What's the Buzz
Coke and Pepsi. Yale and Harvard. The Hatfields and the McCoys. Rexall and Enrich.
Rexall and Enrich?! That's right. From afar, they are essentially the same (after all, they're both large, successful network marketing companies, right?)--but from the inside, they are arch-competitors and have been for as long as anyone can remember.
All that's about to change, says Richard Bizzaro. The day of the homey little MLM company is gone; it's time for network marketing to stand tall in the saddle. A man whose commanding presence communicates his message even before his words sink in, Bizzaro likes to think big--and today he's thinking more than big: he's thinking about an epochal new chapter for the industry. He's talking about a mega-merger.
On April 1 (no fooling), Enrich and Rexall, two of the most respected names in direct selling, will bury the hatchet, link arms, and join to form the Unicity Network. Together, the new entity will form the network marketing arm of Royal Numico, a century-old infant-and-clinical-nutrition manufacturer with 28,500 employees, 300 scientists, and annual worldwide sales of more than $4 billion. Together with another 1999 Royal Numico acquisition, namely the Pittsburgh-based General Nutrition Companies (GNC), the leading supplier of nutritional supplements in the United States, the Dutch company has quickly become, at least on paper, one of the world's most powerful nutrition-based companies.
And it's not just high-margin products. With its 4203 domestic stores (not to mention 351 outside the U.S. in 25 countries), GNC already has 13 percent of the domestic market share for nutritional supplements. GNC accesses the mass market channel through a strategic alliance with Rite Aid Corporation, one of the nation's largest drug store chains. In the meantime, GNC also has an alliance with drugstore.com, which extends the Royal Numico reach even further.
The Rexall/Enrich merger itself is enough to turn the nutritional industry on its ear--and network marketers around the world will be watching to see if their corporate leaders can pull it off.
Merging on paper is one thing. Joining two cultures, one product-based (Enrich) and the other business-based (Rexall), is entirely another. Enrich distributors, for the most part, sell products first and the business opportunity second. With Rexall, it is business first, products second. No fewer than 19 of the top 20 sellers in Enrich are women; at Rexall, the demographics are exactly the opposite.
"Merging network marketing companies is not an easy task," admits Stanley Cherelstein, chief operating officer for Unicity and former senior vice president of finance and operations for Rexall in Boca Raton, Florida. "It's a lot easier to merge traditional companies. That is why we haven't seen a lot of consolidation within the [network marketing] industry. There will be a lot of people sitting on the sidelines, waiting and watching to see whether the Unicity merger is successful. One thing is for certain: as more and more companies struggle, we will begin to see more consolidation within the industry--and as that happens, it will become obvious who the key players are."
Is Bigger Better?
Richard Bizzaro, 57, former chairman and CEO of Enrich International and now chairman and CEO of the network marketing division of Royal Numico, thinks that mergers on this scale (this is the biggest in network marketing history, according to the Direct Selling Association) are the wave of the future. Bizzaro and Unicity President David Mastroianni both came over to Enrich from Weider Health and Fitness, where they presided over a host of acquisitions--seven in all. Meanwhile, Rexall Sundown, the retail parent of Rexall Showcase, Rexall's network marketing arm, followed suit over the same period, snapping up Met-Rx, Worldwide Nutrition, and Thompson Vitamins.
"To do business with the likes of Walgreens, Wal-Mart, and CVS, you have to be big," says Bizzaro, who himself witnessed consolidation in the apparel business from the inside in the 1960s and 1970s. "The growth rates right now in network marketing are almost negative--both for nutrition and personal care--but the combined growth rates for Rexall and Enrich in the past two years is about 30 percent because they were both market leaders."
And with Royal Numico as the parent, Unicity is an instant $400 million start-up powerhouse. Not only that, but the Royal Numico name adds legitimacy--a highly sought-after commodity in the brand-conscious network marketing world. The "Royal," after all, is a designation given by the Dutch monarchy to the most reputable Dutch companies--Royal Dutch Shell, for example--that have been around for more that 100 years.
"Royal Numico came to us--not the other way around," says Bizzaro. "That means a lot."
Besides the prestige of being courted by one of the world's most stable and consistently successful companies, Unicity gains access to the research and development of Royal Numico's clinical researchers, who until now have been perfecting infant and intravenous feeding formulas. One of the formulas they recently perfected contained a component of mother's milk that helps to lower blood pressure--and they proved it in a series of expensive clinical trials. But since infants don't need blood pressure medicine, they had no place to sell the product.
"That's why they started looking for brands and companies like ours who could bring their products to market," says Mastroianni. "A lot of their discoveries were just sitting in their laboratories because it was too expensive for them to brand and market them by themselves. It is a credit to them that they realized that word-of-mouth retailing would be a good match for such sophisticated products. They felt network marketing would be an effective way to get their discoveries into the hands of consumers."
According to Bizzaro, Cardio Health is a good example of a complex, patented product that is tailor-made for network marketing. Mastroianni agrees.
"You can't put a product like this in a GNC store," says Mastroianni. "It is just too sophisticated. It needs a lot of explanation, and it's not cheap."
To Janis Brown, an Enrich distributor who joined originally to treat her own health challenges, the main perk of the Unicity merger is the clinical studies that back up new formulas and products, all designed and paid for by Royal Numico. Each study costs well over $100,000--well out of reach of most network marketing firms.
"When you are a small network marketing company, you can't do that, period," says Brown. "They have to rely solely on word of mouth--while we have the actual clinical studies to prove that what we are selling works."
Brown also is looking forward to taking advantage of Unicity's eCommerce and online shopping network. "Prospecting and selling globally over the Internet is something Rexall does very well--and has always been our weakness," says Brown. "Now we all will be selling the best of both companies' products that way."
Bizzaro agrees. "The difference with Unicity is that with the science of Royal Numico, we can prove that we have the best products. Yes, there are cultural differences between Enrich and Rexall, but now we will both have access to a whole new class of patented, highly sophisticated products, developed by Royal Numico, and I think that will go a long way to helping us overcome our cultural differences. We all feel very strongly that you can either be big or small--but you can't be a medium-sized company today and survive. We think the distributors will ultimately be attracted to strong companies who are growing--and who have the deep pockets to survive. They are searching for a sense of permanence and stability--and that is what big can give them."
The first test of whether this merger would be accepted by rank-and-file distributors was at the two pre-launch meetings in Los Angeles and Atlanta in January. On the first Friday night in Los Angeles, the event started with a wait-and-see attitude, with a lot more distributors (2000) than anticipated, most sitting with their arms folded, anxious to hear what the new company would be about.
Bizzaro and the top distributors had already been planning the merger for nine months. Unicity will adopt a new compensation plan that will utilize the strengths of both Rexall's and Enrich's compensation programs. Together, the combined company would have about 450 products--and that, together with new introductions by Royal Numico, had to be culled to a more manageable number, about 200. The back office functions, manufacturing sites, IT support, and company Web sites had to re-worked. The Enrich manufacturing facility in Orem, Utah had to be closed down.
"There were a lot of unknowns to discuss at the meeting," remembers Mastroianni, "but in the end, most of the distributors were happy that we had at least thought through this process, a decision had been made, and there was a plan. By Saturday night, after the two groups had heard the presentations and had socialized for the first time, there was a collective sigh of relief. You could see them starting to build relationships at parties and in impromptu hallway meetings. I think the distributors realized that even though they had been competing for years, they were stronger united."
Still, Mastroianni doesn't minimize the scope of the challenge.
"I don't know if I would want to go through this again--it was extremely difficult merging two different cultures and philosophies. Network marketing is so much about emotion, it makes something like this even more difficult. We can't make everyone happy. But in the end, we're professionals; if the merger makes business sense, everyone will embrace the consolidation. Both Enrich and Rexall Showcase were growing without the merger, but we can grow faster and bigger and be more powerful together than separately. That is the bottom line, and I think everyone recognizes that."
"A Perfect Marriage"
Jeff Mack, 36, is typical of many of Rexall's top distributors. He was building condos as a civil engineer and project manager for a real estate developer in North Carolina and was looking for a way to start his own business. When he heard about Rexall, he knew nothing of their products. But he did know the Rexall name--and he knew that would translate into credibility.
"With the Rexall name, building a business was immediate-ly easier," remember Mack. "The name gets your foot in the door."
After nine months with Rexall, Mack left contracting and went full-time.
"Unicity isn't scary for me because we get to keep the Rexall name. With Royal Numico, we get a rich tradition and history to talk about--along with their extensive research and development. With Enrich, we get products that are in categories--like diet, personal care and cleansing--that are not our core competencies, which is wellness and nutrition. The things that we don't do so well, they do very well. It is a perfect marriage."
Eddie Stone, on the other hand, another top distributor from Rexall, was a little nervous upon first hearing the news of the merger. "When plans to combine Rexall and Enrich were announced, frankly, I was apprehensive about working with, and in a sense marrying, my competition. But then I saw Unicity's management team begin a sifting process, retaining the best of each group. Suddenly, I recognized what a special opportunity is in front of us--one that leverages Rexall's heritage of integrity and quality coupled with Enrich's product innovations. Unicity truly is a historic step for the industry."
Like Jeff Mack, Eddie also came from a background in construction, doing property development. He began with Rexall in August 1991, fully cognizant that nutritional products and their role in preventive health care were not his field. Now, Eddie admits, he's geared up for the merger. "As I released my limiting paradigms, I embraced Unicity and began to see an environment of realized potential--an environment born from the marriage of two vastly different companies, and developed by individuals around the globe who share a uniquely adventurous entrepreneurial spirit."
Enrich distributors, on the other hand, typically got their start by trying the products.
Doug and Sherry Lawrence are a network marketing powerhouse of their own who have high hopes for the new venture. When their Mitsubishi car dealership in Chattanooga, Tenn. went belly-up in 1991 as a result of a flawed partnership agreement, they were forced into bankruptcy. The Lawrences lost everything--their home, their cars, their boat--everything they had worked on for 20 years in the auto industry to acquire. When the bank locked the doors on their dealership, they were $1.6 million in debt--and didn't even have a car to drive home.
While they were picking up the pieces, Sherry overhead a woman talking about a diet product; she spent the grocery money and ended up bringing home some Enrich Power Trim. She lost 25 pounds in nine weeks, and eventually started selling the product to her Bible study group--at a profit of $8 a bottle. In their first year in business, they earned $85,000 with Enrich, topping Doug's earnings as a consultant in an accounting office. They earned a trip to Hawaii, became Presidential Directors, and Doug quit his day job. Six years later, they are debt-free and earn a comfortable six-figure income, all thanks to Enrich.
While Enrich has been very good to them, say the Lawrences, they welcome the merger.
"When two strong companies come together under the umbrella of Royal Numico, this gives us a great sense of security," says Sherry Lawrence. "With the financial support, you don't have to worry about a pay check, and in this case, you don't have to worry about being the leader in new product formulations. This is a concept we can sell--and we are already signing up people for Unicity."
One other point they like about Unicity is the new cost of setting up a business unit. While the comp plan is not set in stone, Unicity is working on a plan to allow new members to sign up for $29. In the Unicity plan, a new member must sell $150 worth of product to start a business center--not $1000 as in the previous Enrich set-up.
"We easily consume $500 worth of product ourselves every month--so we think it will be easy for most people to sell $150 worth of product a month," says Doug Lawrence. "Then, once they start getting checks, they will see how powerful network marketing can be."
They also are Bizzaro boosters. "Richard Bizzaro is known throughout the industry as a man of his word--and he has vowed that we will have the largest sustainable company in the world, and the best comp plan of anyone in the industry," says Sherry Lawrence. "When you have the assurance by someone you can trust--I believe it, and so does our organization. He has never let us down, and we're behind him all the way."
Daria Davidson is a unique Rexall distributor: she is a top seller, and she is a woman. She is also unique in her own right. She has been a practicing emergency room physician since 1984, attended law school, and, in her spare time, was the former president of the American Heart Association in Kansas. As a full-time doctor with administrative responsibilities--and twin daughters--she received a cancer diagnosis in 1992 at age 41.
"I started looking at the quality of my life, and it was pathetic," remembers Davidson. "I had no free time, little sleep, I was stressed out, and my kids were growing up without me. So I made a decision to find a way to re-create my medical income--but not have to depend on medicine to do it."
She sat down and wrote her Plan B wish list:
• I would be able to work from my home;
• I would be able to live where I wanted to live, preferably where there were trees;
• I would do most of my work on phone or on the computer;
• I would use my medical background;
• I would be of service to the community;
• I would be able to travel and teach.
Daria moved from Kansas to Seattle and after 29 months with Rexall, hit an annual six-figure earning level, equaled her medical income, and went full time with Plan B. She now works in the emergency room only when she wants to. With things going so well, she was caught off guard by the Royal Numico/Enrich news--but she feels the move (along with the success of Rexall.com, which was launched in February 2000) will help the combined companies move into international markets.
"At Rexall, we've all heard that the Enrich distributors are more focused on the product than on selling the business opportunity--and I have already had several Enrich people ask me to show them how to build a network by leading with the business. As we move forward, we won't have two cultures anymore. For all of us who are full-time, it is clearly a business first."
It's Not Always About The Money
Debra and Doug Jones of Claremore, OK, are two Enrich distributors who are all business. For the better part of 20 years, Debra was on the road 175 days a year, catching planes and talking to conventions as a professional speaker in the mortgage banking business. They ended up building their own public speaking business in 1984, and within 10 years, had 43 full-time employees.
"The problem was, we created the very thing that we wanted to get away from: a corporate empire. We went into self-employment for the freedom--and now we had become prisoners of income."
Author Mark Victor Hansen, co-author of the Chicken Soup for the Soul series, sponsored them at Enrich in 1994 to help with their youngest son Andrew, who suffered from chronic intestinal and colon problems. Within 24 hours, Andrew's body responded--and the Joneses were sold. In their fourth month, Doug walked into the office and fired himself.
"Debra said, 'You can't do that,' and I said--'Just watch me,'" remembers Doug, "and I walked off. I hit the phones eight or nine hours a day for three months in 1995--and suddenly, the company shipped us a new Jaguar."
In traditional business, it took the Joneses 10 years to create sales revenues in excess of $1 million. In network marketing, it took them 11 months.
"The difference in our lifestyle was extraordinary," says Debra. "People always talk about the money in network marketing, which is great, but the biggest difference for us was freedom. We were free to enjoy the lifestyle that we were working to create. It doesn't matter if you make millions of dollars a year--if you have no life. In network marketing, you can have fabulous income, but you can also have the time to spend with the people who are important to you. For the last five years we have had the luxury of that freedom. We average taking 12 weeks out of the year, traveling wherever we want to go, in the style we choose. Before Enrich, we never once took off even 10 days in a row, and even if we had, we would have had to worry about the business back home. Now, we can take off for even longer, and when we get back, our business is bigger than when we left."
Freedom is also what fellow Enrich distributor White Plains, NY-based Greg Essayan appreciates most. He had hoped to leave his prosperous Manhattan law practice after investing heavily in the stock market in the 1980s, making millions--on paper. He was living the life of Reilly on Martha's Vineyard when those paper gains vanished in the stock market crash of October 1987, forcing him back to full-time law. This time he looked for a more stable way out. He researched network marketing companies for four years until he committed, joined Enrich, and broke five figures in monthly income after two and a half years. He says he did it "the hard way," recruiting in a cold market (he didn't want his friends and colleagues to know he was "wasting his time selling herbs.")
In August 2000, he bought a mountaintop home in Henderson, Nevada, overlooking the entire city of Las Vegas. It is, says Greg, his "dream home."
"All of this is wonderful, but it is the lifestyle, and the time to enjoy it, that is the most valuable commodity," says Essayan. "As a lawyer, my universe was Manhattan--or, more accurately, a very small part of Manhattan--and time raced by. Every day seems the same when you sit on the same 6:36 a.m. express train every morning. Now every day is different, and I have seen the Pyramids in Egypt and so much of the rest of the world--all because of Enrich. When I stay at the Ritz Carleton on Maui, and I'm having a good time, I can swipe my credit card and stay an extra week. Before, that meant losing income. Now it doesn't. That is the promise of this industry that few professionals outside of it understand."
While Essayan attended Yale as an undergraduate, John Haremza of Fargo, North Dakota joined Rexall eight years ago from a modest background as a maintenance supervisor at a small potato chip snack food company. With severe dyslexia, Haremza has trouble reading signs and balancing a checkbook--and yet he has managed to write two books about his network marketing experiences. He became one of the top 20 earners in Rexall--all from humble beginnings in a rickety trailer outside of Fargo.
"I am an introvert --and never thought I could sell anything to anyone. I thought being a maintenance manger was the best job I could ever get. But I learned that network marketing doesn't require you to utilize reading and writing skills very much--and that it is a business where people skills matter much more, anyway," says Haremza. "Network marketing has given me a world I could never have dreamed of. It has built my self-confidence, self-esteem, and self-worth. My world used to be a 200-mile radius where I grew up. Now I travel the world, and have gotten to experience all the things that network marketing success can bring."
Clearly, there is some truth to the product-vs.-business characterization of the two cultures that the Unicity merger brings together. But scratch beneath the surface, and you find the same thing you find within any successful networking community: stories of people recreating their lives in the image of time freedom, financial self-determination, and a fascinating amalgam of personal growth and savvy leadership skills. Will Unicity succeed in bridging this cultural gap and creating a new opportunity for thousands more of those stories by building their new supercompany?
Absolutely, says Bizzaro--and evidently, his leadership distributors agree.
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