Is Chula Vista Company the next Herbalife?
Youngevity on track to make Top 100 direct-sales companies
By Tanya Mannes April 30, 2012
Youngevity CEO Steve Wallach stand in the company's Chula Vista shipping and packaging warehouse where a pallet is ready for shipment. - Nelvin C. Cepeda
Youngevity Essential Life Sciences
Business: Direct-sales company focused on health and wellness with 100 employees at the Chula Vista facility. Founded in 1997 by Dr. Joel Wallach and Dr. Ma Lan; CEO is Wallach's son Steve Wallach. Owned by AL International, a new entity formed when Youngevity merged with Javalution Coffee Company in 2011
Revenue: $40 million in 2011; $67 million (projected) in 2012
Products: Dietary supplements and sports nutrition to essential oils, skincare and cosmetics, lifestyle products (pets, spa and bath, garden), and gourmet healthy coffee. A total of 20 brands carry the Youngevity banner, including Youngevity Mineral Makeup, to JavaFit Healthy Coffee and Soul Purpose, a line of multi-cultural inspired spa and personal care products
Could a Chula Vista nutrition-supplement company be the next Herbalife?
Steve Wallach thinks so. He’s the CEO of Youngevity Essential Life Sciences, which develops and sells health and wellness products — liquid supplements, weight-loss programs and skin creams — through independent distributors who mainly work from home.
Its most popular product is Beyond Tangy Tangerine, a citrus-flavored drink mix packed with vitamins, minerals and amino acids. A newer product is a “functional gourmet coffee” enhanced with added nutrients. It also sells the ThighMaster Toning System and other products by Suzanne Somers.
"It’s not just about length of life; it’s about quality of life,” Wallach said. “If there’s a silver lining to the poor economy, it’s that people seem to be taking better care of themselves.”
The 15-year-old company is growing rapidly. It had $40 million in sales last year, nearly double the previous year’s sales. Its 58,000-square-foot headquarters and distribution center in Chula Vista ships out enough packages each day to fill a semi truck. Through a recent merger with a publicly traded company, it’s on track to do $67 million in sales this year, Wallach said.
The company contracts with mostly U.S. producers to make its products with ingredients from around the world. Some of the suppliers are trade secrets, but one of its primary producers is the giant Pharmachem Laboratories in New Jersey, Wallach said.
Wallach’s goal is ambitious. He wants Youngevity to be among the top direct-sales companies in the world. This year, he expects the company to break the Top 100 under the umbrella of newly formed AL International, he said.
“Herbalife is a big model for us,” he said, referring to the Los Angeles-based nutrition-supplement company. Herbalife is the fifth largest direct-sales company in the world, with $2.7 billion in annual sales, according to Direct Selling News.
Both Herbalife and Youngevity use multilevel marketing, a business strategy that turns customers into a sales force. The products are sold through a network of distributors, such as moms and chiropractors, who earn additional income by recruiting other distributors. Some liken this system to a pyramid scheme, but it is a $125 billion industry dominated by reputable companies such as Mary Kay, Amway and Avon. (One of the board members of Youngevity is the former chairman of Mary Kay.)
The company’s products are based on the controversial teachings of Wallach’s father, Dr. Joel Wallach, a veterinarian and naturopathic physician who believes all diseases — cystic fibrosis and Down syndrome, to name a few — are rooted in dietary deficiencies. An early proponent of colloidal minerals, his health claims were disputed in the 1990s by the National Council Against Health Fraud, a non-governmental group that appears to no longer be active; and by doctors and nutritionists.
At Youngevity’s shipping and packaging warehouse in Chula Vista, Steven Sanchez uses the company’s computer system to scan and ship large volumes of packages.
Steve Wallach says that his father was just ahead of his time.
Today, the senior Wallach is on the company’s scientific advisory board and is a sort of evangelist, giving hundreds of talks a year to its distributors. “My philosophy is you have to supplement before you get sick and you can add 25 to 50 healthy years to your life,” said Joel Wallach.
Debate over the value of alternative health care methods is common. In the 1980s, for example, Herbalife was fined by regulators for making unproven health claims; years later it had to remove ephedra-containing herbs from its products after that ingredient was linked to health problems. The company is now among the world’s most recognized brands with numerous sports sponsorships, including the Los Angeles Galaxy pro soccer team.
Youngevity doesn’t yet have the resources to sponsor a sports team. (“Maybe someday,” Wallach said).
HOW DOES IT COMPETE?
U-T San Diego asked CEO Wallach what makes the company stand out.
Its history. The company was established in 1997 and has more than 400 products. “We’ve been involved in this industry long before it was popular,” said Steve Wallach. The company has been active in the federal discussion on regulation of nutritional products. It successfully petitioned the FDA to authorize certain health claims about omega-3 fatty acids and selenium.
Unique products. The company says that its proprietary mineral waters, extracted from layers of humic shale deposits in Utah, have nutrients not available in other supplements. One of its newer products is JavaFit Healthy Coffee, enhanced with vitamins and other nutrients. “It’s one of the only ‘functional’ coffee drinks out there,” said Steve Wallach.
Scientific backing. The company relies on a scientific advisory board chaired by Dr. Gerhard Schrauzer, known as the “grandfather of selenium research.” Schrauzer is a professor emeritus in the department of chemistry and biochemistry at the University of California San Diego. Schrauzer calls Dr. Joel Wallach a “pioneer” in nutritional research. “There are people who wrongfully claim that we get all the necessary nutrients from the four food groups and we don’t need supplementation, and they need to be silenced because it’s not true,” said Schrauzer.
Celebrity connections. The actress and self-help author Suzanne Somers lends her name to beauty products and fitness equipment. NBA celebrity Theo Ratliff also endorses the products.
Sales force. The company says it has about 50,000 people selling its products, mostly out of their homes, and is actively growing the network.
U-T research manager Merrie Monteagudo contributed to this report.