Tupperware Brands Corporation
Q3 2008 Earnings Call Transcript

Published: 23 Oct 2008

[E.V. Goings:]

We’re webcast and we’re live also. What I would ask is please that you hold your questions till the end of their presentations and then when there are questions, Herbert we’d like to wait and we’ll have a couple of people can walk around with microphones so that the people on the phone or later webcast gets the benefit of your questions. Firstly, let me tell you what I’m going to do. What I’m not going to do is read you slides. You know the drill with regard to forward-looking statements but our release went out yesterday. We’d be happy to answer any of your questions later. I’m going to make some introductory remarks and then I’m going to turn it over to Simon for about a half hour so the bulk of the presentation this morning will really be Simon. Mike will cover some highlights of the earnings release but we don’t want to waste your time reading what you already have read in the earnings release. We’ll be happy to get a little more granular and help you understand a little bit more. A couple of introductory statements. Generally I don’t have Simon at these meetings because Simon is President and COO. He is responsible for running the day-to-day business and you can’t do both, run the external piece of the business, the strategy piece, and run the business. These are what I would think moderately calling unique times. It’s funny. I was at one financial meeting last week in New York City and somebody’s gum popped. We looked around. We didn’t know if it was gum or a gun. It’s been very, very difficult and that’s why by the way we made the decision to have this meeting today because we want you to understand just a little bit more of our business and why we believe clear communications are important in the time ahead. Again, I’m not going to read you these slides but what I do want to point out are a couple of things on this slide. Our core business is very sound. We’re pleased with what’s happening there. Most of our people are shocked around the world that this was a stock that earlier in this year was over $40. We were in the mid-30s six weeks ago and for us to be $19 and something yesterday when our fundamental business and our managing directors see what’s happening in their business, they say this doesn’t make any sense. Many of them in international markets never felt Wall Street made any sense anyway but our fundamental business is sound. Our business model is particularly solid for these kinds of times of economic uncertainty. As I say that, we would rather have times of robust economy in all of our markets because our average order gets higher with customers. However we have a great counter. The counter cyclical piece of direct selling is that when it is difficult economic times, our recruiting pool tends to go up so the average order may be under pressure but we’re a go-to business and there’s leverage that we can push. Simon will comment on those. This is not a one-trick pony business and I will tell you joining this company 15 years ago, this company was basically Germany. As the Board of Directors when we spun off the company we used to say, “What’s going to happen when there are issues with Germany?” Now we’ve had an improving Germany but even with Germany probably half the size it was 15 years ago because of the pressure with now more than a trillion dollars they’ve had to pump into the reunification, everyone really underestimated the cost of bringing in former East Germany. This company has continued to grow. So it’s a different business than it was. Simon will get into in our emerging markets it’s very early days. We have reached the point of we’ll be finished with our investments in all of those markets by the end of this year so it really is going to be a time to grow in those. Finally we’re financially sound as a company. We’ve always, even during the period when we were going through radical change in our business in the 90s, were able to support our dividend and never starve our business. Now we are down to the debt-to-total-cap and the EBITDA targets multiples. Michael will take you through what our attitude is there. And we’ll talk about share repurchase going forward. Nothing’s changed about the vision of the company, and by the way this was the vision of the company prior to the acquisition of Sara Lee’s businesses and BeautiControl to be the premier global direct seller of premium innovative products. We talk about our three constituencies out there and what we’ve got to deliver to our consumers; really differentiated products. We do not sell commodity items. We are not competing with Rubbermaid. Our sales force is key to us. They’re our key customer actually out there and what we provide them is an earning opportunity. Our associates, that’s all of us, we’ve got to give them an opportunity to grow. I will say that’s one of our key sources of competitive advantage. We believe we have the strongest global direct sales management team in the industry and we have it because we’ve not only attracted talented people; we have developed them. I spend about 40% of my time on leadership development out there. Since the beginning of the year I’ve been gone 67% of the time working on people development because we’re very much a people business and we have now more than 2.2 million people around the world. So each of these elements is important. We’re now today, and this is probably the most misunderstood thing about us, what we are. Most people still tend to think we’re the old Tupperware company; milky white burping bowls basically sold through a party to stay-at-home moms. That’s not the business today. By the way, some have suggested, “You wouldn’t have that issue if you changed the name of the company.” We’ve looked at Premier Global Direct, one of those, but it’s the brand equity of the name and the respect globally for Tupperware brands with consumers and with governments around the world. It’s simply too important. We’re the second most respected household brand name in the US, number 4 in Germany, and when you sit there and think GE and Sony in this country who are number 13 and number 14, why would you want to give up that brand name? We simply have to do a better job of communicating what we are. To try to do that, what I’ve talked about is firstly, we’re not like Avon. By the way Simon and I spend a good deal of time in senior management at Avon all over the world. Avon is a wonderful company but it generally does the same thing everywhere. I say that because I worked at Avon here at headquarters, in Europe and ran Asia-Pacific before coming back as Jim Preston’s number two. They basically have repeater stations. We’re much more like News Corporation. Not in the same industry; the same kind of configuration out there. What they basically are is this conglomerate of these different companies but while they share the same DNA, they’re in the communications business. Communications and entertainment, and you’ll take it even from the early days Rupert Murdoch and his tabloids to taking it through other daily publications. They really dominated that not only the purchase of FOX but the acquisition of Dow Jones now. Have you ever noticed what’s happening to the front page of the Wall Street Journal? It’s moving more tabloid type style but that’s the influence of News Corporation. And finally, they bought Facebook so they’re really getting in a foot even in that for the future. So we sit there and say, “We are a global portfolio of direct selling companies.” Simon will get into how we adapt and adopt those businesses around the world. But it’s interesting. That’s what they do at News Corp. In England, no offense Simon, the Brits like tabloids and if it’s sensational, look at a news rack in England some time. There’s only one sophisticated publication really over there and it’s the Financial Times. That’s what sells in that market. We know that in Latin America beauty is what sells down there. Beauty doesn’t do well in Western Europe in direct sales and that’s why it’s not our focus there. The same kind of levers that we have had at our disposal and I want to read this to you because it was interesting, this was five days ago the Chairman of News Corp’s release for their annual shareholder meeting right here in New York said - by the way they’ve had six record years - “We intend to stick to our strategy that has brought us success. First, diversified assets at various stages of development. Second, judicious investment in businesses that represent the next generation of growth. And finally, the flexibility that comes from a strong balance sheet and cash generation.” Further down he said, “This strategy coupled with more than a half century,” we have 60 years, “Will help us weather the economic storm. It will also guide our decisions as we look to increase our businesses. Clearly we’re going to expand our role in such places as Eastern Europe, Asia, Latin America, India, and in these emerging economies we are seeing the creation of a global class of more than 2 billion people. Interesting. These people are well educated, well remunerated and increasingly sophisticated in their choices, and in the years ahead their entry into the global market place surely means extraordinary new opportunities for our company.” We could put almost these exact words in our annual report. We’re going down the same kind of a path. This was our strategy from 1992 to 2007 to get this company back on track again. You see, we had really four things we had to work on. Refresh the core; I don’t know why we put that in such small space there. That was the heavy lifting. That required a great deal of money, changing of culture, changing behavior, but we went through that. Growing in the emerging markets, and finally expanding into beauty. We’re largely finished with stage one. We’ve changed our product line. It doesn’t even look the same as what it was in the past. The products are changed. Design is now a key function. By the way, new products are a big part of what we do. 25% of our sales are coming from new products coming aboard. What we try to do is keep going to spaces where there isn’t any competition, and then when competition knocks it off out there we get on to new spaces out there. We have this 2 million+ sales force. The party has changed. It’s not for stay-at-home moms. It is a Girls Night Out. It’s social stimulation. The compensation structure has changed too because women today; she’s not looking for pin money; she’s looking for a career. And I’ll tell you, I don’t care whether it’s the US or India, we’re seeing the same kinds of trends. Our emerging markets, we’ve made the investment there. We’ll be finished with it this year and we’re in scale in most of those markets. And we have made this big move into beauty as a direct selling company. So largely we’re finished with phase one. This is our second phase right now and this is what the management team is working on. We’ve got three focuses; they’re in green which are a market focus; and three focuses which are people in process. This whole thing is about focus, fix and grow. It isn’t a lot of new and different things; now it’s continue this execution. Our key focus will be on priority markets, not only established but emerging markets. Simon will show you which markets those are. It’s a group of about a dozen markets that produce more than 90%. It’s hold steady on those, grow those that have momentum, fix those that are flat but still very profitable. Two. Leverage our brands to grow Latin America. We really are in an attack mode of Latin America starting with our Mexican business, and we’re really starting to see robust growth leading through Central America, Venezuela where we’ve been up more than 25% for three or four years now, Uruguay where we now have a beauty more than a 50% market share, but we now have accelerating growth in Argentina, and we’re going to be taking some new tactics this year in our Brazilian business. By the way, it’s the most fertile direct selling area of the world. Finally fix, merge or exit the weaker smaller businesses. By the way, there’s only a few of those and we’re not going to get into details on those because what we like to do is do that in an evolutionary non-disruptive way so there are no charges. Simply it’s the old GE approach. We want to be one or two and in these markets have scale or not be there because they’re a distraction. On the people in process we’re going to continue building this very strong leadership team all over the world. Simon later today heads for Mexico. I am off to the Philippines and then Eastern Europe where it’s basically training with our people there, taking that leadership level up to the next level. We’re going to be strengthening our sales and marketing teams out there. Those are the big levers of direct selling. And then Nike has been kind enough to really look over our shoulder and give us great guidance on supply chain out there. As you may know, Nike really doesn’t make anything but look at the brand they’ve built. They really have 502 factories that are Nike factories but you don’t see a lot of cap ex there because it’s other people doing it. I often find it interesting that when they introduced a golf ball at the same time Calloway spent well more than $100 million building a new golf ball factory in low-cost Southern California to deliver golf balls in a world that already has excess capacity, and Tiger lives in my neighborhood and we saw him out there; this was five years ago; testing the preset ball which is made by Bridgestone and then all of a sudden Nike was in the ball business made by Bridgestone. We’re learning a lot from what they’ve shown us at Nike. We have 17 factories out there. We want to have five to seven factories, and this is more supply chain about us learning how to do third party sourcing. I’m going to turn it over to Simon. A little background. Simon and I worked together at 9 West 57th Street at Avon. I was sent to Europe at businesses over there and then I went to Asia-Pacific, and when I came back as Preston’s number two, the name Simon was our marketing chief. I remember week number one we had to do a billion dollar write-off for previous management got us into the healthcare business and we knew nothing about healthcare. Talk about a time of fix the business but it was a good time because we got Avon back on the grow again. Simon’s got more than 30 years direct sales experience. Originally from London where he’s had responsibility for many markets in Europe. He spent five years living and working in Japan. Many years here working in the US and now he’s had 15 years of experience with the Latin America market. We work very, very well together and complement each other. So Simon I’ll turn it over to you.

[Simon C. Hemus:]

I’m under strict instructions to keep this to 30 minutes so I’m going to do that. I don’t normally read off of a script but this time I will read off of a script because there’s a lot of information to impart. I’m going to really drill down on the emerging markets and that’s really looking forward in terms of why we believe they can grow. And then I’ll conclude my remarks and tell you what we’re doing to really reinvigorate our core businesses. I might add that I might travel about 40% of my time but I’m very much focused on running the day-to-day operations, I’m very focused on making sure we come home with a good fourth quarter, and we’re very focused on 2009. As I said to someone earlier this morning, “In order for corporations to grow, you have to plant the seed that grows,” and that’s really what we’re talking about especially when it comes to the emerging markets. I’ve known Rick a long, long time. There’ve been fun times as well I have to say. This is a fun business and I love the Tupperware business because it’s got so much potential. I have a marketing background and the potential for the brand I think is fairly substantial. So let’s turn to the first slide. There are three items which influence how we structure our business model by market. First of all, the sales force compensation structure to use the product to sell and the actual selling method. All of these can be independently adjusted as needed on a market-by-market basis. This flexibility allows us to adjust our external forces and change within the markets as well. The flexibility of our business mode enables us to combine the right sales force, compensation structure, product line and selling situation to match the needs of each of our markets. For example, in the US we use a tiered compensation level utilizing the party approach for both our Tupperware and beauty markets. However each has its own separate sales force. In Europe we primarily utilize our traditional distributor model. Over the past couple of years we’ve added an additional manager level which we call team leaders which has enabled us to provide sales force with a career replacement income opportunity as well as it has enabled the distributors a broader range of control and to allow them to expand more rapidly. Due to the characteristics of the market, we focus on selling primarily Tupperware products through a party. In Latin America it is a single level compensation level meaning the sales force earns a commission on its own sales but not on those of others with primarily a beauty focus. Here it is the channel that is key. Half of the population chooses to make their purchase through the direct-selling channel in Latin America. The sales force will carry more than one brochure as they collect orders every two weeks from their clients. The key is to really incent the sales force to want to show our brochure over our other direct-selling competitors. Other than China, our Asia-Pacific segment utilizes both the traditional distributor model as well as the hybrid tiered compensation model similar to the U S. We sell both Tupperware and beauty primarily through the party except in China where we have retail outlets and sell through home demonstrations. As Rick has earlier said, we are a global portfolio of direct-selling companies and our portfolio is also one of established and emerging markets. Year-to-date at the end of the third quarter our emerging markets comprised slightly more than half of our sales and ¾ of our sales force. The sales force size in the emerging markets is really a function of the single level model that we deploy in our Mexico and South American markets. For example, at Fuller Cosmetics Mexico we expect to have in excess of 500,000 independent sellers by the end of 2008. That’s quite a number. On this slide you can see the countries that currently make the most significant contribution to our sales and profits within our established and emerging markets, and incidentally I might add China, India and Indonesia collectively count for 47% of the world population. Let me now amplify where we are in the emerging markets. Our business is particularly well suited for the emerging markets and is driven by three primary factors. First of all, the environment has a limited earnings opportunity for women and one where our opportunity can be very compelling compared with what can be earned in more traditional ways. Secondly, there are generally less of a defined retail infrastructure in these markets. Thirdly, usually the population growth rates are significant meaning many new consumers. We really are in the early stages in penetration of these emerging markets. We do business in over 30 emerging markets around the world, and year-to-date through the third quarter local currency sales growth is 20%. We generally look for sales force growth to somewhat mirror sales growth; however in the emerging markets we are not only seeing the size of the sales force rapidly grow, but we’re also working on achieving strong gains in productivity whether it be in order size in our campaign merchandising markets or party average in our markets where we have group sales. We believe we are in the second or third inning of a nine innings game, and I think that’s baseball you’re talking about, right?

[Unidentified Analyst:]

Cricket.

[Simon C. Hemus:]

Oh, cricket. Okay.

[Unidentified Analyst:]

Have you ever been to a baseball game?

[Simon C. Hemus:]

Once, but it was hard for me to follow actually I’d have to say. To illustrate this we’re going to drill down a little more deeply than we have in the past. We are doing this now to help bring substance to the comments I just made and most likely we will not provide this level of detail every quarter. With that said, let’s look at the Europe and Asia-Pacific segments as established and emerging markets. The emerging markets would include countries like Russia, China, India, Indonesia, South Africa, and Turkey just to name some of the larger ones. The established would include Germany, France, Italy, Spain, Australia and Japan. As you can see based on distributors one per million of population, and that’s the population above the poverty line, our established markets are almost twice as penetrated as our emerging markets. If you look at the party average, while we wouldn’t say that the emerging markets can quadruple in size due to lower GDP per capita, there is definitely room for growth in our average party sales where we might be able to double over the next several years. To give you a point of reference, let me give you an example. Looking at the former Soviet Union compared with our largest Tupperware established market Germany, Germany has two distributors per 1 million people. The former Soviet Union has 0.9 distributors per 1 million people. So there’s room to double in size purely by penetration. The former Soviet Union party average with a three-year cage of 12% is still less than a quarter of Germany’s party average. India is even more telling with 0.3 distributors per 1 million above the poverty line and a party average a little over 1/10 the size of Germany’s party average. So we have a lot of room for growth even as these economies face challenges because of our low penetration level and potential for future productivity improvements. We believe we will continue to see very strong growth as we move forward. We continue to foresee significant growth and potential in virtually all of the emerging markets that we operate in and there are really four compelling reasons. First of all, there’s still plenty of room as demonstrated for geographic growth in all these markets. Secondly, as the middle class grows so does the GDP of these markets, and this is particularly relevant to our Tupperware business. Thirdly, increasingly we are extending our training of the sales force and as they become more sophisticated this improves our overall productivity. This results in enhancement of their earning opportunity. Fourthly, consumers in the emerging markets are very brand aware and while the Tupperware brand is well renowned we have spent a great deal of effort and time in building our brands in these markets. Yet our brand recognition can still be improved on in some of these markets. The consumers in the emerging markets are generally younger, which is a good thing, more fashion conscious and brand orientated than their counterparts in the US and Europe. We have positioned our brands to appeal to the needs of the consumers in these markets. We are not thought of as the plastic company. Rather our consumers view us as a dynamic brand that caters really to their product needs, environmentally friendly, excellent quality and we’re very affordable. They associate strongly with celebrity for example and on this slide you’ll see [Ling Ye Ling] who we use in China. He’s a well known singer, actor and cooking show host who endorses and uses our Tupperware products on the shows. Across all of our emerging markets, and as Rick just mentioned, we’ve gone to great lengths to make sure that we have a strong and experienced management team. Human capital is really at a premium in these markets and we attract the best. We’ve also focused on putting in place the best possible local marketing teams and it’s paying off as we are segmenting the product lines to appeal to different consumer groups. This slide really attempts to demonstrate this very clearly. Now what I’m going to do is talk to you about what we’re doing in China, what we’re doing in India, what we’re doing in Indonesia, and then what we’re doing in Russia. These are four very important markets for us. So now let me just discuss China. Looking at geographic expansion possibilities we can look at our business in China. Due to the uniqueness of the China market and working with the government there, we use retail outlets. We have a little over 2,700 of these outlets in both residential areas as well as in the malls. As we looked into each type of our outlets, we found that by focusing expansion in the commercial or mall outlets they have much higher productivity due to the higher foot traffic. So our focus has shifted to opening more commercial outlets. Based upon our own geographic mapping we believe that in China we have potential for over 10,000 outlets. Needless to say, we’ll have to make sure that we continue to strengthen our own management organization to realize this potential. Importantly, this business model is working well for us. It’s growing, it’s profitable and delivers excellent returns. Vincent Liang, our managing director, is not only an excellent leader but he has surrounded himself with a very strong local management team and that’s just basically in our sales and marketing organizations. We have a very compelling earning opportunity in China. In fact it’s very dramatic. An average outlet earner can earn as much as a manager in a hotel or in the healthcare sector and a top outlet manager, you can earn well over $40,000 and we have got some of our best managers who are pushing up towards $200,000 each year. That is a sizeable amount of money for anyone to earn, even in China these days. There is also a great productivity story that we have here which is already beginning to play out. We have been rotating into having a greater share than we have had in outlets in commercial versus the residential areas, we see a much higher customer traffic sales here. This works even in light of the higher operating costs for the outlet owners due to the high volume. As well, we’ve had productivity growth by working with our shop owners to add sales people with an objective going from one on average when we started up to four. These people, by direct service by going to the customers homes and actually demonstrating our products. Finally we have been training our outlet owners to hold demonstrations in their own store which have been another terrific productivity builder. They really are actually right on the leading edge here in China, and we are really building a very, very powerful brand in China. It is an exciting business. Just one example is just as Swatch turned watches in fashion accessories, so we have turned the ordinary tumbler into a must have accessory. Look at this collection of masterful uniquely designed tumblers. They are absolutely fantastic. You’ll see some of these examples around the room and we’ve actually also been spinning this strategy around the world. And by the way, our consumers really like them in China because so far we have sold over 10 million tumblers in China and by the way the gross margin is just excellent, and that really helps us. So, let me now continue our journey and let us take a look at our business in Indonesia which is one of our fastest growing markets. We have succeeded where others have failed. Avon pulled out of this market, having lost a significant amount of money because they did not modify their business model. Our model not only works here, but we make money in Indonesia. We offer a powerful earning opportunity, our unit managers have brought a few others into our business, earn about what those in the broad economy do for about 40 hours of work per week. Our top managers and team leaders make much more than the average person in the economy. It is really a great inspirational element for them as well. Even at the general sales force level, we are much better than average among hourly basis, as we are comparing ourselves with sales forces that might be spending 10 hours per week on their business versus full-time employment on the broader economy. This schedule allows them flexibility to take care of their family. Here again we have exceptionally strong management team, led by [Nining Panana] and exceptional man, and just as in China we have our tailored marketing plans that fit the wants and needs of our consumers. Let me give you an example of one of these products. This is our [Sawyer] line. There is in example of it actually behind me, which is packaged very nicely, that we developed to meet the needs of our Asian consumers. This is just one example of how we are tailoring our products to match the local market face. Incidentally, we have also been able to export this product line to our European markets, where it is also working well. I believe our sales and marketing teams are stronger than many other western blue chip companies operating Indonesia. We really do have very strong management teams on the ground and in this market. Let us now go to India. We are particularly pleased with our progress that we are making in this market which has so much potential for growth for us. As the emerging middle class has started to gain strength, so our business has moved up. We had in place a foundation upon which we can build a very sizeable business, and a management team which will lead us to growth. [Asia Grotta] is our managing director and she is a very stylish and very capable leader with a great team around her. In this market our earning opportunity not quite as compelling as we would like it to be, but as we grow ourselves and add more sophisticated products that will change. Nevertheless, our unit managers earn $1,800 per annum and the best ones earn almost $10,000 per annum. This is over three times as much as the managers in the manufacturing, consumer products or healthcare sectors make, for example. In India our company growth is outpacing out competitors and we are actually making good money here as well. As in other markets in India, we tailor our products to meet the needs of our consumers. The availability of clean water is a major challenge in India, as it is for most of the emerging market, so we are developing a range of water containers and water purifiers under the Tupperware brand Eco, which is a new brand we are developing. The first product of this range will be Eco Water Bottle and it will be launched in India. The one liter Eco-Bottle represents a high quality, durable and reusable alternative which provides a quick, sustainable water solution and we will put water purified tablets with this to go into the water. As a side bar, by the way, the world, and it is a good opportunity for me to have a drink of water, discards 154 billion liter bottles made like this each year. They take 1,000 years to degrade. So with that stuff that we’ll do, this will help the environment. Now let us go to Russia. Russia has been a fantastic experience for us. Tupperware Russia is our biggest success story among our newer emerging markets as we grow so far to about half our potential in terms of distributors. We have also done a good job in driving productivity, but as I have said, still only 1/3 of Western Europe’s productivity. We have done this through training, to encouraging the selling of sets of products to be able to promote features and benefits of our higher priced products. We have also done a good job of building brand. As you can see on this slide, our earning opportunity to all levels of our sales force is compelling, very compelling. It certainly helped enable our sales force to grow. We are exceptionally pleased with the growth development of our CS markets. These used to be Russia in the old Soviet Union. One of our strongest and really one of our most passionate leaders, if you have ever met her, she just blows you out of the room, is [Elena Portellini] who leads this market. Prior to joining us by the way, she was a doctor and she barely made enough money to fill up her car each week to travel backwards and forwards to the hospital she worked at. This business is really growing strongly and it has great, great returns, it’s an excellent business. I look at this next map and I feel wow. In the former Soviet Union, we have deployed the classic Tupperware distributorship mode. As of today, we have 160 distributors, incidentally, most of them are husband and wife teams, and are highly educated, they have highly educated backgrounds. A lot of them used to be doctors, scientists and teachers, but they found that they could make an awful lot more money by running a distributorship for Tupperware. This map is daunting given the sheer size, the geography. But we know we have plenty of room to grow. Including when we look at the number of distributors we have in relationship to the population size. Our supply lines are also well-equipped to deal with this growth. We are really becoming a household name in Russia, I can tell you that. We have established a strong brand presence. We have been able to accomplish this through sales force expansions, sponsoring national TV cooking programs using Tupperware products, press advertising on expensive public relations programs. This has also helped us attract a high caliber of associates to manage the business. Now I would like to finish our emerging market tour with South America, and Rick mentioned how important we view South America for growth. It is a big direct selling market, in all sense of the world. We believe that we have excellent opportunity to aggressively grow our business in South America wherein many of the markets direct selling is a stronger channel of distribution than retail and that is especially true of the beauty segment. But, also in these markets, the Tupperware brand is well recognized and it is a well desired brand. Significantly the base we have established with Mexico, our combined operations by the way, are projected to deliver $500 million in sales which makes us, I’m pretty certain, the number one direct seller in Mexico. And what that allows us to do is that we can share resources out of these operations, we can share our knowledge and we can support our South American expansion. I rather refer to it, I call it project footprint, where you duplicate the business model just as if you are putting your foot in the sand. Really based on the population and our current number of distributors and sales force sizes in these countries, we believe we have significant opportunities to grow here. Also Columbia and Chile are potential opportunities for us. And while we have been in Brazil with Tupperware for a number of years, we have only just introduced our beauty into Brazil markets in the past six to seven years and so we’ve just began to really to tap into this beauty potential. I might add that in 2005 in South America, we had company sales of just over $61 million, and today we estimate that this will rise to $160 million by the end of 2008 and we are just getting going. So we’ve put $100 million worth of company sales on in a three-year period. Direct selling in Latin markets is very much a channel of distribution, and in each of these markets we provide the sales force for the Tupperware catalog, and a Fuller cosmetics catalog. This is not to dissimilar to what other competitors do, Avon does this, but I would like to think our Tupperware branded catalog is a much better than the types of products that they offer. The reason being we understand the worth of our brands, and the brand has been cultivated over the years. A very big opportunity for us also in these markets, and really unlike Europe and other established markets, is that the populations of Latin America is young, is a very vibrant population, and it is very family orientated. So we are expanded our children’s category under a sub brand called Circo which is called Tupper Kids. This initiative is being loaded by our Mexican operation, and our early sales indications are very, very positive. Of course, everyone loves to buy products for their children. And really among our beauty segments, are largest emerging market businesses are in the Philippines, and of course our Fuller business is in Mexico. In terms of growth opportunities among markets we are currently operating in start-up mode, we see the biggest attention in Argentina and Brazil, where we are running businesses under the Fuller brand name, which is very similar to what we are doing, in fact it is the same as we are doing in Mexico. Among the countries that we are not in with beauty, but potentially could decide to enter someday, we think that the biggest opportunity would be for us in Russia. We estimate the Russian beauty market would be $6 billion I think by the year 2010, if I recall. Eastern Europe and China, where it is estimated to be up to $16 billion by the year 2015, if I recall that number. As I said a moment ago, this is where we have our fastest growing Tupperware emerging market, so we can leverage the resources that we have there. I have also already mentioned that South America, we are looking at entering Columbia as our first major opportunity. So now I am going to conclude my remarks. Very quickly, I would just like to- with what we are doing in established markets. As Rick said, the core established markets are very important to us and why we believe we can continue to grow in these tough economic times. A key to our continued success, of course, is increasing the size of our sales force and we believe that we can continue to do that. Firstly by, we can focus on the market segmentation. There are a lot of segments within our established markets that are underserved by Tupperware. Secondly by always staying in tuned with the trends, you have seen the products around. These are products we have in Europe. They are right on the trend and there are things that our consumers really want. Also by leveraging the brands that Rick talked about. These brands are very highly regarded in these markets. I have already mentioned team leaders. Suffice it to say that we have put team leaders into some of our established markets in Europe and really the benefit here is that they reduced the span of control which leads to a more respected sales organization. They extend the reach of our distributors so it allows us to further penetrate the geography that we are already in and it really adds an attainable and aspirational division within the sales force structure. Fourthly provided we are able to improve our productivity, total earnings of the sales force will increase. We have, some of our distributorships have team leaders in Germany, and we have experienced a 5% sales increase, which may not sound a lot but in Germany year-to-date our sales are flat so 5% is quite a jump versus the national. One of the other things that we are doing is that we are segment - I was talking to someone in this room that recently we launched a new business that we have been test marketing in California. It is called [Aman du Pre] beauty business in the US. Basically we are bringing in the Fuller cosmetics line over the Mexican border to service the US Hispanic market. What we are going to do is that this market doesn’t have the kind of beauty control, doesn’t have the kind of a pill for this kind of a market. We can sell our Fuller product line at very competitive prices, especially when we compare them to Avon. While this business is just getting off the ground, the critical performance indicators that I am looking at are very, very positive in terms of productivity, in terms of activity and in terms of the gross margin. So now what we have to do is go out and build a large sales organization. By the way, in our Tupperware business and our beauty control business, we are developing segmented strategies for the Hispanic market here in the US, and I can tell you in the third quarter, our Tupperware Hispanic market grew by 18%. So we see that there is real potential in this strategy. One of the things, Rick alluded this, you know I have a strong marketing background, and I also mentioned that here I really feel that the Tupperware brand has yet to be fully realized. It has incredible brand power name, as strong as Avon’s brand power name, and I used to think that was strong. When we talk to most of our consumers, they tend to think of us as a plastics container company. We are much more than that. When you think about it, we are closely associated with the kitchen, the cooking and also with outside activities. So you may or may not have observed that our core Tupperware business is undergoing a makeover. In the established markets it is really critical that we reach new circles of new consumers, so we have got to really appeal to these new consumers and actually we have to up our marking game, and that is what we are doing. Part of our contemporization effort is that we have focused our products and our catalog on being a lifestyle company more equated to products you might think of when you visit Williams-Sonoma. Not just basic food storage serving lines, but high tech, differentiated and demonstrable products and I will be happy to show you some of these products afterwards. We have also added significantly more color into the product line because the consumer is attracted by high fashion colors. They like all sorts of different colors for their kitchens. I won’t go into detail here, but what we have been doing is also linking Tupperware to celebrity chefs. I don’t know if you have seen, but the power of celebrity chefs around the world is growing, and we have done this with considerable success. We have a chef that promotes our products on television, and goes to our sales organizations in Germany. His name is Horst Licther he is a very funny guy, actually, very funny. We have an Austrian Chef Eric. He also has a TV cooking show where he promotes our products, and we have a top celebrity chef, [Marie Lowe], whose supports our products in Greece. By the way, our Greek market has been growing double digits this year, and we have been there a number of years. So what we are really trying to do here is externalize the message and reach new consumers in our established markets. This will take time to get traction, but we are on the way. In beauty we have created product lines that appeal to a new and younger consumer. By the way, in your product bag you will find a fragrance called Thalia. Thalia is one of the most famous pop stars in Mexico, Latin America and in actually the Philippines. That broke all records for fragrance sales in our Mexican market. By the way, we are the number one fragrance seller in Mexico, even when compared to Avon. We sell more fragrance units than any of the competitors in the market place. This Thalia has so far gone past $300 million in sales and the gross margins, by the way are excellent. So even after we pay the royalty, and by the way, we promote Miss Uruguay, we promote Miss Mexico beauty competitions in these markets. Really the contention here is to get off out there in the market place and make sure that people know who we are. Then the other thing we have done, it is terrific, is that we have extended our Tupperware line with premium consumables called TupperLiving which includes our Essence line you’ll see this in the room. In 2008, not because I’m a Brit, we launched Tea Escape, which lends itself to a party theme, so we’re having tea parties. Another good reason to come to a party, everyone likes a cup of tea, even here in the States. These are unique lifestyle collections, premium consumables. They generate incremental sales from the products that support the core Tupperware product line. It is another reason to have a party, by the way. Importantly, they start to leverage the power, the equity that we do have in our Tupperware brands. And here in the US we are spending quite a bit of money on public relations, and I try to keep that budget under control. I do manage budgets with eye of steel. But, really what we’re doing here is to contemporize our image. We need to do that over here. That’s what our research tells us. It also helps our sales organization reach new consumers. Just one example is that we have partnered with Brooke Shields for the Chain of Confidence campaign and so far we have generated 135 placements in top tier publications and broadcasts and we reached 285 million readers and viewers. Brooke also attended our Jubilee here in the US and Canada this past August, and actually this past weekend God bless her she hosted a tea party here in New York. That was a first for Tupperware. I understand it was a terrific success.

[Unidentified Analyst:]

[Participant inaudible - no microphone]

[Simon C. Hemus:]

70, well, that’s pretty good. I didn’t get there. I had to go run the business. Someone else was there. I’m just going to conclude with licensing. I like licensing because part of the time it contemporizes the company and it reaches new consumers. We’re really expanding our licensing not only here in the US but also around the world and linking up with as soon as a new film is released we generally get the license for our plastic containers but also for our fragrances and cosmetics for the younger end of the consumer. So we’re able to utilize these licenses right around the world and we’re seeing considerable success. It really is another way of externalizing and modernizing how people perceive the companies and the brands that we operate in. That concludes my remarks. There’s a lot more I could talk about but I realize we don’t have the time. I ran a little bit over time and I apologize for that but I’ve only really been able to briefly talk about the transformation that’s going on at Tupperware Brands Corporation. I love working in the business. It’s a great business to lead. We’ve got great management teams and I really do believe that we’ve got great potential. I don’t like to be part of businesses that don’t grow. I’ve never been that even in the Sara Lee days we would grow our businesses when they wouldn’t grow them and they’d look across at us and wonder what it was we were doing. I told them it was about leadership and planting the seeds that grow. You don’t grow if you haven’t got anything to grow with down the road. In the emerging markets we have plenty to grow. So I’m going to conclude with the first financial chart in the [inaudible]. Wrapping this all together loking at our longer range local currency sales outlook by emerging and established markets, in total we expect to grow by 6% to 8% in local currency sales versus our previous long-range guidance of 5% to 7% with established markets at 1% to 2% and emerging markets at 12% to 14%. Frankly speaking, and I know I probably shouldn’t say this, I would be disappointed if we didn’t do better than this because of the opportunity that we have. I’m going to hand it over to Mike who probably thought I shouldn’t have said that.

[Michael S. Poteshman:]

Simon, it’s true that you shouldn’t say that but you should do it. To talk on a few things from the third quarter results, you saw that we were up 13% in dollars which was a nice result, and really focusing on local currency how we manage the business which was up 8% at the high end of the range we gave in July where we said 6% to 8%. We were certainly pleased with that. The emerging markets led the way with a 21% increase for the quarter. EPS we were $0.05 above our range that we gave in July where we said $0.37 to $0.42 and that $0.05 up side was even with lower benefit from foreign exchange that we were seeing in July as the rates moved. That was about a $0.04 hit on fx veruss where we were in July so without that we were even better. You can see there detailed the things that moved the numbers. When we look at our full-year forecast we’ve narrowed the range. You saw that in our release to the high end of what we’d said before. We were at 7% to 9% and now we’re at 8% to 9%. Again with the lion’s share or the growth really coming from the emerging markets, up 17% to 18%. Simon noted we were up 20% year-to-date. Continued good growth going forward. The range for diluted EPS excluding the items impacting comparability, the $2.57 to $2.62 does reflect a lot of fx since the last guidance in July where we were saying that we would have $0.23 to $0.25 favorable fx. Now using the rates from Friday it was even with last year at a +$0.02. A huge swing there. We did add a $0.03 to the guidance because of the good results in the third quarter. Simon mentioned on the sales where wer’e going long-term to 6% to 8% so 1% point up from the 5% to 7% we’ve been talking about. We’ve also increased our longer-range guidance for pre-tax profit return on sales by half a point from 9% to 10% to 9.5% to 10.5%. The other thing I’ll mention here, and this is in our release as well, because of the bigmoves in the fx rates we noted that if those rates from Friday were to stay the same all the way through next year, we’d take a 9% point hit on our sales comparison purely from the fx; that’s before the local currency growth. The EPS impact would be a -$0.37 to -$0.39. That’s versus the $2.57 to $2.62 that we’re talking about here. To give you a frame of reference or how you could think about fx, the guidance that we’ve given this year implies $280 million to $285 million or so of segment profit. In 2007 we made 92% of our profit outside of the US. A 1% point move in currencies all in the same direction if the foreign currencies were to strengthn for example would help us by between $0.03 and $0.035 so that goes in both directions.

[Unidentified Analyst:]

I apologize for interrupting, can I just have you repeat something. You said that $0.37 to $0.39, that’s if the fx [inaudible]. So your guidance right now is assuming that the fx is going to improve?

[Michael S. Poteshman:]

No, we’re talking about the comparison of that with 2009 versus 2008. So if the rates were to stay the same from last Friday all the way through next year when we compare 2009 to 2008, we’ll have an impact of $0.37 to $0.39. Cash flow and liquidity of course takes on an even enhanced importance today than it probably did three or six months ago. The good news on some of our working capital lines

[E.V. Goings:]

Before you leave, please take one of the bags of some sample products. Just to give you a feeling real quickly, this is where to imagine we have more than 2 million demonstrators. One of the things in there I’ve always called this one the Ferrari of salad spinners. It is an incredible product and very easy to use. There’s a Tupperware seal on the top. A little effort but by the way this sells for $50 in Europe. It’s a very, very high tech. Some parties will be around healthy eating and salads and this will be the main thing that we sell there. You’ll see new products we’re going into; microfiber, textiles that we use for table top, you’ll see how absorbent this is. This is a very interesting product. We’ve launched this. BeautiControl is our business for really high tech skincare and by the way IBIS the research firm just came out with their predictions for the next couple of years in the beauty industry and they expect beauty sales to continue particularly in skincare to be 4% to 5% up even in this time of economic turmoil. The last big product Simon and I introduced when we were at Avon was called the Anew and [Morgan Hair] was our head of skincare at that time. She’s head of skincare at our BeautiControl business and this is the new product called [Nicada] outside the US but Tight Firm and Fill. It’s one of those products that goes to the second layer of the skin. By the way, over 90% of the tests had remarkable results within three days. What it does is just like the Anew was the filled alphahydroxy, that acid fileld in crow’s feet here, you’ll see results. 97% of the respondents saw results in three days. I’ve tried since we’ve been in the test phase of this to bath in this stuff. It’s a great product you’ll see. This is a sample of our new corkscrew that works even with plastic corks out there. We have two things that at financial meetings we have sitting around the tables

[Doug Lane:]

I have to ask about the beauty business. I saw the average actives across your beauty portfolio was up 2% in the third quarter which is a pretty sharp deceleration for being up 9% in the second quarter. Can you talk about your global beauty business and the slowing there?

[Michael S. Poteshman:]

I think in the beauty North Aemrica business a lot of that was at BeautiControl. That reflected the recruiting environment and what we were doing with our programs. We did talk about it in our release. We’ve gone to a more effectively priced kit for the fourth quarter and we think that can really help move the needle there as we look to get that business doing what we’d like it to. When we look at the beauty other segments, we’ve seen a lot of good productivity there which is one of the things I was talking about with what we need to do with the average order size. So there I think the story is relatively healthy in terms of getting the KPIs really more in alignemtn with where they should be.

[E.V. Goings:]

If you do a comparison o the Tupperware business in the US in Q3 to the BeautiControl business, it clearly is a sales management issue in our BeautiControl business and we are addressing that. Firstly with the more attractive kit and some management changes. If you’ll look in contrqast to our Tupperware business, we’ve really kicked into gear with regard to very, very strong recuirting. We believe that you’re going to see in 2009 the trend change at BeautiCotnrol. One other thing I should mention in beauty other is we combined our businesses in the Philippines by putting our Tupperware business in with our beauty business and that had a big impact on those sales force numbers. By the way, the business though did very well in the Philippines compared to where it’s been so we think that confirms we made the right move.

[Dara Mohsenian:]

You highlighted the flexibility of your business model if you do see an impact from the macroeconomic environment. Can you just talk specifically about return on sales if you were to see a big hit from the macro environment and do you have flexibility to pul back on some of your promotional spending or are there levers you can pull until you do see a big macroeconomic impact or do you need to actually invest more behind the business to try to drive sales if you see an impact there?

[E.V. Goings:]

We spend on promotions 18% so that’s our heaviest area right there of investment spending. What you generally have the opportunity to do is when there are changes in that macroeconmnic environment shfit where you put that 18%. Generally what you start to do is move more of that money on the mix of where you’re spending it because you could be spending that for the sales force, to recruit, to get active, you could be spending it to get people to come to parties, consumers; you start to direct that more at sales force for recruiting kinds of incentives. So the first button you press isn’t spend more money; it’s to push it more on the recruiting side. The average order may be under pressure but we’ll have a larger sales force. Now if it continues, the only place we’ve ever seen most of these cycles only last 18 months to two years of the higher unemployment in the higher context markets, the only place we’ve seen a difference there is in Germany we’ve now had 18 years of $100 bililon a year that they’ve been spending. Well, it’s been $80 billion a year they’ve been spending in Germany on reunifications. It’s been unemployment north of 10% for almost 20 years. So there you kind of fizzle out. We really ahad to then go beyond the normal investment level. Would you add anything to that Mike?

[Michael S. Poteshman:]

I think that that’s right. When you look at our leverage and things like that within our fixed costs, on the Tupperware side on a manufacturing basis about 40% of our cost is the raw materials so the other 60% are the buildings and the machinery and equipment. So there’s leverage both directions on that. Of course we look to match our capacity over time with the size of our business. On the beauty side in manufacturing it’s much more weighted towards raw materiasl and compoentns in terms of the cost to the product. It should be less of an issue there other than any kind of a rebound thing. Then when we look in our marketing offices and so on, of course we’re always trying to have the right investment in terms of people and resources given the size of the business and the trends. We grow the business and if thinsg change then we look at that.

[Simon C. Hemus:]

I’d also add that in our 2009 planning process we’re asking each of our operating companies to build a contingency over and above what they have or what they agree the plan would be so there’s a safety net there. Very strong about managing the gross margins and I review these operations along with Mike on a monthly basis and we know how the sales are developing on a weekly basis. The other thing that’s going to be a high priority for us is to make sure that any excess inventory gets turned into cash. We’re going to take a close look at the size of the product lines; we’re going to take a close look at making sure that the new products we introduce deliver what they’re expected to do. We’re tightly managing the business as we steer our way through all of this. It will be very good prudent management because we do want to protect our returns for sure.

[E.V. Goings:]

It’s interesting that this new plan we’re calling Vigilant Plan 2009. The naval ship I was on before you walked out on the bridge where I worked it said, “Vigilance. The price of safety and success.” We’re sitting there saying we don’t think it’s business as usual out there and what we understand is don’t cut the things that are the muscle of the business, the reenue generation side of the business but look at everything that has to do with regard to fixed and variable costs. We’re expecting contingency plans coming out of that. Then with regard to the balance sheet items, things like accounts receivable and inventory, we’re even working on incentive plans to ensure our people turn that stuff into cash. Not because we have issues; we don’t want to have issues going forward so you go in with almost the positive assumption of a negative result.

[Unidentified Analyst:]

I wondered if I could maybe get a more near-term outlook on how some of your non-US geographies are doing? From my standpoint China’s slowing down, Russia looks like it’s in a lot of trouble. I’m wondering fi you can comment on how your non-US geographies are currently doing?

[Simon C. Hemus:]

I can say we’re only into our third week of the fourth quarter but we’re not seeing any slowing in our businesses in the emerging markets of any substantial nature. That includes China, Indonesia or India, CIS as we call it which is the former Russia. We saw a little bit of slowing in Australia. I don’t know if that was a promotional change or whether it was something the world was talking about three weeks ago. But certainly the emerging markets we have yet to feel any substantial impact sitting here in week three of the fourth quarter.

[Michael S. Poteshman:]

When you look at our guidance we called the fourth quarter up 4% to 6%. We were up 8% in local currency in the third quarter. The emerging markets in Europe were up 30% in the third quarter. Asia Pacific was up 40%. A lot of the markets that Simon was talking about. We did call for a more moderate pace in the fourth quarter than the third quarter and we were up 10% in each of the first and second quarter in local currency.

[E.V. Goings:]

I might add in Mexico our Fuller business there, the only place we’re really feeling it is the [McKilla Daughters] area just at the border, and that’s the impact of what’s going on here. Some might ask, “Why are you using the name [Aman du Pre] to move that business across the border?” We don’t own the rights to the Fuller name up here. [Aman du Pre] is the highest quality of our Fuller product line so all Mexicans know the name [Aman du Pre]. That was our Bentley brand name down there so we think that’ll come across.

[Simon C. Hemus:]

It’s highly recognized amongst the Mexicans here in the US.

[E.V. Goings:]

One other question that usually comes up is, “Why are you using this model in China?” By the way, we have no investment in these neighborhood store fronts in China. She does. It’s our signage but she does and she can own up to 15 of these. Simply stated, with the average apartment being 300 to 400 square feet, there isn’t any room to do parties in homes there so you go into one of these and it’s a big island area like you see in many kitchens. That’s there. So in the neighborhood it’s like a little sorority house in the neighborhood where they do parties and her mother basically works as she’s learning kitchen skills. There are almost 2,700 and we think we can triple the size of those. That’s why we use that model there.

[Unidentified Analyst:]

Recognizing the long-term story of the emerging global consumer, the level of income is pretty low at a lot of these markets that you serve. So just asking the same question that was asked earlier a little bit differently, if we’re talking about $20 items or $10 items, it’s a material number for a lot of those consumers. Is your growth coming from new buyers more than it is selling more product to existing and is that something you would expect to shift in 2009?

[E.V. Goings:]

Let me comment first on that if I may. A couple things are happening there in these markets. Firstly, the lower per capita GDP markets; India, Indonesia, China; they have [Maslow’s] hierarchy of needs; food, clothing, shelter. They clearly spend a higher percentage of their disposable income on those things. This is a very important category for them. They pay a lot of attention. If we can show them through food storage, through the ability to show how to bulk cook, it frees her for other activities. So they pay a lot of attention to it. As a matter of fact, in the Philipppines you can take Tupperware to a pawn shop and that’s where the value perception is very strong. Secondly, we tend to in those markets have in today’s replacement value over $800 million worth of fully amortized molds. We write our molds off over four years so as Simon used the example of the [Tups] in China, that’s a 1964 mold. Fully amortized. We go in and use a less engineered resin so we have great margins there but it’s a very low cost product. However if we would sell that kind of a product in Europe for example, we use [elexan] which is two to three times the price and a different kind of a mold. That’s another way that we target. To the other part of your question, in many of these markets these are first-time consumers and you have in many of them population growth rates as Simon said north of 2%. Household formation and you’ll have in many of them almost half the population less than 30 years old. So there’s a huge pent up demand for Western goods. Would you add anything?

[Simon C. Hemus:]

The other thing I would say is that we actually tailor our product lines to meet not only the needs of the consumers but what they can actually afford. So if you look at the lines say in China or India, it is quite a bit different to that than we offer in Germany. We don’t offer something like the Speedy Chef. We also merchandise it in a different way. A lot of it’s targeted for children going to school. The eco bottle that I mentioned in my presentation, I can do a lot more about this, that is a classic Indian product that goes into the fridge and we’ve seen it in the market place except ours is a lot better than that of the competition. It’s a very affordable product. So we’re very conscious of the consumer and tracking what it is the consumer needs. Also I think one of the reasons we got traction in India is that the middle class has really started to emerge quite rapidly. I forget what the number is but the number of people having an income of over $30,000 a year, don’t quote me on this but I know it’s high, it’s about 36 million. So we look at these big populations but what we’re doing is zeroing in on segments of the population. They themselves are like countries in some of these markets. It’s very much making sure we cater our product to programs to meet the needs of the consumers. Wer’e pretty good at doing that.

[Unidentified Analyst:]

Can you discuss your cash from operations down significantly, $7 million versus $6 million a year ago?

[Michael S. Poteshman:]

The two biggest factors in there, we made a VAT payment which was sort of a balance between the two years at the beginning of the year so that was $20 million payment and was even payment a bigger difference there. That will have worked its way through this year. We also had a large payment related to hedges, about $28 million I think through the third quarter. Most of that was in the first quarter and that related to having some of our debt in other currencies previously as those hedges closed. So we don’t have nearly as much of an exposure to currencies from the hedging point of view at this point. Those are the two big factors.

[Unidentified Analyst:]

To clarify in your input costs assumptions, you were stating that the $9 million to $10 million that you were expecting to see in 2009 you think will reverse or will it be a $9 million to $10 million positive if oil price stays where it is?

[Michael S. Poteshman:]

It’s more reversed so it’s a round trip if you think about where oil prices have been.

[Unidentified Analyst:]

So if oil continues to stay down or go down you should expect a benefit from that [inaudible] in ’09?

[Michael S. Poteshman:]

Yes. The resin markets move a little bit differently always than the crude oil markets and about 40% of our resins are more highly engineered and they move even more differently than the crude oil and natural gas markets. But yes, directionally that’s right.

[Unidentified Analyst:]

Part of my question was the hedging and all but what about the cost? You mentioned you’re using two different types of resins and molds in your products in different countries. In the emerging markets in Russia you use a different type of quality than you use in let’s say China or Indonesia. What is the strategy there? It doesn’t make sense. The quality of products. If you use a poor quality of products, they won’t return on the purchase.

[Michael S. Poteshman:]

There’s no difference in quality. In other words the product performs very well. It’s a question of if you use a more highly engineered resin to get a different effect or something that’s microwavable; those kinds of things; it costs more and from a price point of view that’s going to be more interesting to people in higher GDP per capita markets. It’s certainly not a difference in the quality of the product.

[E.V. Goings:]

This is an [elexan]. This is the same thing used on fighter planes, on the windshields or on commercial aircraft. Very expensive. This is a polypropylene. Both high quality. This has a wonderful seal on it but very different. This is what we sell in China. This is what we sell in Europe.

[Michael S. Poteshman:]

It’s the same mold that we would have used in the US when we introduced the product. It’s just the same as 50 years ago. So there’s no difference in quality.

[Unidentified Analyst:]

A follow up on the currency question. Who does your currency managing and how well is it hedged? How much fluctuation in the earnings does that give us going forward given the markets today are going all over the place every day?

[Michael S. Poteshman:]

We don’t hedge the translation and that’s the $0.37 to $0.39 based on the [inaudible] rates that we were talking about 2009 versus 2008. What we hedge are things on the balance sheet so actual fx transaction exposures or cases where we’re going to buy across borders and we want to protect our gross margin. As an example we don’t produce for third party stores’ products in Australia. We make most of those ourselves in different places so we’ve hedged a high percentage of that to protect the gross margin in case the Australian dollar moves. We’re not hedging the translation.

[E.V. Goings:]

Our treasurer manages that. He thinks he’s a profit center. Our head of tax thinks he’s a profit center too. So there’s a lot of [inaudible]. The only time we’ve ever hedged translation it was a disaster. We said, “We’ve got natural market baskets out there.” By the way, we did an analysis at one time in the 90s and we focus on managing our businesses in local currency because over an eight year period of time, it’s smoothed out. So you’re going to have some years benefit; some years it’ll go against you. That’s why we always report out to local currency. We always incent our management teams for driving their businesses in local currency because there we’ve got our factories in 17 different locations; we buy raw materials all over the world; so we’re fairly naturally hedged there.

[Unidentified Analyst:]

What about going in to Eastern Europe a little bit, what kind of sales do you do in Eastern Europe, say Russia, Poland, Hungary, Czechoslovakia and how are we managing that business? Just doing the parties or do you have some retail outlets let’s say in Moscow or St. Petersburg?

[E.V. Goings:]

It’s our traditional distributorship model. We have a huge distribution center in Aalst, Belgium and that’s where we do the distribution. We’ve got 160 distributors in CIS. It would go there and we’ve got a lot of distributors. By the way, it’s a husband-and-wife they have a physical property; it would probably be two to three times the size of this room here; they’d have their warehouse and then they’d have their meeting room. They’d probably have relatives that work in there filling orders and when the people come to a Monday assembly sales meeting, they turn in their orders for what they sold the week before. As they come in, they go to their two-hour assembly and they pick them up as they leave. Then they distribute the products very effectively locally so distribution costs are low. That’s pretty much the model throughout Europe.

[Unidentified Analyst:]

Just staying on currency for a second, you said $0.37 to $0.39 is purely translational. What about any gross margin impact just because you’re making a product in the wrong geography and selling it in the wrong geography so to speak or maybe even a benefit, vice versa?

[Michael S. Poteshman:]

By and large we produce close to where we sell so we don’t for instance make 30% of product in China and ship it to Europe or something like that. So there’s not a big currency exposure in that sense between China and the Euro. There are some promotional products that we sold in Ceylon and we’ve been able to manage that over time and be in the 65%+ range.

[Unidentified Analyst:]

And on a different topic, has Avon’s recent stumble in China created an opportunity for you?

[E.V. Goings:]

I opened China for them when I lived over there. Their whole focus was initially doing these boutiques and then they got their license and then the boutique owners were upset by that so they had some real tension. I don’t know where that’s played out. We don’t consider them competition there. What’s really interesting is you’ll go into a space like Simon alluded to where we’re considering, “What do we do in the former Soviet Union in beauty?” The reason we haven’t done anything there is it’s too crowded right now with direct sellers

[Simon C. Hemus:]

Uruguay’s a relatively small market but certainly we pushed Avon out of the market because with the Tupperware brand coming in, it’s a very well-known brand and you put it together with the beauty brand, you really get a real cache. People want us. People want us in Argentina.

[E.V. Goings:]

And we get a larger average order and she makes more money.

[Simon C. Hemus:]

That’s important of course in South America and that’s why Avon in South America sells what I call stuff because otherwise you can’t run a business with just the average order on the beauty side of the business so you have to have the two. That’s why they have two catalogs. We have a branded catalog, our second catalog, much stronger consumer proposition. Much stronger.

[E.V. Goings:]

We used to be on a cycle back then at our former [inaudible] but what you’d see is you’d see the cosmetic, fragrance and toiletry business in Latin America and then you’d start, we called in channel leverage in the early days at Avon, and it started with the fragrance decanters at Christmas time. And then we’d get into other kind of stuff; intimate apparel, lingerie, etc. and you’d find that every two or three years you’d have to write off all kinds of inventory. But then you needed to grow sales again. They’d relaunch it again. So Simon’s been very disciplined with our business in Mexico. Don’t get into just stuff. It’s got to be branded; it can’t undermine our core brand names there; and we don’t want to do inventory write-offs in the future just to gain sales today.

[Simon C. Hemus:]

One of the things we’re actually doing in a number of our markets is we’re cleaning up the number of SKUs because there are products there that I don’t think I should be in. So we’ll get benefit from that as well. We really want to be focused.

[Unidentified Analyst:]

On Mexico, have you seen any impact from the slowdown in the US trickling into Mexico and what are your expectations in the next six months?

[Simon C. Hemus:]

Certainly in the north with a lot of the manufacturing for the US and then with the remittance of the US dollar, which is very important to the Mexican economy, we did see a slowdown but what we’re seeing now is we’ve gone out and we’re recruiting like crazy. So we’re building towards getting a double-digit sales force advantage which sets us up for 2009. This is another strong message to the operations is that we’ve got to go into 2009 with strong sales force advantage. It’s probably one of our number one priorities.

[Unidentified Analyst:]

[Analyst inaudible - no microphone]

[Simon C. Hemus:]

No. I don’t like to slow down anything. I’m going down there straight afterwards and one of the first things we’re going to do is, “How’s the sales force sales going?” That’s one of the first things I look at. Well, I look at it every week actually.

[E.V. Goings:]

Every Monday morning at 10

[Unidentified Analyst:]

I’m an equity guy so I always love share repurchase programs. I’m delighted with them. At what point do you have to consider hording your cash. You’ve already wisely delayed a pay down on some of your debt. You were just talking about accelerating the conversion of your non-cash working capital into cash. What kinds of business conditions would we have to see where maybe it’s just good business sense to keep as much cash on the balance sheets as possible if for no other reason than you don’t see the credit markets opening up for example?

[E.V. Goings:]

Let me comment on the first piece of that and then Mike will take it down more granular. First, we could have gone forward. There was a consideration today of, do we announce a five-year share repurchase program? A lot of smart people on our Board. We didn’t push the idea. We just said, “What’s best?” One of the reasons we took off the table the idea of a dividend increase is you’re locked into that right there. The worst thing flexibility wise is to reduce the dividend and frankly we don’t know what’s ahead here. We’ve been through similar times in many markets of the world so we know how to react. When the consumer environment slows down, we know how to do that. How long will it last? We don’t know. The second decision was, “Okay. Share repurchases.” The thought of doing both but don’t go out any more than a year right now and I have a strong feeling that by the end of June we’ll have a better lay of the land. But that’s where right now if you go to every one of our businesses, when I talk about vigilance, they have banners. If you go into our headquarters building, it says Mobilize, Mobilize, Mobilize. We started doing that six weeks before all of this meltdown on Wall Street because our instincts were that this isn’t going to be business as usual. So our people have been leaning into it. Mike, you might carry it beyond that then.

[Michael S. Poteshman:]

We talk about having a 1.5 to 2 times EBITDA leverage kind of a target and being in that range at the end of this year. We’ll continue to look at that and obviously that’s impacted by EBTIDA so if for some reason it goes down that would be built in I would say to our thought process. When we gave the guidance this year for $110 million to $120 million of cash flow from operating activities net of investing activities that’s below last year, that same measure was $152 million even though we’re making a lot more on income and that’s because of the factors that I mentioned primarily the [3AT] timing and the hedging. Hopefully, that goes back to more normalized next year. What needs to come out of that number, the $110 million to the $120 million are the dividend payments which are running around $54 million and then any share buybacks we do but hopefully a recovery in the amount of cash flow. So the rest, and that’s why we say we still perceive being able to pay down debt. If those metrics start to change then we’ll need to think about doing something differently. I don’t think even today aiming at 1.5 to 2 times EBITDA leverage I don’t think is real aggressive in terms of being overleveraged so we’ll keep our eye on that.

[E.V. Goings:]

We’re looking at too the things that you can monetize too. That’s why the big focus on inventory out there, focus on our accounts receivable. We’ve still got $75 million worth of land. By the way, the anchors are all in, the Lowes, the BJs, etc. that are – by the way, one person our general counsel manages that and we’ve already brought in $75 million on that. Good news on our banking relationship, JP Morgan’s been our led bank. We’ve got a lot of strong banking relationships because we’re 85% outside the US and we’re known as the nationality, we’re not known as an American company. We’re know as Tupperware if you’re going to Austria, we’re just known as part of that local economy so there is a lot of relationships there we could leverage. But, we started talking about that several months ago too.

[Unidentified Analyst:]

What about out positions or buying up some brand names? With the market being what it is there’s a lot of opportunity there and if you were to do that, I know we talked about it last week when I saw you. Would you use the cash produced, stock, would you stop the share buybacks, would you have to over lever yourself? What would you do in that sense? And with you going to Europe, where would you go?

[E.V. Goings:]

Personally, we don’t need – we got in to cutlery, cookware, etc. we don’t need to buy someone else’s brand name out there. We wouldn’t do it. We would do very much like what Nike does. I mean, when we got in to higher tech products, they’re called TupperChef, third party source makes it for us and they want to become a Tupperware factory for us. So, we’ve built these strategic alliances out there. Never say never but I don’t see the need for us to do any acquisitions down the road. By the way, most of the companies that say there in direct selling that are public, other than Avon, [inaudible] traditional direct seller, the Herbalife’s, NuSkin, all those, those are multilevel marketing companies. Those are mostly wholesale buying clubs and we, by the way, don’t believe they are very good model for public markets because their episodic. They’re recruiting machines, boom, bust. One right now, [Arbonne], we’d hear about it a couple of years ago they were a billion in sales and I’ve had three or four phone calls about do we want to buy them because now they’re in trouble because those things run out of steam. That is not the kind of business we are. There are real customers out there, real hostesses that have Tupperware parties, real customers that love Tupperware and we only recruit people who really want to sell. If you want to buy our products at wholesale, we don’t encourage people to get involved in our business. We want people who sell. So, our use of cash going forward we want to get it down to five or seven factories and yet we want to evolve to that so don’t expect us to have any big reengineering program. I think what did we put $10 million to $12 million away?

[Michael S. Poteshman:]

We’ve been running at about a $10 million pace. We have $11 million in the outlook this year.

[E.V. Goings:]

And what we’ve been looking for is those opportunities where we can keep in Europe, move machines further south and further east, modeling machines and then you’re left with real estate and you don’t have all these huge social costs for severance. I mean, we’re managing like a private company that way, that’s spending shareholder money. So, I think in the future the number one thing you’re going to see is we’re going to be a cash flow machine. It’s going to be buying shares, raise dividend. Thank you very much for your time today.