'Multilevel' marketing goes green.
The multilevel marketing technique, just one way marketers sell their wares directly to end users, involves selling not only products, but business opportunities as well. Each independent distributor at an MLM firm receives a commission on the products he or she sells - but also earns commissions and bonuses on all of the products sold by other distributors he or she recruits (the "downline" sales force). Because of the importance of repeat business, consumable products are standard MLM offerings. MLM companies emphasize the value of one-on-one selling of products to family, friends and associates in an informal atmosphere that allows the distributor to conduct product demonstrations, answer questions and provide information. Most MLMers believe that this personal touch gives their products an edge over retail and mail-order competitors.
Amway Corporation, the MLM kingpin with $4.5 billion in estimated sales for fiscal year 1993, though not founded on environmental principles, has recently taken to emphasizing its environmental accomplishments. In national magazine ads and in its literature, Amway boasts an on-site recycling center, the 1989 elimination of animal testing, biodegradable ingredients, concentrated and some phosphate-free products, a 1989 United Nations Environment Programme Achievement Award, and sponsorship of the American Forestry Association's Global ReLeaf project and Environmental Protection Agency (EPA) programs to reduce toxins and increase the use of energy-efficient lighting. Amway's "Environmental Mission Statement" reads, in part, "Amway recognizes its responsibility and role in both fostering and promoting sound environmental stewardship."
Shaklee, with $459 million in sales for 1992, was founded in 1956 and as early as the first Earth Day in 1970 was emphasizing the biodegradability of its products in its literature, long before emblazoning environmental attributes on product packaging became the norm. Today Shaklee also points to its Family Circle Magazine "Green Chip Award" and its sponsorship of Earth Day 1990, the Cousteau Society and the Sierra Club as evidence of its environmental commitment, as well as its two-for-one matching environmental gift program for employees, its concentrated products line (available in large refillable and/or recyclable containers) and its line of phosphate-free laundry products.
Enter the new kids on the block: upstart MLM companies with a decidedly environmental bent and a relatively low-key approach to sales and recruitment. Greenway, a multilevel marketing firm offering environmentally-friendly household and personal care products, was founded two years ago by Jim Whitaker, the first American to climb Mount Everest, and his wife Diane Roberts, who began operating the company out of a converted laundry room in their home.
Greenway hopes to top $1 million in annual sales by 1994. And although it officially counts 800-plus distributors, chiefly in the Pacific Northwest, spokesperson Pat Nelson notes that many of their distributors only buy occasionally and for their own use, while only 25 percent actively engage in sales.
Greenway's stated mission, "to work cooperatively to ensure a clean, safe Earth, for now and for future generations," hopes to tap consumer interest in environmentalism by offering products priced to compete with their mainstream counterparts. "Prices have to be as good as or better than grocery store prices, on a per-use basis," says Whitaker. Greenways products are manufactured by 20 or so subcontractors who, Whitaker says, "have contracts that guarantee the products are OK and not tested on animals." Pat Nelson says that almost all of Greenways cleaning products "will biodegrade within 24 hours... and there's no known physical or environmental hazard when they biodegrade." Greenway products contain no artificial preservatives, petrochemicals, perfumes, phosphates or dyes, and are predominantly packaged in recyclable plastic containers. "We have a strong mission orientation," says Nelson.
Natural World, another - and the largest-newcomer to the MLM green scene was founded by former Vestron Video owner Austin Furst Jr., also in 1991. Based in Stamford, Connecticut, Natural World markets cosmetics, household products, nutritional supplements and weight-loss products, and produces a catalog which enables repeat buyers to order direct from the home office (with commissions still going to the distributor), freeing up the distributors to make new sales contacts. "We chose multilevel marketing because it's the best opportunity to get the word out about the importance of nontoxic products," says company president Janice DeLong, who notes the difficulty smaller manufacturers have in competing for supermarket shelf space with industry giants like Procter & Gamble. In 1991, the fast-growing company had three employees; now it has 25, plus some part-timers. DeLong says that Natural World currently has about 6,000 distributors in 43 states who make "from $500 up to five-figure per month" salaries. "We don't give out statistics on our gross income but we are doing well financially," says DeLong. "I can tell you that our average sales per representative are much higher than the industry average."
Natural World uses "annually renewable resources" such as seaweed and fruit and vegetable enzymes rather then petro-chemicals in its products. The company received a rave review in the April/May 1993 issue of Downline, an MLM industry newsletter. Downline's editor, Corey Augenstein, says that "the environmental area of network marketing has the greatest representation of people motivated by something more than money ... they try to expound their own values through the companies and believe in the products - not just in making a quick buck."
Contact: Amway Corporation, 7575 Fulton Street East, Ada, MT 49355/(616)676-7196; Greenway, P.O. Box 2369, Oakland, CA 94614/(800)966-1445; Natural World, Inc., 652 Glenbrook Road, Stamford, CT 06906/(203)356-0000; Shaklee U.S., Inc., 444 Market Street, San Francisco, CA 94111/(415)954-3000.
In 1990, Austin Furst Jr. ran an ad in a tiny Connecticut weekly, the New Canaan Advertiser, for business partners in a new company. "The only requirement is a sense of humor," the ad said. At that time, Furst was not at all sure what kind of business he wanted to get into. His background was varied, including stints at Time/Life Films, People magazine, and as president of Home Box Office (HBO). He then became CEO of film and video marketer, Vestron Inc., best known for the early-80s smashing success, Dirty Dancing. But business reversals led Vestron to close in 1988.
Janice DeLong, then a senior associate with the venture capital firm, Oxford Partners, liked the idea of a company that valued laughter, and she'd been looking to get involved in running a business, instead of just buying and selling them. Together, Furst and DeLong came up with the idea for Natural World, selling Earth-friendly nutrition and cleaning products through what they like to call "network marketing." Says Furst, "I wanted to be involved in something I could genuinely be proud of. I wanted to live it and love it."
Furst also recalled an incident that occurred when he was at Procter & Gamble: A child became very ill from drinking Mr. Clean out of a cartoon figure-shaped bottle. The company responded by changing the packaging rather than the ingredients. Furst, noting the 4.7 million household cleanser poisonings a year (two-thirds in children under age six), resolved to market only non-toxic, ingestible products.
The duo were not motivated by idealism alone. DeLong conducted research showing natural products increasing their market share, and multilevel marketing as the best way to distribute. "Natural products were clearly a trend for the 90s," she says. "But health food stores were too small to handle our products, and supermarkets too big."
Delong is now president and CEO of Natural World in Stamford, and Furst is chief executive director. Is Natural World a "green" company? DeLong thinks so. "For every box our representatives recycle, we donate 10 cents to a charity chosen by them" (this year it was Earth Save). And, although some of Natural World's products are sold in hard-to-recycle #3 plastic bottles, DeLong says it will take back all such containers and ensure they don't end up in landfills.
Natural World was doing fine on its own, but it now has a rather formidable cash reserve. Furst recently won a dispute with his former bankers at Security Pacific, whose withdrawal of a huge loan destroyed Vestron - and the payoff was a record $100 million cash settlement. "Austin called me from the plane," DeLong recalls. "He had a cashier's check for the entire amount."
Natural World does not make its own products - they come from 12 independent labs around the country - but DeLong claims they're strictly monitored for quality and compliance with the company's "environmentally responsible" and "no animal testing" pledges, though she admits that "some ingredients" may have been tested on animals at one time. True to Furst's pledge, any of Natural World's products can be safely ingested by children - though they don't recommend it.
A poster in Natural World's boardroom reads, "We cannot direct the wind, but we can adjust the sails." The company appears to be heeding that philosophy by helping sail environmentally conscious consumers into the uncharted sea of direct marketing.
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|Title Annotation:||includes related article on 'green' networking; Amway Corp. and Shaklee see profits from environmentally safe products|
|Date:||Apr 1, 1994|
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