Hurt by Legal Battle With Canada, Firm Hires Walter Cronkite to Do Ads : Amway Moves to Brighten Its Tarnished Image
Amway, the billion-dollar empire built with an army of neighborhood soap peddlers, is putting some industrial-strength polish on its tarnished image.
The direct-sales giant has a new theme, “The Company We Keep,” to reflect its affiliations with celebrities such as former CBS news anchorman Walter Cronkite and with such companies as MCI Telecommunications and General Electric. Amway also has a new name for what it does: “network marketing,” which was promoted heavily during the annual convention for 4,000 Amway distributors over the weekend.
Amway President Richard DeVos said the term is meant to reflect Amway’s move to add telephone, legal, auto, travel and other services to its line of household and personal care products.
It is also an image-retooling attempt to lure younger, more upscale distributors who may not be satisfied selling and delivering soap, DeVos said.
“Today’s kid comes out of college, he has a perception of himself, it’s not that of being a peddler,” DeVos said in an interview.
“What it really is doing, along with image building . . . is to try and match the marketing system to what today’s well-educated, well-dressed young person is willing to do,” he said.
DeVos, who founded Amway with Chairman Jay Van Andel in 1959, acknowledged that associations with Cronkite and GE also are part of a conscious effort to improve Amway’s image in light of its legal battle with the Canadian government.
“Of course,” he said. “But what it shows to the world, at least, is that a lot of people who really know what we’re all about are happy to associate with us.”
Amway relies on a worldwide network of independent “mom-and-pop” distributors to sell products ranging from furniture polish to burglar alarms, and to recruit other distributors.
Evangelical Zeal
The Federal Trade Commission charged in 1969 that the company was an illegal pyramid, but it ruled after a six-year investigation that it wasn’t.
The company also has been controversial because of its almost evangelical zeal in promoting free enterprise, and it gained attention with DeVos’ and Van Andel’s high-profile participation in Republican politics.
In late 1982, Canada filed criminal charges alleging that Amway had defrauded the country out of millions of dollars in customs duties. Amway and its Canadian subsidiary pleaded guilty to fraud charges in November, 1983.
Criminal charges against DeVos, Van Andel and two other executives were dropped. Still pending is a civil suit seeking to recover $81 million that the Canadian government says it is owed in back customs duties.
DeVos insisted that the pending trial is a small matter. “The Canadian government would like to use it to attract publicity, (but) from a company standpoint, it’s not an issue,” he said.
The Canadian controversy broke during a period when Amway sales fell for the first time in company history. Sales dropped by $70 million in 1983, remained about the same in 1984 and were back at $1.2 billion last year. DeVos said the privately held company projects a 15% increase this year over 1985.
Amway made its first move into the service industry in late 1984, when it began test marketing the idea of distributors selling MCI service. DeVos said distributors have since signed 1 million subscribers to MCI.
Other new forays by the company include:
- A line of women’s clothing.
- A discount travel service.
- A service that provides cutrate legal advice to people who pay a membership fee. The service is now in California and is to be expanded to 10 other states this summer.
- The addition in August of GE appliances to Amway’s sales catalogue.
- Starting in September, an affiliation with a network of auto dealers. People who pay a membership fee will get price breaks on new cars, parts and service.
- The image-boosting recruitment of celebrities. Beginning in November, Cronkite will host a series of television spots on the America’s Cup yacht race. And former astronaut Walter Schirra has been hired as a spokesman to pitch Amway’s air purifier. DeVos said there are “even bigger names” being courted.
Household Products Key
Distributors say the services are welcome, but some say the mainstay is still the household products that made the company the world’s second-biggest direct-sales company, behind Avon Products Inc.
“That’s where we made our money, on the soap,” said Anita Winegarden of Edina, Minn., a distributor for 22 years.
Glen Cruzen of Anaheim, a distributor for 20 years, said younger Amway sellers probably would be attracted to the new services.
“But I hope by moving upscale they’re not forgetting other people,” he said.
