1.0 Introduction From 21th to 24th June, I have gone to USA and spent a week at the country for discussing our future collaborations with suppliers of health supplements. Two largest suppliers were chosen and compared. They are USANA Corporation and Shaklee Corporation. This business trip has two objectives:

1) To gather information about USANA Incorporated and Shaklee Corporation. 2) To examine products from these corporation.

To gather information about Shaklee Corporation, I spent the first three days in California; a state which harbors Shaklee’s Headquarters. We managed to held meeting and site visit to Shaklee’s lab. On forth day and upward, I travelled to West Valley City, Utah to meet executives at USANA headquarters. However, we can’t discuss much as only short meeting in Salt Lake City were held.

2.0 Trip to Shaklee Corporation (21th to 22th June 2011) On the first day of my trip (21th June 2011) to Shaklee Corporation, a meeting was held in the Shaklee’s headquarters in Pleasanton, California. The objectives of this meeting are:

1) To discuss business opportunities with Shaklee. 2) To keep good relationship with Shaklee Corporation for future business opportunities.

During the meeting, I managed to meet CEO or Chairman of Board of Shaklee Corporation, Roger Barnett and Shaklee International’s President, Bradford Richardson. However, I did not have the opportunity to discuss business matter with them as they have to attend another program.

Therefore, the discussion was lead by Chief Marketing Officer, Mr. Brad Harrington. Surprisingly, other executive from management team also participated in this meeting such as Cindy Latham, The Senior Vice President (Marketing) and Laura Hughes, Senior Vice President (Sales and Field Development). The meeting started with a presentation about Shaklee’s founder by Mr. Brad Harrington. Afterwards, its followed by introduction of Shaklee Corporation and how they doing business by Laura Hughes. From the presentation, I learned that although Shaklee was a successful corporation in United Stated but the number of its branch is still limited to certain country such as U.S, Canada, and . Therefore, I proposed to open a branch in United Kingdom.

My question was quickly answered by Cindy Latham. According her, despite this suggestion was a good idea; the corporation has to be concern about the economic crisis that occurs lately. Hence, longterm market monitoring programs need to be done in the potential area to make sure that branching is a success.

During this trip, I also gained additional information about this corporation’s condition for the past ten years. Like other big companies in the world, Shaklee also has its upside down. However, they manage to keep it stable and maintain as one of most trusted health supplement in the world. All information about Shaklee was described below.

2.1 Founder of Shaklee Dr. Forrest C. Shaklee was born in 1894 in a farm in Carcisle, , USA. He is such a great person as he dedicated most of his life doing research that inspires millions of people from all over the world. By using his philosophy and Shaklee Corporation, he helped many people throughout the world both in term of health and wealth.

After spend most of his life researching about the importance of nutrition to human health, Dr. Shaklee created Shaklee’s product in 1956’s. Together with his two sons, Forrest Jr. and Raleigh, they started distributing and selling nutritional supplements. The corporation sales plan at that time was based on Golden Role and Dr. Shaklee’s philosophy, “Thoughtmanship”.

In his career, Dr. Shaklee has been awarded by many personal honors including special recognition from the California Secretary State. In 1975, he was appointed as Chairman Emeritus of Shaklee Corporation, a position he retained till his death in 1985 at the age of 91.the recognition of Dr. Shaklee not just restricted in nutrition industry, but also in philosophy and business. His name has appeared in many publications such Who’s Who in The West, Who’s Who in America, Who’s Who in The World and The International Register of Profiles.

2.2 Shaklee Corporation In the late 1970s, Shaklee Corporation has become a publicly traded corporation and was listed on the . In November 1986, this corporation began to diversify by sign an agreement with RJR Nabisco to purchase Bear Creek Corporation for $1233 million; a direct marketing corporation that best known for its Harry and David Fruit of The Month Club (New York Times, 1986). Three years later (February 1989), Shaklee sold its 78 percent interest in Shaklee Japan to the Yamanouchi Pharmaceutical Corporation for $350 million, while maintaining its licensing agreement and continuing to collect royalty payments from the Japanese operations (New York Times, 1989a).

However, a month later Shaklee Corporation received an unsolicited acquisition proposal from a group led by Irwin L. Jacobs, the Minneapolis financier known also by his nickname "Irv the Liquidator". Analysts placed the leveraged buyout value of Shaklee at $35 a share. The Jacobs group had been aggressively accumulating Shaklee shares, and disclosed it currently held a 14.98 percent stake in the San Francisco-based corporation.

As return, Shaklee immediately declared a special dividend of $20 a share, as a way to discourage interest in Shaklee. Despite that, the corporation disputed that view. Shaklee's anti-takeover provisions come into play when an investor reaches 15 percent (New York Times, 1989b). After a few tense weeks, during which time Jacobs increased his stake in Shaklee (New York Times, 1989c); Shaklee Corporation announced it was being acquired by Yamanouchi Pharmaceutical for $28 a share in cash, or about $395 million.

The partnership of Yamanouchi with Shaklee in Japan helped make the transaction possible, and cast Yamanouchi as a "white knight" in helping Shaklee fend off the hostile takeover bid by Jacobs (New York Times, 1989d). Jacobs announced he would not challenge the Yamanouchi bid (New York Times, 1989e) and the deal with Yamanouchi was quickly finalized (New York Times, 1989f). Therefore, in 1989, Shaklee became a privately held corporation. However, in April 2004, Yamanouchi sold Shaklee Corporation to American billionaire Roger Barnett, managing partner of Activated Holdings LLC, for $310 million. Bear Creek and the Harry and David line were separated from the corporation and were sold to Wasserstein Perella & Co. for $260 million (New York Times, 2004). Barnett became the new CEO and Chairman of the Board of Shaklee Corporation.

2.3 Business method Dr. Shaklee found out that conversation was the best way to spread the message of health, because it's based on trust in the people you know. Instead of putting money into advertising and supply chains and storefronts, Shaklee believe that money is better spent by rewarding people who share Shaklee products with the people they know.

Even as business grew, Shaklee Corporation has remained focused on the direct sales approach because it is the personal contact and services that give greater value to the customer, more than any other system of marketing.

2.4 Site Visit On the second day, I was invited by Brad Harrington to visit both Shaklee’s Laboratory in California; one in Hayward and the other one in Stanford University, Palo Alto. This time I was accompany by Laura Hughes. The visits objectives are:

1) To observed Shaklee Laboratory condition 2) To collect information about Shaklee’s product

The laboratory in Harward is called The Forrest C. Shaklee Research Center. This facility was first served as laboratory in 1971, fifteen years after Dr. Shaklee founded Shaklee products. It has 52,000 square feet of space to research and development laboratories to bring scientifically based superior products to Shaklee customers.

This visit was devoted to give me an experience to see and feel how Shaklee’s products were different from other companies’ health supplement. At the research center, I got warm welcomed by Dr. Carsten R. Smidt, Chief Scientific Officer from Research and Development Unit. First, I saw a short movie about history and general outline about The Forrest C. Shaklee Research Center then followed by a facility tour.

2.4.1 Facility Tour During about that 3 hour, Dr. Smidt showed me various modern facilities and components they have at the research center. First, he brought me to quality control laboratories. These laboratories were set to examine the finished product to ensure that final products follow certain standard.

In the lab, he explained in details about every object that he showed me. For instance: stability chamber, a chamber used to verify the life of the tablets; tablets hardness tester, small machine that use to test the hardness of tablets; disintegration tester; a tube that test tablets dissolve in condition similar to our stomach; High Pressure Liquid Chromatography (HPLC), most expensive instrument to identify raw materials in finished product; Inductive Coupled Plasma Spectrophotometers (ICP), a machine that measure quantity of minerals in finished product; Infrared Spectrophotometers, use to identify material for minerals identification;

After the quality control lab visit, Dr. Smidt explained how the finished product was made. First, he brought me to a vast raw material storage. The warehouse is so large about 36,000 square meters.

Here they explained the details about how they manage such large warehouse. In this warehouse, they keep about $15 million inventory of raw materials. Electronic bar code system was used to identify incoming and outcoming raw materials.

Afterwards, I was brought to a room called Pharmacy Area. This room functioning as place for prepare raw material to be blended together. Therefore, every formula has a standard operation procedure and all blends must have uniformity regarding the particle size. I also visit a room where a machine called Ribbon Blender located. In the Ribbon Blender the blends raw materials will be blended again for certain amount of time to make sure the mixing of raw materials is similar.

And then they brought me to see the encapsulation machine, tools that make the capsules. There are two types of encapsulation machine, high speed fully automatic encapsulation machine and semi automatic encapsulation machine. They also showed me the high speed rotary tablet compression machine, a machine that design to produce tablets.

Next hour, Dr. Smidt leads me to the packaging room. Here the tablets and capsules were put into bottles and package using Automatic Packaging Lines. Firstly, the tablets were counted using digital counter to control the amount of tablets go into the bottle. After the bottles being feed by correct amount of tablets, the bottles will cap-sealed. Lastly, labels and expire date were put onto the bottles so the bottles could go into the market.

2.4.2 Discussion Finally, after the facility tour, there was a discussion with several people from the corporation including Jamie McManus, Chairman of Medical Affairs, Health Sciences and Education and Luiz Cerqueira, Senior Executive of Vice President of Global Operations.

In this session I have the opportunity to ask an important question. I asked how The Shaklee different from other products. My question has been answered by McManus. She replied that there are at least ten reasons why Shaklee’s are different:

First, each product is designed to provide a specific, important health benefit; usually more than one benefit. Second, each product is formulated with nutritional ingredients that have been extensively studied to confirm safety and efficacy. Shaklee products do not follow trends, but incorporate scientific and/or epidemiologic evidence of need and benefit. Third, all ingredients must be acceptable from the standpoint of the Shaklee philosophy, as well as detailed scrutiny as to their safety. Shaklee do not simply accept the Certificate of Analysis that many other companies accept, but rather retest for contaminants—including lead and heavy metals, pesticides, and more to confirm the Certificate of Analysis is accurate. Shaklee has an unwavering commitment to avoid the use of artificial flavors, sweeteners, and added preservatives. They use only non-genetically modified soy protein. Shaklee’s products start with nature. Shaklee scientists search the world over to source the finest natural ingredients. Then they conduct over 350 tests on every single new ingredient for heavy metals, pesticides or any of hundreds of other harmful contaminants. And they continue to conduct over 80,000 quality tests annually to guarantee the purity and safety of each and every product.

To get technical, Shaklee products have no parabens, triclosan, phthalates, sodium lauryl sulfate (SLS), sodium lauryl ether sulfate (SLES), 1,4-dioxane, or propylene glycol. There are no banned substances, no dyes, no trans fats and no artificial sweeteners or flavors.

Shaklee’s labs do not test on animals. Even the packaging is safe and free of toxins biophenol, a phthalates and toxic inks. That’s why we are absolutely sure of this: Every Shaklee product is 100% safe to use and guaranteed.

Fourth, Shaklee employs advanced delivery systems to enhance bioavailability and these systems are tested to confirm their nutrient delivery advantages. Fifth, manufacturers are also carefully chosen. Not just any company can qualify to manufacture Shaklee products. Shaklee has, for many years, followed the standards for manufacturing that are now referred to as Good Manufacturing Practices (GMPs).

Sixth, Shaklee has its own research and development lab in Hayward, California, and a second lab built in conjunction with the Stanford University in Palo Alto, California.

Seventh, Shaklee Quality Assurance routinely visits manufacturers to confirm that they quality standards are being upheld and they onsite lab in Hayward does additional quality control testing. Eight, Shaklee has invested over $250 million in exhaustive product research and development, and clinical trials. Shaklee spends in excess of $12 million per year on research and testing. Shaklee also has over 150 scientists on staff, and an advisory board consisting of doctors, professors, and scientists from leading industries and universities around the world. The list below consist some of Shaklee’s Clinical Studies:

1) Nutrient Intake of Elite Male and Female Nordic Skiers (Ellsworth et al., 1985). 2) The Coach and Nutritionist - A Partnership in Performance. A Case Study - Applied Nutrition with the US Ski Team and Mount Everest Expedition (Shrimpton and Ottaway, 1985).

Ninth, Shaklee products are also powering medal-winning athletes for more than 30 years. Shaklee powered athletes including the U.S. Ski and Snowboarding Team, pentathlete Eli Bremer, wakeboarder Darin Shapiro, water skier Michelle Simpson, swimmer Carly Piper, LPGA golfer Reilley Rankin, and softball player Jessica Mendoza rely on Shaklee nutritional products everyday for optimal performance.

In addition, Shaklee products fueling world explorers, including a special rehydration product (called Astro-Ade) that has been made for NASA Shuttle astronauts since 1993. Shaklee also have won the 50 years of providing nontoxic household cleaning choices that truly perform.

Tenth, Shaklee’s product has proof of its effectiveness. Shaklee has their own products clinically tested by outside, unbiased sources (such as Yale University and Harvard University) providing scientific proof that these products break down and are utilized by human body.

Ongoing proof of Shaklee’s product performance is also demonstrated by over 100 scientific publications and more than 90 in peer-reviewed journals such as:

a) The American Journal of Clinical Nutrition b) The Journal of Nutrition c) The Journal of the American Dietetic Association

2.5 Product At the end of the meeting, I tried to get information about all Shaklee’s product. In general, Shaklee’s products were divided to three sections: 1) healthy body; 2) healthy beauty and 3) healthy home. The products were described below.

2.5.1 Healthy body According to Shaklee, health is energy, vitality and well-being. There are 12 descriptions containing 25 products that defined the healthy body section:

No. Description Product 1. Anti-Aging Vivix™ 2. Essential Nutrition Vita-Lea® Iron Formula Energizing Soy Protein – Vanilla Sustained Release Vita-CTM 500 Chewablemg Vita-C™ 100 mg Vita-E Complex® B-Complex Zinc Complex Lecithin Alfalfa Complex 3. Antioxidants CarotoMax 4. Bone Health OsteMatrix™ 5. Heart Health OmegaGuard™ Fiber Plan® Unflavored Garlic 6. Digestive Health Herb-Lax™ Peppermint-Ginger Plus 7. Immune Support NutriFeron™ 8. Liver Health DTX Complex™ 9. Women's Health GLA Complex 10. Children's Nutrition Meal Shakes Vita-Lea® for Children Chewable 11. Sports Nutrition Performance® Maximum 12. Healthy Weight Cinch™ Shake Mix Cinch™ Energy Tea Mix

2.5.2 Healthy beauty Healthy beauty was described by 4 descriptions that contained 22 products. Motto of this section is clean, natural, gentle ingredients to pamper your skin and hair.

Description Product 1. NutriWhite Ultimate Protection Whitening Lotion SPF 15 Overnight Renewal Whitening Cream Gentle Deep Foaming Cleanser Soothing Radiance Whitening Softener Gentle Action Makeup Remover Daily Defense Whitening Essence Spot Whitening Treatment 2. Enfuselle Hydrating Cleansing Lotion Purifying Cleansing Gel Hydrating Toner Purifying Toner Hydrating Moisturizer Balancing Moisturizer Eye Treatment 3. ProSante Nourishing Scalp Treatment Revitalizing Shampoo Purifying Shampoo Replenishing Conditioner Lightweight Conditioner Long Lasting Finishing Spray 4. Daily Care Herbal Blend® Multi-Purpose Cream

2.5.3 Healthy Home Using at works best for the earth works best for your home motto, this section focus mainly on reducing water and air pollution through its organic product.

No. Description Product 1. Get Clean Get Clean® Water Pitcher Basic H²™ Organic Super Cleaning Concentrate Dish Wash Concentrate Fresh Laundry Concentrate (Powder) Soft Fabric Concentrate 2. AirSource AirSource Mobile™

3.0 Trip to USANA Incorporated (23th June 2011) On the third day, I went to West Valley City, Utah to meet Kevin Guest, the president of USANA Health Science in North America. He was accompanied by Douglas Hekking, the chief financing officer and Roy Truett, the chief operation officer. The meeting started with a brief introduction about USANA Incorporated background and products. Despite that, not much information was told. The summary of USANA Incorporated was explained below.

3.1 USANA Background USANA was founded by an immunologist and microbiologist Myron Wentz. The company distributes its products through multilevel marketing: distributors recruit other distributors. The products are not available through retail channels, but instead can only be obtained through one of its independent distributors (referred to as "associates") or by direct order through the company. The company has approximately 228,000 associates and 77,000 "preferred customers" in its worldwide distribution network. In 2010, 90% of product sales was purchased by associates, and 10% by preferred customers. The company states that, as of 2010, its products are marketed in the United States, Canada, Australia, New Zealand, United Kingdom, Netherlands, Japan, Hong Kong, , Korea, Singapore, , , The Philippines, and China.

3.2 USANA’s Award Since its inception in 1992, USANA has achieved many milestones, received several prestigious awards, and earned recognition from a host of industry experts. The following lists some of the highlights in USANA’s history of excellence:

1997 - First voted “Distributor Choice” Best Company in NetWork Marketing Today & The MLM Insider Magazine

2002 - U.S. Patents awarded for Olivol® - Children’s Hunger Fund partnership begins - Third best-performing stock on Marketwatch.com

2003 - Listed on Russell 2000 Index - Dr. Myron Wentz receives Utah Ernst & Young Entrepreneur of the Year Award

2004 - Named a Business Week Hot Growth Company for first of two consecutive years - Listed on S&P Small Cap 600 Index

2006 - Top 20 company on Forbes’ 200 Best Small Companies List for third straight year - One of Utah’s “Best Companies to Work For” in Utah Business

2007 - U.S. Patent awarded for Sensé self-preserving formulas - NSF International certifies USANA manufacturing practices and select products - Dr. Myron Wentz receives Albert Einstein Award for Outstanding Achievement in the Life Sciences 2008 - Utah “Best of State” Dietary Supplements for record fifth year - Utah “Best of State” Personal-Care Products for second year - Utah “Best of State” Overall in Merchandising & Consumer Services - Voted “Distributor Choice” Best Company for 10th year in NetWork Marketing Today & The MLM Insider Magazine

2009 - NutriSearch Comparative Guide to Nutritional Supplements™ (4th ed.) continues to give USANA products its highest rating, including its first Editor’s Choice Award

3.3 USANA’s Product The product of USANA was separated by three groups: 1) Nutritionals; 2) Diet and Energy; and 3) Personal Care.

3.3.1 Nutritionals

Type Product Essentials™ Green Body Rox™ Mega AO w/out Vitamin K Usanimals™ HealthPak™ Essentials™ Chelated Mineral Optimizers Active Calcium Plus Biomega III Plus CoQuinone Poly C Procosa II Proflavanol® Visionex Probiotic Healthy Heart Pack

3.3.2 Diets and Energy Type Product Foods Nutrimeal Dutch Chocolate Nutrimeal French Vanilla Nutrimeal Wild Strawberry

3.3.3 Personal Care

Type Product Skin Care Gentle Daily Cleanser Hydrating Toner Daytime Protective Emulsion w/ Sunscreen Night Renewal Créme Skin Treatment Perfecting Essence Eye Nourisher Rice Bran Polisher Nutritious Créme Masque Blanc Balance Brightening Radiance Serum Blanc Balance Brightening Moist. Masque

3.4 Discussion Only a question was raised after the presentation. I asked about what is USANA’s difference from other product. According to Roy Truett, the most significant difference is the use of Nutritional Hybrid Technology. Based on an advanced tableting technology used by the pharmaceutical industry, USANA's innovative Nutritional Hybrid Technology (NHT) is a state- of-the-art approach to formula design and manufacturing. NHT features bilayer tableting: the separation of various formula ingredients into two distinct tablet layers.

For the first time, incompatible ingredients can be combined in a single tablet, and key nutritional ingredients can be visually highlighted in distinct tablet layers. In addition, USANA's Nutritional Hybrid Technology opens the door to accelerated innovation in supplement design and manufacture. The possibility of combining two existing products into one facilitates human daily nutrition routine by reducing the number of tablets taken every day. 3.5 Controversial Despite the convincing answer from Roy Truett, I still did not receive satisfactory answers. Therefore, I do some studies on USANA Incorporated and its product. Surprisingly, I found out that USANA had many repeated crisis. For instance, USANA was not included on Forbes' 200 Best Small Companies” list, and an article in the magazine quoted industry and government experts who had raised questions about USANA’s business practices and products.

During 2007, USANA also faced another controversy after several of its executives were found to have made false statements regarding their qualifications. The executives included Denis Waitley, a member of the board of directors who had falsely claimed to hold a a master's degree from the Naval Postgraduate School; sales associate Ladd McNamara, who quit the company's medical advisory board after it was discovered that his license to practice medicine had been revoked; the Vice President of Research and Development, Timothy Wood, who was found to have doctorate in forestry, as opposed to biology as he had claimed; and the Executive Vice President and Chief Financial Officer, Gilbert Fuller, who had continued to use the title of CPA, though his CPA license had expired 10 years before he joined USANA in 1996.

On May 10, 2011, 4 of USANA's executives was officially resigned their positions at the company to pursue an unspecified business opportunity. They are President and Chief Operation Officer, Fred W. Cooper; Chief Financial Officer, Jeffrey A. Yates; Executive Vice President of Sales; Mark H. Wilson, and Vice President of Finance, Riley Timmer; The resignations sent the company’s share price downward by the largest daily percentage (12%) among decliners on the New York Stock Exchange that day.

Their products also have been questioned. According to natural health product specialist Prof. Jean-LouisBrazier of the University of Montreal's Faculty of Pharmacy via Radio-Canada's consumer report show La Facture, USANA cost two to three times the price of equivalent store- bought items, and no evidence that USANA's products were of better quality than their competitors.

4.0 Conclusion In term of stability, Shaklee had considerable advantages compare to USANA. Shaklee’s product also has not been questioned for its quality. Visit to their laboratories also shown that they really care about what we called Quality Control. Furthermore, Shaklee’s expertise in the nutrition field are also proof through its publications.

5.0 Recommendation Hence, it is clearly that Shaklee’s product is better. Although USANA has wider distributions, its conditions are not stable and this might be affected our company’s reputation if the corporate were to join us. Furthermore, Shaklee’s products are more trusted by many people in the world. Therefore, I preferred Shaklee to be our company’s new health suppliers.

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