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Melaleuca: The Wellness Company has beaten the odds in the ultracompetitive consumer goods industry, and it has done so by providing shoppers with alternatives that are more effective and safer than what is commonly found at the grocery store.
Melaleuca’s success is a result of taking an original, unconventional path in competing with the goliaths of the consumer packaged goods (CPG) industry. As a privately held company, Melaleuca developed its own set of rules that emphasizes principles over profits. It eliminates the need to compete for crowded shelf space at local retailers. Instead, this company creates one-of-a-kind wellness products for health-conscious consumers while directly engaging the marketplace and rewarding its customers in a way traditional CPG companies never could.
Barriers to entry in the CPG industry are extraordinary. After all, the market is dominated by some of the world’s largest manufacturers with some of the world’s largest advertising budgets. Built over generations, companies like Procter & Gamble, Clorox, L’Oréal, SC Johnson, and Colgate-Palmolive have developed the brand awareness, market share, shelf space and other advantages that allow them to either squash emerging competitors or acquire them if needed.
Melaleuca, Inc.’s rise as a major CPG manufacturer is truly rare. It is one of only a handful of CPG companies in 70 years to hit $1 billion in annual revenues—a feat Melaleuca accomplished in 2011. By comparison, most of its competitors began well over 100 years ago and earn tens of billions annually. But this health products manufacturer that started just 37 years ago now earns over $2 billion in annual revenues. Melaleuca is challenging the status quo by offering a distinctive array of wellness products and a different way to shop that the old-boys network just can’t touch.
Interestingly, when lucrative buyout offers have come across his desk, Melaleuca founder Frank VanderSloot has publicly stated that Melaleuca is not for sale no matter the price. This company is here to stay.
What is Melaleuca?
Headquartered near Yellowstone National Park in Idaho, Melaleuca took an innovative approach to product development and distribution by allowing customers to purchase directly from the factory. Today, Melaleuca.com offers over 400 exclusive health and wellness products in the consumer goods categories of dietary supplements, nutrition, personal care, home cleaning and beauty.
Serving 2 million households each month, Melaleuca: The Wellness Company now operates in 20 countries and territories around the world.
Why haven’t I heard of Melaleuca?
Perhaps you’ve never heard of Melaleuca. Although it may be the largest online wellness shopping club in North America, this company is a well-kept secret. That may be because Melaleuca does not advertise like the rest of its competition. Instead, the company has organically grown by letting its satisfied customers tell their friends about the products they love. That strategy requires its products to be exceptional, even buzzworthy. In stark contrast, Procter & Gamble pushed its promotional messages through a $8.2 billion ad spend last year.
How do Melaleuca products compare with the competition?
This company has pioneered the field of superior wellness products by offering health-conscious consumers what they are looking for. Melaleuca’s standard is to produce products that are measurably better than those offered by the grocery store brands. Based on extensive consumer testing, if a Melaleuca product isn’t higher quality or a better value than what the grocery store products offer, the company won’t manufacture it.
Melaleuca says its corporate culture is refreshing to scientists since they are not encumbered by the bureaucracy normally found in CPG companies. Their researchers welcome the clarity of the mission and the freedom to aggressively develop impactful health and wellness products.
Melaleuca customers remain loyal and repeatedly order
Shoppers are so loyal to Melaleuca products that 96% of the customers who shopped with Melaleuca this month will shop again next month. That kind of loyalty doesn’t happen without creating an experience that delights customers.
This reorder rate is staggering considering that customer loyalty can be a major downfall for manufacturers, brick-and-mortar retailers, and e-commerce sites. Earning repeat business is always challenging considering how demanding consumers can be when it comes to customer service, product satisfaction, branding, alignment with company values, and purchase experience.
Melaleuca discovered nature has solutions for creating superior wellness products
When VanderSloot opened Melaleuca’s doors in September 1985, he believed that nature offered the solutions to help people live healthier, more vibrant lives and keep their homes cleaner and free from the toxins sold at the big-box stores.
Since then, Melaleuca has unlocked the secrets of hundreds of essential oils, plants, botanicals, and minerals—putting the power of nature to work in more than 400 products. And they are just getting started.
VanderSloot reasoned that while using natural, higher-quality ingredients may not be the easiest or fastest road to growth, it was the right thing to do by choosing performance and safety over profits.
Melaleuca Ingredient Philosophy
Scientists agree that working with natural ingredients is trickier than using the cheap, synthetic chemicals found in the grocery store brands. It’s also why many so-called green products sold in the marketplace have earned a reputation of not working.
It takes dedicated commitment and advanced knowledge to unlock the power of natural ingredients and put them to work in sophisticated formulas. For instance, to avoid using chlorine bleach, ammonia and other harsh chemicals like many CPG manufacturers routinely use, Melaleuca cleaners are formulated with safe ingredients, like citric acid, natural enzymes, Melaleuca oil and other pure essential oils. For example, at the individual product level, MelaMagic® Heavy-Duty Cleaner provides industrial-strength cleaning power using a variety of plant-derived ingredients without exposing a family to caustic ammonia or chlorine bleach. That’s the type of challenge that Melaleuca’s team of scientists and researchers work to solve.
Decades of mastering how to isolate and extract the best parts of nature have allowed the scientists at Melaleuca to create products that don’t just sprinkle in a bit of nature—they drive the benefits of its formulas.
Each year Melaleuca spends millions on research and development to determine the best sources, the safest and most effective forms and the optimal extraction processes to develop the finest products while still protecting the environment.
Melaleuca product innovation
Here are two more examples: Melaleuca was among the first in the world to use phosphate-free dishwashing detergent, and it’s been a world leader in developing super-concentrated technologies. Its scientific team has amassed scores of patents for their cutting-edge methodologies, formulas and research.
The Wellness Company also takes a hard line on harmful ingredients, fillers and excessive packaging. To protect its customers, Melaleuca’s products do not use the commonplace yet harsh ingredients like chlorine bleach, ammonia, formaldehyde, phthalates, abrasives, phosphates, parabens or quaternary disinfectants.
Instead, Melaleuca customers are relieved to discover Melaleuca products use naturally derived, biodegradable ingredients such as citric acid, glycolic acid, disinfecting thyme oil, and other trustworthy ingredients.
Why do Melaleuca products beat the major grocery store brands?
When Melaleuca was founded in the mid-1980s, grocery store brands were in the middle of a pricing war—each competing to offer the absolute lowest price on the shelf. Walmart and the other national chains controlled the retail channels, placing the CPG manufacturers under pressure to cut their prices for shelf space.
This eventually caused them to lower their product quality by using fewer active ingredients and loading their products with cheap fillers. This downward trend continued as CPG manufacturers compromised on quality ingredients, diluted products with water and added fillers to maintain profit margins for their stockholders.
Melaleuca’s products fill a void in the marketplace by offering measurably superior products in effectiveness, quality and safety to its competitors. Early on, Melaleuca saw that when dealing with their health, consumers don’t want to make compromises. They want exceptional products, which is exactly what Melaleuca develops and then prices against those found at grocery stores.
What’s more, “as a privately held company, Melaleuca does not answer to Wall Street,” said Scott Hollander, who served as Melaleuca Chief Marketing Officer for 12 years and is now retired. “We answer to the owners, but more importantly, we answer to our customers. Making quarterly numbers and trashing the business in order to hit profit goals isn’t part of the game plan at Melaleuca. We’re all about doing what’s right for the long-term benefit of the customer and the business.”
Establishing a New Business Model: Consumer Direct Marketing
To keep prices low and quality high, Melaleuca knew it could not follow a textbook business model that relied on middlemen, brokers, retailing at grocery store chains and expensive advertising. It had to be more efficient. Instead, Melaleuca created its own business model—Consumer Direct Marketing—to eliminate many of the wasteful expenses that don’t go into manufacturing a better product.
VanderSloot believed that if customers were delighted with the products and found a shopping club worth sharing, they’d recommend Melaleuca to others. Instead of national advertising campaigns, Melaleuca would simply rely on word of mouth. And instead of working with retail giants and middlemen, it would ship products directly to the consumer.
With the money that is saved through this model, Melaleuca invests in higher-quality ingredients and still sells its products at prices in line with the market leaders found at retail stores.
It also rewards others for referring new shoppers. To thank those who help to spread the word about Melaleuca, the company has paid out more than $6.8 billion in commissions. While the company acknowledges this method is not the fastest way to grow, particularly when viewed against national advertising, it provides a financial opportunity with repeat income for those who believe in these products enough to share them with their friends.
As a result of this network, every Melaleuca shopper was referred to The Wellness Company by someone who loves Melaleuca’s products. The power of word-of-mouth marketing is formidable because it helps Melaleuca customers establish a relationship with the company while keeping them engaged and learning about the products. It all adds up to Melaleuca having a direct relationship with every single one of its shoppers.
The Unprecedented Rise of Melaleuca: The Wellness Company
Given the extreme barriers to entry in the CPG industry, Melaleuca created a different kind of company based on a different ingredient philosophy and a different distribution model.
VanderSloot deserves the entrepreneurial credit for creating a disruptive and innovative company that, even with fewer resources, can challenge the larger, more established grocery store brands. Its success is undeniable.
“We have products that no one else can offer,” VanderSloot said, “and we offer them at reasonable prices. People want to stay well. It will always be that way. We think we have a really bright future because of our superior product line, and we’ll work to stay ahead of that. We want to be the best. Our requirement of ourselves is to be the absolute best.”
