A health products company called SkinnyMe Weightloss has built a business in Papua New Guinea that boasts 10,000 members. Founders Sue and Garran McPhee tell Business Advantage PNG how they established the business and dealt with obstacles.
Sue McPhee, Director of Operations for SkinnyMe and formerly Assistant Managing Director for Jenny Craig Weight Loss Systems, says the foray into PNG began when she was looking at social media in PNG and saw they were desperate to find the money to educate their children.
‘They know that is the way out of poverty,’ she says. ‘So, I said: “You should look at selling some of our products and generating some business.” They said: “Only if you come over and show us the products.” We got talking and at the end of that conversation I said: “I am going to Lae.”
‘There are several challenges that no-one tells you about when you set up in PNG. One is the importing of goods from other countries.’
‘I went the week after. I took products that I thought would help them start their own small businesses, earn money. That was how it started. We had 22 people in the first meeting, then it sort of got a bit out of control. We were getting hundreds of people at a meeting. They want to better themselves and pay for [their children’s] education.’
Sue says SkinnyMe was established in PNG in 2013. The business grew strongly. ‘We marketed it through shopping centres, started off with face-to-face marketing. Then we ran advertisements with different products and then set up stockists, distribution channels. They handle all our products.’
There were problems to overcome, however. ‘There are several challenges that no-one tells you about when you set up in PNG,’ Sue says. ‘One is the importing of goods from other countries. When you import you have to pay for the goods up front. But the Treasury often does not have enough US dollars [to exchange kina to US dollars].
She says once they were out of stock for eight weeks because they couldn’t get the funds. ‘We had a great frustration about that,’ she adds.
‘We were getting people knocking on our door asking for products.’
The McPhees are based in Melbourne, Australia, so another option was available. Co-founder Garran says instead of trying to import stock from Malaysia into PNG, they had the products manufactured in Dandenong, a Melbourne suburb. ‘We sent it by post and paid for it in Australia.’
Sue says turnover is strong – in 2017 sales were K1.45 million – but profit margins are tight. ‘The freight cost internally is horrendous. It brings our margins down.’
People in PNG are ‘keen to be in good health because there is really no alternative up there,’ says Sue. She believes there is a cultural receptiveness in PNG for natural, plant-based products and herbal remedies.
‘We now have over 10,000 members – it has grown,’ says Garran. He says the initial idea was to set up a multi-level marketing company, but the person who was supposed to explain it to the PNG people ‘didn’t turn up’. The enthusiasm was there, however.
‘We were getting people knocking on our door asking for products,’ says Garran. ‘I started running product meetings, then I set up a member operation. They would buy products at wholesale prices, and then become like a retailer for our products. They bought a majority for personal use and then sell a bit to pay for education, or to make a profit.’
Membership fees are low. Sue says the scale of the business makes marketing efficient. ‘It gave us a great database so we can send out a message through Digicel to mobile phones. We just send out a bulk SMS message which costs K10.’
Garran says SkinnyMe no longer does any multi-level marketing. ‘We turned it into a membership-based business and it is chugging along.’ The plan is to increase the Australian manufacturing to avoid logistics and foreign exchange difficulties. They will also look to develop franchising operations in PNG. ‘We will do it by province. Distributor, franchise, call it what you like – probably franchise.’
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