Though multi-level marketing (MLM) supplement sales currently make up just 20 percent or so of the entire supplements market, according to the industry journal Nutrition Business, countless numbers of consumers in the United States and elsewhere got their first introduction to the potential benefits of nutritional supplementation through direct contact with distributors working with network marketing companies (often called MLMs).
An estimated 14 million people in the United States today work part-time or full-time as direct marketers for about 1,200 direct marketing companies, with 50,000 joining each day. But the dropout rate for new direct marketers is high, by some estimates up to 98 percent within six months of joining.
In spite of this high turnover, this form of distribution remains a relatively effective way to provide the general public with vitamin supplements, with the added bonus that this form of person-to-person contact can be a valuable way of educating people about the need for proper nutrition.
Comparing the quality of direct-marketed products versus those sold in traditional retail outlets is a question that has rarely been raised until now, but we consumers deserve to know that there are both similarities and differences that can and should impact our buying decisions.
In spite of claims of superior quality made by many direct marketing organizations, the majority of supplements sold by direct marketing organizations contain synthetic ingredients and adhere to the same basic production standards as the chemical supplements produced by conventional retail and pharmaceutical firms.
As a result, they can suffer from the same limitations in quality. The majority of supplements we are speaking of, which is to say any non-naturally occurring standard supplement, regardless of how they are distributed, tend to perpetuate a myth of quality that needs to be dispelled.
I have also reviewed a lot of other dietary supplements, if you are interested, you might check them out.
Be Wary of Inflated Claims
Marketing and advertising campaigns try to create a perception of quality and superiority of one brand of product over another, and so must engage in some degree of hype or even myth-making that can stretch or hide the truth.
That is the inherent nature of the economic competition game. But unlike other categories of consumer products, those products that affect our health require special scrutiny so that hype and reality part ways in our decision-making.
The inadequate labelling laws currently in place encourage some supplement sellers to stretch the boundaries of truth about the purity and effectiveness of their ingredients and products. Of course, many of these same supplement makers actually do believe their own hype, and not just for the convenience of financial gain, but because they have bought into—and have failed to question—a synthetics belief system that places the creations of the laboratory on a level equal to the creations of nature.
Federal laws prohibit employees of supplement retail stores from making medical claims or dispensing medical advice to customers about which particular products they should use to treat diseases or symptoms of the disease.
It is true that many retailers and their employees learn how to skirt these laws in a variety of ways, and the potential for the abuse of customer trust escalates sharply when direct marketing person-to-person contact comes into play.
In a direct marketing system, the emphasis is on product distributors recruiting more distributors to form networks so that sales profits are distributed both “downline” to associated distributors and “upline” to the parent corporation.
The origins of this distribution concept can be traced back to 1959 and two young entrepreneurs who founded the Amway Corporation. They expanded on an idea developed in the 1930s by American businessman Carl Rehnborg, who produced food supplements and encouraged his friends to sell them on commission. His California Vitamin Corp. changed its name to Nutrilite Products in 1939, and within eight years it had 15,000 door-to-door sales agents who promoted the product using a booklet titled “How to Get Well and Stay Well.”
This booklet claimed the supplement was effective in “almost every case” against asthma, allergies, irregular heartbeat, depression, and at least 30 other common maladies. It also implied that the supplement could treat heart disease, cancer, and every serious illness known to humankind. When the U.S. Food and Drug Administration brought legal action challenging these declarations, a federal court in 1951 issued a permanent injunction forbidding the company and its agents from making such unsubstantiated claims.
Most direct marketers today emphasize the illegality of making medical claims about supplement products, yet the words often fall on the deaf ears of enthusiastic distributors who have set sights instead on the promise of financial freedom.
In truth, the majority of direct marketers are selling financial opportunities, even if they initially approach you about the quality of their product. This is part of the reason why the direct marketing industry has earned itself a less-than-favourable reputation throughout the years.
Many direct marketing companies also require their distributors to purchase product samples, or even require them to buy promotional and teaching materials such as CDs and DVDs, or they must pay for attendance at conferences and conventions. All of this contributes to pressure that distributors feel to recruit others into their network, even if they have to make exaggerated claims about profits that can be made and the effectiveness and value of the products being marketed.
An analysis of more than 100 direct marketing companies offering health-related products, mostly vitamins and other supplements, was conducted in 2003 by the National Council Against Health Fraud, which reached a series of conclusions:
Every one of the multi-level firms examined made false or misleading claims about their products in their promotional materials handed out by distributors.
Products such as vitamins that claimed nutritional value were “invariably overpriced.” Across the board, direct marketing company supplements “generally cost much more than similar products” that are purchased through retail outlets.
Direct marketing distributors, in order to compete with retail outlets, must convince their prospective customers “that their products are superior, even though [in most cases] they are not.”
Most of the direct marketing companies selling supplements “get their raw ingredients from the same bulk wholesalers and merely repackage them into brand-name products.”
This last point is worth some elaboration. Much of what these companies promote as their “unique” and “special” vitamin/mineral formulated products are simply generics that come from the same small group of five private label manufacturers in the United States that provide the bulk of materials: Arnet Pharmaceuticals Corp., in Davie, Florida; Botanical Laboratories, Inc., in Ferndale, Washington; Contract Pharmacal Corp., in Hauppauge, New York; Leiner Health Products, Inc., in Carson, California; and Perrigo Company, in Allegan, Michigan.
Because nearly all direct marketing companies and major retail distributors get their supplement materials from the same basic suppliers, that means most direct marketed products are simply no better—or worse—in quality than the standard supplement company products.
In fairness to people involved with direct marketing programs, it should be pointed out that many people who are selling supplements and giving nutritional advice are not qualified to do so, and that includes nearly all physicians. Few medical schools even offer comprehensive courses on nutrition. Many non-medical people with a passion for vegan nutrition—some of whom may distribute plant- and food-based direct marketed products—know far more about authentic nutrition than most doctors, many of whom also distribute private-label chemical supplements.
Additionally, most Western-trained dieticians and nutritionists, until recently, have been schooled in the chemical paradigm, rather than the whole-food, naturally occurring paradigm, when it comes to supplements, specifically in the benefits of consuming isolated (chemical) nutrients—the foundational and flawed assumption upon which the entire vitamin industry was built beginning 100 years ago.
New Technologies and Claims of Superiority
Higher prices do not mean higher quality! An examination of numerous products and their ingredients, and the associated Websites of supplement manufacturers, presents consumers with the following picture.
Some advertise their supplements as being “all-natural,” free of preservatives, colourings, and other artificial additives, but if you examine their ingredients closely you will still find that the nutrients are synthetic and not from naturally occurring sources at all.
Others say their nutrients are “modeled after nature,” which is a dead giveaway that these are synthetics. Just duplicating in a laboratory the molecular structure of a nutrient does not mean that the synthetic will behave like a molecule from nature once it is inside the human body.
Organic is sometimes placed on labels even when the product’s ingredients are a mix of organic and synthetic. Still, others claim “high potency” supplements provide us with an important extra dose of a particular chemical that, based on our experience, is harmful in the first place. And they are charging more for it.
Finally, consider the safety implications of what is being done to supplements in the name of “product innovation” and “special features.” In an attempt to prompt the human body to more readily absorb a greater percentage of nutrients from supplements, some companies using synthetic ingredients in their supplements are experimenting with the addition of nano-sized particles in both vitamins and inorganic minerals to facilitate absorption into cells.
Nanotechnology is being introduced at every level of the world economy, from plastics and textiles to sunblocks and cosmetics. So it was inevitable that nano-particles would turn up in supplements.
Nanoparticles can be as small as 100,000th the thickness of a sheet of paper, and this tiny size enables chemicals to enter the bloodstream and penetrate cells and body organs in a way never before possible with conventional chemicals.
But does shrinking the particles of synthetics down to this tiny size create safety problems we should be concerned about? “The chemicals industry has blithely assumed that if large grains are safe, smaller ones will be too,” concluded Nature, the science journal, in a 2006 article titled “Nanoparticles in Sun Creams Can Stress Brain Cells.” “But that assumption is coming under
increasing scrutiny and is not necessarily always valid.” Emerging health concerns associated with nano-particles were well summarized in a November 22, 2007, article titled “A little risky business” in Britain’s The Economist magazine: “Research on animals suggests that nano-particles can evade some of the body’s natural defence systems and accumulate in the brain, cells, blood and nerves. Studies show there is the potential for such materials to reach the lung and cause inflammation…to other organs; to have surprising biological toxicity….”
You will need to read product labels even more carefully than ever before to detect the presence of nano-particles if they are listed on labels at all. One giveaway will be if you see the terms micro-fine or ultra-fine associated with the ingredients listed.
Are You Really Getting What You Pay For?
Yes, it is a myth that direct marketing products are necessarily superior to what you find in retail stores and doctor’s offices, but it is also a myth that what you get in most retail stores and doctors’ offices is superior to products marketed directly to you.
In terms of superiority, there is only one question: Is it NOS or not NOS? Unless the answer is NOS, you are getting nothing of what you think you are paying for. Let’s take a closer look at the costs to you, the consumer.
Because direct marketing distributors make money by purchasing supplements wholesale from the parent company and reselling them at a profit, and by receiving commissions from sponsoring others who resell at a profit, the markup on the product price is above and beyond the cost of producing the product can be substantial. These network costs equal—and often exceed—retail store costs, which must factor in wholesalers, store employees, marketing, advertising, and so on, to the prices they charge.
An industry insider, who has worked with both direct marketing companies and retail stores in selling supplements but the economics of production costs into focus this way. Synthetic vitamin C, for example, is relatively cheap to produce in a laboratory compared to naturally occurring vitamin C. You can picture the difference this way: Chemists in a lab isolate and extract the “active ingredient” of vitamin C, which they say is ascorbic acid, then they duplicate it cheaply using a synthetic chemical process on a production line.
By contrast, naturally occurring vitamin C is extracted from an actual plant or fruit, which requires labour-intensive harvesting. Then it undergoes processing that condenses the essence of that plant or fruit—along with all of its important nutrient cofactors—into a dense nutrient pill, powder, or liquid form.
So the ultimate cost of growing and harvesting the plant, fruit, or herb source, the cost of shipping it for processing, the cost of extraction, and the cost of actual processing all combined together results in a higher price than most synthetics.
Given that economic reality, if you see synthetics that are the same price or higher than the same type of supplements taken from a natural source, your consumer alarm bells should start ringing! Production of synthetic vitamin C costs 80 to 90 percent less per unit of value (potency claimed) than whole-food naturally occurring vitamin C, which is the main reason why synthetics bought from bulk suppliers are so attractive to most supplement manufacturers, including those in the direct marketing field.
If a manufacturer buys a finished vitamin product from a bulk manufacturer for, let’s say, $3, after production, marketing, and distribution costs (which vary based on the type of distribution—retail versus direct marketing), the price will be anywhere from $12 to $15 (wholesale).
The general retail markup is typically 100 percent over wholesale, so a consumer will pay around $30 retail for a product that actually costs less than $8 to manufacture. Consumers can count on a minimum retail price/cost ratio of 10 to 1, for a chemical product that may also be “costing” you your health.
In contrast, the base cost of a purely whole-food vitamin supplement that is organic and NOS certified is approximately two to three times the base price of the synthetic vitamin product from a bulk manufacturer. Retail prices are understandably higher for NOS products as compared to their synthetic counterparts—however, not much higher. Keep in mind also that in many cases lower dosages of NOS supplements can be used to achieve the desired results, simply because the supplements can be fully utilized by the body, which offsets their higher retail expense.
One additional point on the pricing of NOS supplements: Because NOS supplements cost more to produce, their value is not yet fully recognized by consumers. As such, the retail markup over wholesale on some NOS supplements can be as low as 50 percent to remain “competitive,” even though the products offered by the “competition” are synthetic and of far lesser quality and value.
As we noted earlier, the cost of some products distributed through direct marketing channels can be higher because of the commission and incentive programs that are in place to drive the building of downline networks, and because of their own beliefs of superior product quality.
The industry publication Nutraceuticals World featured an article by Rebecca Madley in a July 2001 issue in which numerous direct marketing company executives were quoted as giving various justifications for their supplement prices being higher than those in retail stores. “In terms of our products, you can’t find them anywhere else, so we have a unique proposition,” said one executive.
A president of one of the larger direct marketing firms said that direct marketing is like a doctor who makes house calls: “A doctor who makes house calls would probably charge you more than a doctor who makes you come to his office, e.g. our approach to one-on-one marketing versus retail. We pay our people more.”
One direct marketing company even makes this claim on its Website about why it has higher prices: “Products that are more expensive usually have greater features and benefits over competitive products.”
But when it comes to synthetic nutrients taken from the same bulk suppliers, their attempts to compete about the quality are mostly an illusion. Supplement sellers that rely upon synthetic ingredients are competing with each other based more on marketing strategies and branding claims than on true product quality differences.
To illustrate this point, a February 2008 Associated Press investigation revealed how a direct marketing company marketed a nutrient drink at nearly $40 a bottle, calling it an antioxidant immunity booster.
But when the product was tested in a lab at Oregon State University’s Linus Pauling Institute, it was found to have antioxidant strength no greater than a comparable-sized product sold for just $3 or less at retail stores. Consumers were paying 10 times the price they would for comparable products because they believed the stories of health benefits being told as part of the company’s marketing strategy.
As Anthony Almada, president and chief executive of GENr8 Inc., a dietary supplement company, admitted to the Associated Press: “The industry is built on storytelling, and because they do it one-on-one, without advertising, they don’t incur the wrath of the FDA.”
Although you might be alarmed to learn this, vitamin supplement manufacturers across the board, regardless of distribution methods, are freeing themselves from liability by using the simple phrase “this statement has not been evaluated by the FDA.” In these cases, if the supplement does not carry the NOS certification, we advise you to inquire further about the vitamin source.
The stark reality of today is that few sources of supplements, be they standard supplement distributors, from doctors, or from direct marketing companies, offer naturally occurring vitamins and minerals that have been proven to be completely free of all synthetic ingredients, including colourings and other additives.
Yet they are charging consumers as if they were. Although we could debate the issue of high mark-ups in the vitamin-supplement industry, it is difficult to debate—in the case of chemical supplements—that you are getting far less than what you believed you were paying for, and perhaps far more than you bargained for.
We encourage all companies, no matter what marketing system they use, to abandon synthetics, which are overpriced and with unproven or over-valued health benefits. We urge them to instead develop only plant-based non-synthetic products as a service to the cause of public health.