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A leading investment firm in the health, wellness and fitness industries, JD Ford & Company estimates that the health and wellness market segment represents a staggering $600 billion globally, and growing. According to the World Federation of Direct Selling Associations (WFDSA), direct selling companies in this segment currently make up about one quarter of the industry’s $132 billion in global retail sales. Clearly, the direct selling industry has room to continue gaining health and wellness global market share.
Direct sellers have always known the power of the testimonial to share a product and its key features and benefits. In fact, some might argue the entire industry was built upon the power of this type of sharing. Testimonials and personal stories serve to assure customers that the product or service offered lives up to its claims, and reduce anxiety associated with buying the product. It’s a very powerful marketing technique, providing “third-party” information that others just like themselves experienced the product and saw excellent results.
Direct sellers have started to maintain a Scientific Advisory Board to provide oversight to the company’s executive team, including individuals from leading academic institutions such as Stanford, Columbia, Berkeley, Cornell and Yale.
Sometimes, however, customers or others involved in consumer affairs such as regulators require more than a shared personal story as validation for a company’s products. Many of the direct selling companies making up this $132 billion number in health and wellness have elected to focus on the scientific validity and substantiation of their products in a big way. They are doing so by hiring scientists, building state-of-the-art labs and research facilities and constructing Scientific Advisory Boards to oversee their efforts and hold them accountable.
Spencer Reese of Grimes & Reese PLLC, a law firm specializing in direct selling, believes that government agencies will only be increasing their oversight of the dietary supplement industry. He says, “As the FTC becomes more and more stringent with its regulations, direct selling companies and retail brands will be challenged to back up their testimonials with clinical studies—in other words, science.”
In essence, those regulators want to see “hard evidence” that product claims are real. Direct selling dietary supplement companies, long known for successfully selling products through testimonials, are ready for the challenges ahead. The products these companies manufacture and sell are now more and more backed by very rigorous and thorough science.
Born in Science
But don’t think that the products prevalent in the industry today evolved to their current state without science. For some of the industry giants, science has always been a natural part of their operations, even if the general public didn’t know it.
1n 1934, an American named Carl Rehnborg returned to the United States after many years living in China. He had noticed the great difference between the health of the Chinese in rural farming communities, where fruits and vegetables were plentiful, and that of people in the cities with less access to fresh nutritious food. Back in California, he set up a lab, equipped with one of the earliest gas chromatography machines, used to identify key substances within a sample. His experience in China and his experiments led him to believe that extracting pure food and maintaining its bioactive properties could help “fill the gaps” in the diets of individuals who weren’t getting everything their bodies needed from the food they ate.
Seeing that pure food could help “fill the gaps” in the diets of individuals, Carl Rehnborg, Founder of Nutrilite—now owned by Amway—created the first commercially successful multi-vitamin/multi-mineral product.
In his laboratory, Rehnborg created the first commercially successful multi-vitamin/multi-mineral product. That multivitamin became the foundation of what is today the world’s largest dietary supplement brand, Nutrilite. Owned by Amway, the Nutrilite brand is sold in 58 countries, generating over $4.5 billion in sales for Amway.
Dr. Forrest Shaklee was also an early pioneer in the processes of extracting nutrients from food and encasing them in a pill form. In 1915, Shaklee introduced a product called Vitalized Minerals to the public, well ahead of the public’s understanding of the value of supplements. In 1956, Shaklee founded the Shaklee Corporation at the age of 61 after spending a lifetime studying nutrition and the value of good food, releasing the Vita-Lea multi-vitamin/multi-mineral at that time, and growing into a leader in the direct selling industry. The Shaklee Research Center was formally established in 1971, where the Health Sciences Team continues to innovate, investing over $250 million in research and clinical trials, validating their products.
A few companies in the direct selling arena developed out of even more intense science. USANA Health Science’s founder, Dr. Myron Wentz, spent his career on the world health stage, a recognized pioneer in the study of human cells and the diagnosis of infectious diseases. With a Ph.D. in microbiology, specializing in immunology, he came to believe disease prevention was as important as disease detection. In 1992, after a 30-year career in cellular study, Wentz founded USANA. The company has grown to generating over half a billion dollars in revenue by staying committed to “nutritional technology.”
In a few cases, the dietary supplement products themselves are actually associated with a specific scientific breakthrough or discovery. In 1978, renowned scientist and researcher Gustavo Bounous led his team to the discovery of a dietary protein source that would boost the immune system. Continued development and testing over the following 15 years led to the establishment of a product called Immunocal, a whey protein concentrate that helps to sustain normal glutathione levels. Glutathione is the body’s natural antioxidant. Immunocal would later become the flagship product of Canadian direct seller Immunotec.
Jimmy Gutman, M.D., Senior Medical Consultant at Immunotec, says, “Dr. Gustavo Bounous was the first to publish an association between glutathione and protein supplementation. As of 2012, there are approximately 100,000 articles written on glutathione. Many of them are really a spinoff of the work Dr. Bounous initiated 40 years ago at McGill University.”
Dr. Joe McCord, also a respected scientist, is now the Chief Science Officer at LifeVantage. He has researched antioxidants and their defense against oxidative stress for more than 40 years, having co-discovered the enzyme Superoxide Dismutase (SOD) in 1969. For his work, McCord received the Elliott Cresson Medal, awarded to distinguished inventors and scientists by The Franklin Institute. That puts him in the impressive company of Pierre and Marie Curie, Alexander Graham Bell, Orville Wright and Henry Ford.
“[Our product, Protandim] came out of academic research at universities,” McCord says. “A number of university faculties around the world are studying this just because of their fascination with it. It’s real cutting-edge science.”
So whether it is the products themselves introducing a scientific direction, or companies realizing the value in science and desiring to validate their company and product, direct sellers are certainly going full force. Herbalife’s Chief Operating Officer Richard Goudis, who formerly served as COO at Rexall/GNC, says, “At the end of the day, science is what differentiates direct selling companies from food and drug en masse. The companies that are successful today are relying more on science than ever before.”
“At the end of the day, science is what differentiates direct selling companies from food and drug en masse.”
—Richard Goudis, COO, Herbalife, and former COO, Rexall/GNC
The Perfect Distribution Method
And it doesn’t take a rocket scientist to figure out why the direct selling channel of distribution is the perfect match for any product that benefits from a “story” about its features and benefits. In 2008, David Brown, then CEO of LifeVantage, understood this aspect of the channel, and approached the Board of Directors with the idea of moving from a retail model to a direct selling model. He understood that an independent consultant could provide a customer with more understanding of the complexity behind the company’s products. He convinced the board it was a good idea, mainly by explaining that the largest companies in the dietary supplement arena and the only ones that expanded internationally were those using this model.
Ultimately the board agreed, and in 2009, LifeVantage relaunched as a direct selling company. For current CEO Doug Robinson, the channel is an exciting opportunity. He says, “To arm a distributor workforce with dynamite science-based products is pretty fantastic. What we’re experiencing is that marriage between a great science-based company and a great selling channel in network marketing, which includes very skilled and experienced distributors who are energized, hard-working, ethical people armed with continuing education.”
Many dietary supplement companies have also added the position of Chief Science Officer (CSO) to their roster of executive positions. In addition to the basics of overseeing R&D and clinical studies, the CSO is often responsible for having the results of their studies published in peer-reviewed publications—often prestigious and highly regarded medical and science journals. This is a level of accountability not taken lightly. To have one’s study accepted into a journal not only means that it meets the stringent requirements of the publication, but also that the authors of the study are opening up their work to the scrutiny and criticism of their peers and the entire medical and scientific community. Other scientists have the opportunity to inspect the work and object to it.
“A study that appears only online or on the Internet is not a published study,” says Immunotec’s Gutman. “This is why it’s so important that we use peer-reviewed journals to ensure that the scientific community has had a chance to do due diligence on our studies and ensure that standards are met.”
Direct seller Freelife International is also careful to seek validation of its clinical research by submitting it to peer-reviewed scientific and medical journals. “In the last three years, we have had 40 published papers in various peer-reviewed journals and scientific presentations in many international scientific meetings around the world,” says Ray Faltinsky, FreeLife International CEO and Co-Founder.
McCord says LifeVantage rarely engages or pays for studies performed on the company’s flagship product, Protandim. “Since the initial two studies conducted at the University of Colorado, researchers with their own and independent funding have contacted LifeVantage,” he adds. “Our science is our foundation, and we are proud of the scientific research that backs up our claims.”
Indeed, the level of scientific study and research and the proof of efficacy of the products among these direct sellers might be unmatched by any other industry. Additionally, the Chief Science Officers oversee the Scientific Advisory Boards—groups of doctors, scientists and researchers that interact with the company and their products. As many boards are made up of third-party non-employee professionals, these companies are building in high-quality oversight and accountability.
“Our board has input in our formulation development decisions, and they are invaluable in designing our clinical studies and in preparing them for submission to journals,” says Faltinsky. “They also take an active role in presenting our research at scientific conferences.”
John Cuomo, Ph.D., USANA Health Sciences Executive Director of Research and Development, says USANA’s Scientific Advisory Council includes medical doctors who use the company’s products in their practices. “These doctors give us feedback on how our products can be used in the marketplace,” he says. “They also conduct a fair amount of research whenever we want to reformulate products or design new products.”
Immunotec also maintains a Scientific Advisory Board to provide oversight to the company’s executive team. “This board does not contain any company employees,” says Gutman, Senior Medical Consultant. “It’s important for this kind of a board to be impartial and to have no potential conflict of interest so they can be completely candid.”
These Advisory Boards are packed with impressive pedigrees. Individuals hold degrees including Ph.D.s in biophysics, genetics, oncological biochemistry, immunology and molecular biology, to name just a few. Also on the Advisory Boards are practicing Doctors of Medicine in the fields of dermatology, aging pathology, allergy and immunology, oncology, pediatrics and more, with degrees conferred by revered institutions—counting Stanford, Columbia, Berkeley, Cornell and Yale among them. Additional members include chiefs of medicine at university hospitals and directors of institutes and research centers from all over the world.
For companies like Amway, whose Nutrilite brand started with strong science, that foundation is always present, even with the passage of time. From Carl Rehnborg’s first experiments in his small lab in California, to the breakthroughs of today, Audra Davies, the Director of Nutrition Product Development at Amway, says that scientific innovation will never stop. In her 14 years working with the Nutrilite brand and other Amway wellness products, she has seen amazing growth, both in the sophistication of the tools used and in the development of products. “The dietary supplement industry has matured in the types of products offered and the level of science behind them,” says Davies. “In the past, very few clinical studies were done. Now, in addition to clinicals, leading academic institutions are involved in validating data.”
These academic institutions include Tufts, McGill, Cornell and Yale—universities whose very names invoke respect and trust. When companies can produce studies validated by these research heavy-hitters, they not only satisfy the FDA, but reap the benefits of enormous trust among their distributors and customers. The high-quality associations go on and on: Herbalife’s Nutrition Advisory Board is chaired by David Heber, M.D., Ph.D., who serves as the Director of the UCLA Center for Human Nutrition. The FreeLife International Scientific Advisory Board is composed of a multi-disciplinary group of experts from universities including Tufts, Cornell, Columbia, University of California, and University of Sydney and University of Queensland in Australia.
Calvin McCausland, Ph.D., Chief Scientific Officer and Health Sciences Advisory Board Chairman at 4Life Research, says, “Our Health Sciences Advisory Board includes immunologists, microbiologists, medical doctors, toxicologists, researchers, scientists, and nutritionists—all who inform the decisions 4Life’s research and development department makes on our new product launches and formulations.” He adds, “These board members participate in a monthly phone call where we discuss ideas that we are going to pursue as we develop products.”
And this scientific validation isn’t lost on consumers. They have become increasingly informed and educated with the vast amount of information available through the Internet. “Access to information is more readily available than ever before,” says Herbalife’s Goudis. “If I am a customer sitting across the table from you and you’re talking about a supplement or product, I can use my smart phone to look it up on the Internet and ask you further questions. That’s requiring us to spend more money and time training our distributors so they can educate their customers.”
FreeLife’s Faltinsky believes scientifically savvy consumers are becoming more wary of unsupported claims due to a culture that embraces science. “Thanks to celebrity health experts like Dr. Oz and shows like The Doctors, consumers are becoming more familiar with science as it applies to health and nutrition,” he says. “The last thing a direct selling company wants is to be accused of selling snake oil, and having good scientific support can go a long way to instill and reinforce confidence in a company and its products.”
Gutman agrees, saying, “People are eloquent about science and they will not be sold a bill of goods. Scientific validation is important and will become even more important in the future.”
Direct sellers are counting on it. Herbalife will soon open a new, state-of-the-art extraction facility in Changsha, Hunan Province, China. The company will use the 80,000-square-foot facility to process approximately 8,000 metric tons of raw materials annually through extraction, purification and drying of powders and liquids. The new facility is part of Herbalife’s strategy for quality control, purity and traceability on all ingredients throughout its supply chain.
“Building this new extraction facility will allow us to be 100-percent vertical in acquiring raw materials from the field, creating our own extractions and then putting those extractions into our manufacturing process,” Goudis says. “This will give us complete control of quality throughout the entire process.”
According to Goudis, Herbalife is also making more investments in clinical studies than ever before, saying, “Some studies are done to prove new benefits and advantages while others are done to prove existing benefits and advantages in markets where local regulators want clinicals done in their own countries.”
Amway has a similar philosophy, working to ensure that the biological activity of the supplements remains strong through every step of the process. Davies says that the science begins even before the seeds are planted on Amway’s own organic-certified farms. It starts with research on which bioactives in which plants best perform in supplements to “fill the gap” for people with concentrated fruits and vegetables. Carl Rehnborg set up this rigorous approach in the very beginning of his experiments in 1934.
At USANA, building new facilities to monitor raw materials, the extraction processes, and then manufacturing is only a part of the continued effort to increase internal standards and provide more than what is asked for by regulators. In July 2011, USANA Health Sciences announced it had obtained the U.S. Food and Drug Administration’s Drug Establishment Registration, allowing the company to manufacture over-the-counter drugs and holding it to a higher standard than what is required of a nutritional supplement manufacturer. “We decided to go with a higher standard with our manufacturing practices, making sure we’re putting together the best products possible and doing things like uniformity studies and process validations,” says Cuomo. “By following these practices, we are more or less welcoming the FDA to come out and check on us.”
Some individuals feel that dietary supplements should be more regulated here in the United States and around the world; others feel the system works as it is and that additional regulatory layers and levels of approval could negatively affect consumers. Spencer Reese of Grimes & Reese PLLC feels that more regulation is coming, and direct selling companies who already have their science houses in order will surely stay in the lead.
Herbalife’s CEO Michael Johnson has committed the company publicly to such disclosure, saying, “We’ll continue to invest in nutrition research, studies and ingredient usage. Everyone in our industry should be able to hold up their product and show the science that went into its development, the justification for ingredients, and how it was proven to do what it’s supposed to do.”
While nutritional supplements have drawn a lot of recent attention, the $600 billion global health and wellness market has plenty of room for direct selling companies to increase its claim of market share with other products, including beverages, weight-loss products and even fortified coffee.
And as the nutritional supplements industry continues to evolve, we can count on the direct selling industry to stand out in its commitment to sound science.
Brittany Glenn contributed to the research for this article.