December 02, 2011
A Cloud of Opportunity
by Barbara Seale
When race horse owners breed two champion thoroughbreds, they hope to produce the next Secretariat. In direct selling it’s no different for companies. In fact, the merger of two fast-growing companies this summer, plus the infusion of the genes of yet a third, may have conceived this industry’s next version of that Triple Crown winner.
AL International Inc. headquarters in Chula Vista, Calif.
As every networker knows, sometimes what counts most is who you know. The management team at Javalution knew John Rochon.
Today, Rochon is Founder and Chairman of Richmont Holdings, a private investment and business holding company, and a significant investor in Javalution. What’s more, he is the former Chairman and CEO of Mary Kay Inc. and at one time was the largest shareholder in Avon Products Inc. His direct selling expertise runs deep.
As the head of Javalution’s investment committee, Rochon brought Javalution and Youngevity together, resulting in their merger and the creation of AL International Inc. He now sits on AL International’s board of directors.
When the merger was announced, Rochon was enthusiastic about the new company’s future and the synergy each company offered the other.
“We believe this merger is a brilliant move and that the way to generate impressive sales growth for coffee is to penetrate multiple sales channels,” he said in a press release. “By teaming with Youngevity, JavaFit coffee gains a much larger presence in a powerful channel, direct sales. I know firsthand the power of this channel. It’s common sense that the more people [you have] selling your product, the more your sales will grow.
“Coffee is the second most popular beverage in the world, behind water—almost everybody wants it and JavaFit coffee has a unique twist. Coffee doesn’t conflict with any other direct sales product, so anyone should want to participate. Combine all that with an established and growing direct salesforce and you have something really potent. This remarkable team has an exciting vision and this merger is a major step toward achieving it.”
AL International CEO Steve Wallach values Rochon’s involvement.
“He is someone who will help us grow bigger and better,” Wallach notes. “He was a significant shareholder in Javalution. When someone is willing to introduce their own money into a company, it shows at a high level that he believes in where we’re going. He cast a vote of confidence with his dollars. When it comes to strategizing, he brings additional resources through Richmont Holdings—planning, business strategy, connections. All those things are at our disposal. As we’re entering new markets, developing new products, considering partnerships or acquisitions, he has unique and great insights—as do his key staff members. Having that safety net as we make decisions is great.”
AL International Inc. was created on July 11, 2011, through the merger of Youngevity® Essential Life Sciences and Javalution Coffee Co. But unlike Secretariat, neither of them had to come from behind to be winners. Youngevity had a history of double-digit direct selling growth, and Javalution stacked up big contracts and record sales in its wholesale and retail coffee division, CLR Roasters, while it created the functional coffee category through its direct selling division, JavaFit®.
Then on Aug. 15, Youngevity joined with Financial Destination Inc. (FDI), a nationwide direct seller of financial, telecommunications, and health and wellness services, bringing approximately 100,000 new customer contacts and nearly 10,000 active marketers to the fold. FDI’s Founder, President and CEO William J. Andreoli became President of both Youngevity and AL International after the merger.
This triple threat produced impressive third quarter results. Revenues increased 1,400 percent, with gross profits of $7.7 million. The company is on track to produce $50 million in annualized revenue by the end of this year. And just like Secretariat’s pace, profitability is accelerating.
Dr. Joel Wallach
All the expansions add value to the growing family of companies now known as AL International Inc. Youngevity’s executives have always looked for other companies that could bring value to the corporate clan and to their direct selling distributors. Javalution’s JavaFit was a good match for that model, and Youngevity’s international reach could help it grow more quickly. At the same time, Javalution was a publicly traded company and offered stock and stock options to its direct selling distributors as an element of its compensation plan—something that was on the wish list of Youngevity Co-Founder and Chairman Dr. Joel Wallach and his son and CEO Steve Wallach. The marriage between Youngevity and FDI—a highly successful company with a strong corporate team, robust product line and formidable salesforce—expanded the happy family.
The company is on track to produce $50 million in annualized revenue by the end of this year.
Youngevity Essential Life Sciences grew out of the passion of Dr. Wallach, a renowned nutritional researcher, veterinarian and naturopathic physician. A staunch advocate for the dietary supplement industry, he has made it his mission to provide the average consumer with accurate, timely health information and resources. Dr. Wallach and his wife Dr. Ma Lan started American Longevity in 1997. It later changed its name to Youngevity. Under the leadership of Steve Wallach, Youngevity grew organically and through numerous acquisitions and strategic alliances. Youngevity “relatives” include such names as Tidal Wave™, a wellness and skincare company; DrinkACT™, the world’s first “feel good energy drink” company; ProJoba™ International and its flagship product PollenBurst™; Youngevity Healthy Chocolate; Suzanne™, the party-plan company founded in 2006 by entertainment icon Suzanne Somers; Soul Purpose LifeStyles; antibacterial pioneer PureWorks™; and OvatioN™ LifeStyles Inc. This year alone, in addition to FDI, Youngevity has partnered with R-Garden, Bellamora and Adaptogenix International.
Flagship products developed under the Youngevity Essential Life Sciences brand.
On the other side of the newly grafted family tree, former Wall Street investment banker Scott Pumper and leading research advocate in performance nutrition Jose Antonio, Ph.D., founded Javalution Coffee Co. in 2001. Eventually Javalution would become sole owner of coffee producer CLR Roasters, create a new category of functional gourmet coffee by launching the JavaFit brand into the direct sales channel, and begin trading under the stock symbol JCOF-PK. It continued to grow by making inroads into the restaurant industry and contracting with 14 cruise lines, retail giants Wal-Mart, Winn Dixie and Aldi Grocery Stores, and others. In August, CLR Roasters—now AL International’s retail and wholesale coffee company and maker of JavaFit—leveraged the Javalution name by introducing two new retail brands, Javalution™ and Josie’s Java House™. At the time of that announcement, Steve Wallach, now CEO of AL International, said that CLR Roasters was on track to double revenues in the third quarter.
He says he believes that AL International’s traditional business brands, combined with the strength of its direct selling brands, will further drive growth and increase shareholder value over the long haul.
“When distributors [from small companies] come into a bigger environment where they have more support, infrastructure, or product categories, their sales increase and they make more money.”
—Steve Wallach, CEO
A sampling of AL International coffee products under the JavaFit brand.
AL International’s expansion strategy is based on what executives call the “Network Cloud,” a concept that describes the corporation’s approach to acquisitions and strategic partnerships. They look for win-win situations where, for example, a young company with a great product is growing too fast for its infrastructure. As part of the Youngevity family, that company can gain the infrastructure it needs to thrive while its unique product gets far greater exposure by the distributors of all its new siblings.
“We started partnering with companies years ago and in a variety of ways,” Steve Wallach explains. “We would acquire the best parts of some smaller direct selling companies—products, brands, trademarks. Those smaller companies might not have the money to build infrastructure such as customer service, distributor support, or product development. Or maybe they couldn’t afford market expansion. Maybe they were growing but understaffed or undercapitalized. We were able to bring the resources to bear to better the situation for the founders of the companies and their distributor groups. When distributors come into a bigger environment where they have more support, infrastructure, or product categories, their sales increase and they make more money. The day-to-day challenges of a smaller company are greatly relieved or eliminated. We’ve been a solution for a lot of companies.”
Distributors for companies in the AL International network cloud can sell any of the 400-plus products from any company’s product line.
Most of these companies offer nutrition and wellness products, and they also benefit from the commitment to science and health education that has been a hallmark at Youngevity. It is the only direct selling company to achieve an authorized health claim through the Food and Drug Administration. For those that know the mineral selenium may reduce the risk of certain cancers and that the essential fatty acids in fish oils can protect the heart, they can thank Youngevity and Dr. Wallach, who went to battle with the Food and Drug Administration for their right to have that information.
Distributors for companies in the AL International network cloud can sell any of the 400-plus products from any company’s product line. With only one exception, the compensation plan is seamless. And with the merger of Javalution and Youngevity, the cloud compensation became even more attractive.
“When we were introduced to Javalution, they had already created the opportunity for their JavaFit distributors to earn stock options,” Steve Wallach recalls. “There’s only so much a company can pay out in compensation from revenue. From Day One, we paid at the higher end of what we could pay out, and we made the commitment among ourselves that if we ever became public, distributors would have the opportunity to have a part of it. We saw the merger with Javalution as a way we could get it done. We also wanted a healthy coffee line—coffee is the second most consumed beverage after water—and from a stock standpoint, we could compensate distributors at a higher level. It made a lot of sense.”
Mergers and acquisitions are helping the company grow, but they’re only part of the story. Organic growth was up 49 percent year over year, Steve Wallach reports. He says that distributors were among the first to recognize that economic pressures were causing their friends and neighbors to look for new opportunities, so they actually asked the corporate office to provide more support materials to help them introduce the business opportunity.
“For years we led our discussions primarily with our products,” he says. “We believe strongly in the products, but at the same time there are hundreds of millions of people around the world who need opportunity more than ever. We’ve always seen growth from people who knew that they needed to take better care of themselves, and now we’re also seeing growth by introducing the business opportunity.”
To meet demands from distributors who want to build by recruiting, AL International designed a new business presentation and began holding more business-building calls and supporting personal presentations with the help of corporate staff. The company’s public websites now put more focus on the business opportunity, and distributor online back offices offer more opportunity presentation tools.
“We not only want to be in the DSN Global 100—and we’re on track to achieve that sometime in this next year—but we want to get into that exclusive Top 10 club.”
In addition, one of FDI’s executives, Steve Schulz, became AL International’s Vice President of Training. He travels the world doing business presentations for large groups of distributors, helping them recruit and do initial training for new recruits. Those newbies—who join one of Youngevity’s companies for as little as $10—learn how to run their businesses from their upline, and their company instantly sends them an email that outlines the first few steps they should take to activate their websites and explore their back office. It also offers suggestions that help them introduce people to their business. Moreover, they can take advantage of ongoing training and business-opportunity calls to learn and to grow their businesses.
International expansion is also fueling growth. Youngevity has been an international company for several years, and its experience often helps new acquisitions ramp up their international presence.
“What it comes down to is the world is still a big place,” Schulz says. “Where interest shows up, we pay attention. We’re looking for key people in key markets around the world. We already send products to more than 60 different countries, and we have staff on the ground in a half dozen markets. We intend to increase that dramatically in the next year or two.”
The most recent step in international expansion took place in July, when Youngevity opened an office in the Philippines to support sales and recruiting in South Asia. At the company’s first pre-launch meeting of regional salesforce leaders, four times as many guests attended the meeting as the company expected, and early sales exceeded expectations.
Diversification on so many levels—international, products, companies, even business models—will keep the company strong and help it grow, Steve Wallach believes.
“We don’t live or die by any specific product or concept,” he explains. “That’s important in the business world. We not only want to be in the DSN Global 100—and we’re on track to achieve that sometime in this next year—but we want to get into that exclusive Top 10 club. That won’t happen in the next year or two, but that’s our goal. No company can get there just selling coffee, chocolate or any single product. Our wide range of offerings captures people’s interest, imagination and purchasing power.”
While AL International has a long way to go to achieve the Secretariat-style goals the Wallachs have set, Steve Wallach notes that his company’s efforts are already paying off. Web traffic and sales are increasing, product shopping is becoming simpler, and the business opportunity is reaching more people every day. To support those efforts, the company is translating marketing materials into more languages, ensuring that products stay scientifically up to date and enhancing distribution and shipping methods.
Steve Wallach notes that when his father founded Youngevity, he wanted it to be a legacy company that would become a source of generational health and wealth.
“We have a significant base in the United States,” Steve Wallach says of the company’s potential. “Our international markets are still relatively small, but they represent a big opportunity. Outside the United States, networking is a primary profession. Our goal is to get much bigger, and we’re going to introduce our business opportunity and product benefits to more people. We’re just scratching the surface.”
An eye for acquisitions and partnerships has been a hallmark at AL International, as well as one of the keys to its growth. But executives are calling its largest and most recent move a game changer.
On Oct. 27, AL International subsidiary Youngevity finalized its merger with Financial Destination Inc. With its pharmacy discount card that offers discounts at major pharmacies, FDI creates new synergies with the wellness products already offered through many Youngevity direct sellers. In addition, it offers financial and telecommunications services.
But while its services were an attractive addition to the 400-plus products that Youngevity distributors can offer, FDI’s full management team joined Youngevity and brought with it some key business components that are already benefiting all Youngevity distributors in its network cloud.
“FDI’s distributor training and recognition programs—regarded as second to none in the direct selling industry—are already beginning to take our company to the next level,” says AL International CEO Steve Wallach.
The new relationship mirrors the benefits that the distributors at all AL International companies enjoy, according to William J. Andreoli, Founder of FDI and now President of Youngevity and AL International.
“Youngevity provides a strong and aggressive marketing group plus exceptional products and solid infrastructure,” he notes. “The FDI team now has access to their gourmet coffee line, hundreds of consumable products, and international marketing opportunities. Consumers are looking for ways to simplify their lives, stay healthy and achieve financial stability. Working with Youngevity, we believe we can offer solutions to what today’s consumers are looking for.