales in Mexico and the United States increased at a
compound annual growth rate of 9.4% and 5.8%, respectively, from 1998 to 2002.
Within the United States direct selling market, we focus on the Hispanic
community, which comprises over 13% of the entire U.S. population, and which is
expected to increase its buying power at a compound annual growth rate of 9.2%
from 2003 through 2008.
Our business strategy is focused on expanding and retaining our loyal
and motivated consultant base, the growth of which has been a significant driver
of our net sales growth. Our multi-level direct selling business model is a
source of organic growth that aligns our consultants' income opportunities with
our strategy of continuing to grow our consultant base, net sales and cash flow.
We focus on providing our
independent consultants with a portfolio of premium quality skin care and beauty
products, superior customer service, and excellent marketing and training
support. Our established, cost-effective distribution infrastructure allows us
to generate high levels of operating profitability and requires relatively low
capital investment and working capital to support and expand our business. We
believe that these strengths of our business model have given us a competitive
advantage in attracting and retaining a productive consultant base, which in
turn has contributed to our success and positions us well for ongoing growth in
net sales and profitability.
We were founded 48 years ago in Southern California and were acquired
in April 1998 from The Gillette Company by an affiliate of Clayton, Dubilier &
Rice, Inc., a New York-based private investment firm, along with a newly formed
management team highly experienced in the direct selling industry. Since our
acquisition, we have grown our consultant base more than 95% from approximately
205,000 to approximately 401,000 consultants as of December 31, 2002. Our net
sales have grown from $241.9 million to $382.6 million from 1998 to 2002 largely
as a result of this growth in our consultant base.
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Our principal executive offices are located at 174 route de Longwy,
L-1940 Luxembourg, Luxembourg, and our telephone number there is 352 22 6027.
The address of our principal U.S. subsidiary's main office is 2451 Townsgate
Road, Westlake Village, California 91361, and the telephone number there is
(805) 449-3004. Our website is located at www.jafra.com.