Viewed from distance, United Sciences of America Inc. looks much like another, better-known, multilevel-marketing company.
It has a charismatic young founder who seems destined for "Lifestyles of the Rich and Famous." It has a line of nutritional supplements that promise health and fitness. It has a plan for astronomical growth rates.
United Sciences, however, isn't planning on becoming another Herbalife International, the diet-and-herbal-remedies company that has made so much money and generated so much controversy (see "Unbridled Growth," INC., December 1985). On the contrary: chairman and founder Robert Adler has set out very deliberately to build a multilevel-marketing company that neither runs afoul of the law nor makes trouble for itself through shady management practices ane extravagant product claims.
Such straightforward objectives are unusual in multilevel marketing. The system itself isn't controversial; multilevel means merely that distributors recruit other distributors as well as sell to customers. But along with such legitimate practitioners as Mary Kay Cosmetics Inc., the business has attracted a host of fastbuck operators peddling never-never-land dreams of riches.
Adler, 37, seems like an unlikely candidate for the role of choirboy entrepreneur. Tall, with blond hair, he has a boisterous salesman's manner that seems to run in the family; on his birth certificate, he is fond of pointing out, his father described his occupation as "salesman for Wearever pots and pans." After college, young Robert went right to work for a company that sold cemetery plots, and promptly "broke every record that company had."
In 1976, Adler and his brother Michael set up TBS International Inc., which manufactures and markets a computer system that dials telephone numbers and provides interactive recorded messages to parties on the other end of the line. The system was a hit, and when Adler sold the company in 1983, he became a wealthy man. Today he lives in Palm Beach, Fla., where he owns a 4,000-square-foot penthouse and drives a white, $156,000 Rolls-Royce Corniche convertible. He has a second Rolls, Black, for Texas.
Living well, however, wasn't the only thing on Adler's mind when he sold his first company. Turning his attention to his long-neglected health, he says, he discovered that there was a sizable amount of medical data available on the vitamins and nutrients that doctors believed should supplement a person's diet. What was missing was a simple way to obtain all that was recommended: "You needed to take about 70 pills every day." Figuring that where there was a need there was a niche, Adler spent nearly $100,000 devising a nutritional supplement of his own, then bought a gym in Dallas where he test-marketed the resulting product. A subsequent chance meeting with a former "crown ambassador" for Cambridge Plan International, a multilevel weightloss program that had filed for protection under Chapter 11, led Adler to think of creating a multilevel-marketing system. He asked Mark S. Albion, a marketing specialist who is a professor at Harvard Business School, the research the industry for him.
Multilevel marketing, Albion told Adler, was like a beautiful woman with a shady past. It had a lot of allure and a not-unwarranted reputation for trouble.
For a start-up, the allure could be compelling. Most multilevel-marketing companies use subcontractors to manufacture their products, and they rely not on a paid sales force but on a large network of distributors who work on commission. That by itself keeps start-up costs to a minimum. Because each distributor then recruits others, who in turn recruit still more, a company can assemble a massive distribution network quickly. Given the increasing competition for shelf space in stores and the escalating expense of advertising campaigns, Adler figured, multilevel system offered the perfect way to introduce new products.
But then there was the potential for trouble that always seemed to plague multilevel companies. Some were out-and-out pyramid schemes, which prospered by selling expensive starter kits to new distributors or by requiring exorbitant entry fees. Others practiced inventory loading, requiring distributors to stock up on products whether or not they actually sold any. Even the best multilevel companies had come to be associated with low-quality, high-priced products and amateurish management. The worst had run into trouble with the law or had gone broke.
If he could marshal the advantages of the system and somehow avoid the pitfalls, Adler decided, he would have a very high-powered company. But he also realized the task would be complex. "I knew that we had to build this company like a battleship," he says now. "It had to be well taken care of from every angle."
First, he assembled an impressive scientific advisory board. Among the members: Dr. Robert A. Good, former president and director of the Sloan-Kettering Institute for Cancer Research; Dr. Christiaan Barnard, the pioneering heart-transplant specialist; and two Nobel laureates, Julius Axelrod and Andrew V. Schally. Window dressing? Apparently not. Dr. Good, once featured on the cover of Time magazine for his groundbreaking cancer research, recalls, "I was very hesitant initially; I'm an academician through and through. But I've been working since 1969 on the relationship between nutrition and immunity, the diseases of aging, and the maintenance of health -- and I wanted to see the understanding we've acquired made a vailable to the public."
Dr. Jeffrey A. Fisher, a New York City immunologist and pathologist who decame United Sciences's vice-president of research, science, and medical affairs, was another cautious convert. "I've been contacted by a lot of people who have wanted to do a variety of different deals, but, before this, I've always rejected them," he says. Fisher, John Wise -- who holds a Ph.D. in microbiology -- and the advisory board were all responsible for formulating United Sciences's products.
Adler took equal pains with his other personnel and with his business plan. The company's marketing program was designed by Albion, who is executive consultant and a member of the board of directors while maintaining his teaching position at Harvard. Its legal affairs are handled by Jerris Leonard, a former U.S. assistant attorney general. Its spokes-people include tennis star Chris Evert-Lloyd, runner Bill Rodgers, and San Francisco 49ers quarterback Joe Montana.
"Bobby [Adler's] strategy," boserves Dr. Fisher, "was simple: get the top people and do this thing right."
Adler's products are simple enough; so are his claims. Master Formula is a general nutrition supplement. Formula Plus is designed for people over 30. Calorie Control Formula is intended for those who want to lose weight, while a high-fiber bar is a substitute for less wholesome snacks. "If you're on the program," says Adler, "you'll be able to rest assured that, at the year least, you're obtaining all of the nutrients doctors believe should be in your diet." By the standards of multilevel-marketing companies, such a claim is modest in the extreme.
To sell the products, United Sciences plans to pur together a distributor network of 100,000 during the next year. The man in charge is Haydon Cameron, formerly with Cambridge Plan International, and many of the distributors are to be culled from a list of former Cambridge representatives. But Albion's marketing program seems to limit the potential for abuse without sacrificing the lucrative commissions on which any multilevel-marketing company depends. The plan limits the amount of inventory a new distributor can purchase, provides for 100% buy-back of unsold inventory, and requires that each distributor sell directly to at least 10 consumers -- all provisions designed to keep the company free of pyramiding charges.
Another hedge against legal complications is technological. When potential distributors attend a United Sciences meeting, they will be shown films narrated by "Star Trek" actor William Shatner, explaining the products and telling how people can become involved. Individual distributors, in turn, will be armed with audio- and videocassettes for presentations to customers. Both systems are designed to eliminate hyperbole on the part of overeager salespeople.
All in all, it is a formidable package, and one that Adler believes will be hugely profitable. The company was formally launched at a Dallas gala just last month, but Adler is already talking of first-year sales of $150 million -- which would break the first-years sales record currently held by Compaq Computer Corp. -- and of a billion dollars in revenue by 1989.
Industry observers who have studied Adler's plan give it generally high marks. His growth target is within the realm of possibility, says Jeffrey A. Babener, a Portland, Ore., lawyer who specializes in multilevel marketing, with only a trace of skepticism in his voice. "These businesses are among the few that have the potential of immediate exponential growth."
"The fact that they have M.D.s backing up the product is the biggest plus they have," adds Richard Walsh, co-publisher of Multi Level Marketing News, a trade magazine. "For decades, the multilevel field has been the province of snake-oil salesmen, so the credibility provided by top-name medical people is invaluable." Walsh also applauds the use of filmed and taped materials. "The VCR," he says, "may be the best thing that's ever happened to multilevel."
Adler might disagree: though the marketplace hasn't yet cast its ballot, he would like to think that United Sciences of America will eventually qualify for that distinction. If he can somehow marry his keep-it-clean impulse to his flair for salesmanship, maybe it will.