A second chance: not quite destroyed by flood, Reliv climbs to $60 million in annual sales

A second chance: not quite destroyed by flood, Reliv climbs to $60 million in annual sales

Duncan Maxwell Anderson

Four years ago, reliv in Chesterfield, Mo., survived a disaster you could only call biblical. The Missouri River overflowed its banks so far that the fast-growing little company was submerged in 11 feet of water. Reliv’s records and manufacturing facilities were destroyed. As founder and chairman Robert Montgomery told us, in direct selling you’re either growing fast or dying fast Reliv lost many of its distributors, as sales plunged from $47 million to $32.5 million, and its stock price dove accordingly.

Incredibly, the company has come back, projecting $60 million in wholesale sales for 1997. As Montgomery explains below, Reliv is investing in research programs to put itself at the forefront of the new “functional food” industry, where nutritional-supplements makers, with the FDA’s blessing, may openly promote the medical benefits of their products. Montgomery’s objective is to expand gradually into a monster in this multibillion-dollar marketplace.

How did you come to start Reliv?

Originally I’d planned to go to law school. In 1965, I was ready to take the exams, I’d just gotten married, and I was selling insurance to make money. It was a brand-new company where I was able to earn stock options, and I wound up staying. After five years I sold my shares and left to become an owner in another new insurance company, which was one of the first to do tax and estate planning. I sold out in 1980 for about $4 million and retired at 38. I had a lot of free time. I raised Arabian horses. Then I got bored

I guess that’s not the end of the story.

A friend got me taking Shaklee vitamins. He told me that everyone needs fiber to help prevent colon cancer, and I started taking alfalfa and lecithin. My mother had died of cancer the year before. I got interested in nutrition and health.

At a kind of nutritional trade show in Kansas City I met Dr. Theodore P. Kalogris, who had worked for the National Institutes of Health and had 17 different patents. One was for a powdered nutritional product that he said contained all the supplements you need for the day in one scoopful. He said that, many times, tablets shoot through you and don’t get absorbed, but a powder mixed with water goes right into the bloodstream. I loved the product and ordered it from him for the next five or six years.

In 1987 I started getting dizzy spells and headaches that fumed out to be caused by a brain tumor. The doctors removed it — it was benign — and they were astounded that I recovered so quickly. I concluded that it was because my nutritional state was so good. Around then my wife, Sandy, and I started tasking about marketing Ted’s product

With a direct-sales organization?

No. Ted had a contact with a food chain in the East — Giant Food Stores. His thought was to put it in their stores. I said, “You may be right, but I think it will sit there and gather dust.” A product like his doesn’t work unless someone is holding the product in your face and telling you why you should be taking it.

I definitely needed to be told why. I’ve been trying your Classic antioxidant powder, and when I open the canister, it sets up a powerful smell that ain’t roses.

You have to be a pretty good man to take this stuff. I mix it with some of our other products, so it doesn’t taste too strong.

I’d never built a Shaklee business, but I was intrigued with network marketing as a distribution method. Even though everyone had a negative attitude toward Amway, I knew they were doing pretty well. We had our first Reliv meetings in January 1988. Now we own the rights to four patented products and hold licenses to two more. We had scientific studies done in Germany showing that one of our products, Arthaffect, helps people with arthritis.

Are you allowed to say something like that on the label?

It used to be that you couldn’t make a claim of any health benefit unless you were selling something regulated as a drug. The official view at the FDA in the past was that nutritional supplements are essentially useless. But there was a change in attitude among the regulators a couple of years ago. Products can be described as having medical benefits to people with certain ailments.

Why? What happened?

A lot of evidence has come forward that they just can’t ignore. Soy has been shown to aid in the prevention of breast cancer. And the FDA is acknowledging that 30 grams of fiber a day will seriously reduce your chances of getting heart disease and colon cancer. Pressure may have been put on them in the Senate. Reliv is one of 20 companies taking part in studies at the University of Illinois Food Science Department on “functional foods” — those that have a specific effect on the way the body functions. Reliv is the only direct-selling company involved. The others include Nestle and Kellogg’s — a lot of the giants of the food industry.

Do you think mainstream companies like those will use what they discover to take over the nutritional market?

Those big guys could introduce products like ours. Making them work is a question of marketing. With a product like Arthaffect, the big companies would spend three years in studying how they would market it Then they’d spend millions of dollars trying to promote it on TV.

We don’t have to go through that, because we already have a distribution system built When we introduce something, we know darned near everybody’s going to buy at least one. If it works and people like it, they’re going to order it again and again.

Considering when you started, Reliv hasn’t grown as fast as some other direct-selling companies. Are you satisfied?

Well, yes, when you realize what we’ve been through. We were growing at 170 percent a year until 1993. That was the year of the flood. This is a business of momentum — you grow in a geometric progression, either upward or downward. We lost a lot of our distributors and two-thirds of our balance sheet Most companies would never have survived.

Today, in U.S. sales, few companies are growing quicker than Reliv — this month, we’re up by 47 percent compared with a year ago. We’re building new quarters next door because we’ve outgrown where we are. We have a good base to start from if we decide to sell other kinds of things.

Is that what you plan to do?

I’m not in a hurry. But as time goes by, our little paper route — nutritional science — could expand to personal-care products, and we’ve already started a program called Direct-Select, which is a catalog service where you can order single units of everything. That helps keep our customers supplied and gives us a broader base to build on as we grow.

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