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Tuesday, May 28, 2024

Pill Powerhouse

What began as a one-room lab on Balboa Island in 1927 now is a powerhouse in vitamins and other health supplements.

Nutrilite, part of the Amway Corp. empire of Ada, Mich.-based Alticor Inc., takes up 22 acres in Buena Park, where it makes more than half of the brand’s vitamins and other supplements.

Last year, Nutrilite sold $3.4 billion worth of vitamins and related products.

The company founded by the late Carl F. Rehnborg now is run by son Sam Rehnborg, who serves as president and is known as “Dr. Sam” by workers and customers.

Officially founded in 1934, Nutrilite plans to mark 75 years in business in October.

With an almost cult-like status, Nutrilite provides vitamins, nutrition bars and powders to an army of mostly part-time, independent sellers who thrive by converting people in their personal networks to fellow buyers and sellers.

Amway’s founders and owners of Alticor, Richard DeVos and Jay Van Andel, at one time were top Nutrilite sellers. They left in 1958, taking several sellers with them to start Amway. They returned to Nutrilite as investors in the 1970s and acquired all of the business in 1994.

DeVos also owns the Orlando Magic basketball team.

Nutrilite makes up about 40% of Alticor’s more than $8 billion in yearly sales.

Rehnborg said he credits DeVos and Van Andel for using the direct selling strategy of his father to turn Nutrilite into a global phenomenon.

“My father evolved this method of turning customers into distributors,” he said.

Direct selling generates about $30 billion in yearly U.S. revenue, according to the Washington, D.C.-based Direct Selling Association.

Nutrilite doesn’t disclose how many sellers it has. The company said it’s seen a 10% increase in sellers from a year ago, due largely to a high number of unemployed people looking to make money.

“Our business model does its best recruiting in times like this,” Rehnborg said. “This is when we tend to get our best distributors.”

Nutrilite’s sales are up about 4% from a year ago, which Rehnborg said he considers “strong” given the economy.

“People are more likely to cut out lattes, Coke or hamburgers—not our products,” he said.

Nutrilite faces a perennial challenge in the stigma some attach to direct sales companies.

Some see them as get-rich-quick schemes.

Others may have a bad image from a pesky uncle who tried to sell them products over Thanks-giving dinner.

In the case of vitamins, the lingering issues of Los Angeles-based Herbalife Ltd. may come to mind.

The company is fighting a lawsuit by former sellers alleging Herbalife is a pyramid scheme. In 2004 the company settled a similar suit by paying $6 million to 8,700 sellers and enacting reforms.

In the 1980s, California’s attorney general sued Herbalife over claims about the effectiveness of its supplements. The company settled without admitting wrongdoing.

Through the years, Amway has faced its own scrutiny by regulators and charges it is a pyramid scheme. In 1979, the Federal Trade Commission ruled Amway wasn’t a pyramid scheme but required changes to the business.

Nutrilite is different in that it makes all of its products and doesn’t just market them, according to Rehnborg. It offers tours of its Buena Park factory and research and quality control labs to foster openness, he said.

Using independent sales representatives is the best way to sell Nutrilite’s products, Rehnborg said.

Nutrilite also relies on sponsorships of soccer stars, Olympians and Italy’s AC Milan soccer team.

Most of the company’s products are made from crops grown on its 6,400 acres of farmland near Palmdale and in Washington, Mexico and Brazil.

Its products are made from 150 plants such as alfalfa, watercress, cherries and herbs, which are shipped to Buena Park and other facilities.

Manufacturing Space

Buena Park has 390,000 square feet of space with 140,000 square feet for manufacturing and packaging. The site handles about 6 billion tablets and capsules a year.

Nutrilite also produces in China, Vietnam, Brazil and Mexico. Even with California’s higher costs, Nutrilite keeps manufacturing in Buena Park because it likes to have everything in one spot.

“This is where it started,” Rehnborg said. “People have been working here for 40 years.”

Buena Park also holds the Nutrilite Health Institute Center for Optimal Health, which sees about 12,000 visitors a year who come for education.

Nutrilite employs about 775 people locally. It hasn’t made any recent layoffs, nor does it have plans to make any large hiring pushes, officials said.

Rehnborg, who joined the company full-time in 1964, once took three years to sail around the world, visiting 39 countries where he studied dietary habits.

Nearly 100 years ago, his dad spent about 12 years in China as a sales representative for American consumer products companies.

After a failed attempt to sell milk—which the Chinese rejected for making them bloat—he took back home a belief that a plant-based diet was the best way to go for everyone.

In 1927, Carl Rehnborg set up his first lab on Balboa Island, though he was forced out after neighbors complained about the smell of alfalfa cooking.

Sam Rehnborg spends about 60% of his time traveling to the 50 countries where Nutrilite is sold. Like his father, he preaches healthy living and looks for potential customers.

Last month, Alticor bought a majority of San Clemente-based Metagenics Inc., a maker of vitamins and supplements geared toward addressing health concerns that will fall under Nutrilite.

Metagenics had sales of $200 million last year, according to Chief Executive Jeffrey Katke.

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