In less than 30 years, Melaleuca has evolved from a small startup company to a billion-dollar operation that does business in 17 countries around the world. Melaleuca started with a mission to be different and to help people change their lives. The company is a direct marketing business that sells health and wellness products as well as environmentally friendly cleaning supplies. They have been hit with many pyramid scheme allegations over the years, but they continue to be one of the largest MLM’s in the world.
Melaleuca Company Overview
History of Melaleuca
Melaleuca was founded in 1985 by Frank VanderSloot. Earlier that same year, VanderSloot’s brother-in-law offered him the CEO position of an MLM company called Oil of Melaleuca. Oil of Melaleuca was said to have an 80% market share of tea tree oil sales; however, VanderSloot found the company in bad shape when he arrived.
Oil of Melaleuca’s market share turned out to be closer to 5%, and VanderSloot was very disappointed by the company’s model that enticed people to purchase $5,000 worth of inventory upon signing up. With sales not increasing, the partners decided to shut down Oil of Melaleuca. This is when VanderSloot founded Melaleuca, Inc. and began selling natural supplements and cleaning supplies.
The company grew quickly and was included on the Inc. Magazine’s list of fastest growing American companies every year from 1900 to 1994. In fact, it was inducted into the Inc. 500 Hall of Fame for having been recognized 5 or more times. In the late 1990’s, the company’s sales began to slow which led to some adjustments in their commission structure.
Those adjustments paid off as the company began to increase sales again and hit the $1 billion sales mark in 2011. In 2017, the company hit another huge milestone reaching $2 billion in gross sales for the year. The company operates today with approximately 2,000 full time employees and still has its headquarters in Idaho Falls, Idaho.
With Melaleuca being one of the largest direct marketing companies in the world, it is certainly not immune to allegations that it is a pyramid scheme. During the 1990’s, the company was investigated by several regulatory bodies in Michigan and Idaho as well as the Food and Drug Administration. The claims in both Michigan and Idaho were related to pyramid-scheme activity.
The company ended up reaching an agreement with both states to refrain from marketing an illegal pyramid scheme. Both states further went on to agree that the company itself had committed no real wrongdoing. The regulators decided that the company’s marketing materials and information were not at issue, rather the actions of some of the independent distributors had caused the concerns.
The FDA has also warned Melaleuca about advertising its products using false and misleading claims. This seems to be very common in the nutrition supplement space, as many other companies have also been warned about making false claims related to the products curing certain diseases and ailments. Lastly, the FTC released a whitepaper related to multi-level marketing and noted that “Melaleuca fails to disclose that approximately 99% of all participants lose money and therefore get further behind financially because of their participation.”
Melaleuca Current Company Structure
Melaleuca operates from its headquarters in Idaho Falls, Idaho and does business in 19 countries around the world. They have a full-time workforce of approximately 2,000 employees. While it is somewhat difficult to find an exact number of distributors, it seems to be that there are around 150,000. The numbers are difficult because most people who join Melaleuca do so just for the member discount and never intend to build a business.
The company still has gross sales in the range of $2 billion each year, and the original founder Frank VanderSloot still serves as the CEO. The company has been privately held since its inception. Interestingly enough, Mr. VanderSloot is considered to be the richest person in Idaho with an approximate net worth of $1.9 billion.
While Melaleuca’s product lines have evolved somewhat over their 30-year existence, their core focus has remained essentially the same. They continue to focus on natural nutrition supplements and environmentally friendly cleaning products. Their vitamins and supplements were some of their original products and continue to be some of their best-sellers today.
Melaleuca has also expanded their product lineup to include personal care products such as bath soaps, skin treatments, and first aid products. They also offer many different types of essential oils, called Pure. All their products across their entire line are still touted as being natural and environmentally friendly.
Melaleuca Marketing Practices
Melaleuca is a big believer in putting people first and helping people to achieve their goals. Their mission states that they do this in several ways. First, they want to help people achieve their health and wellness goals through the products that they offer. This includes their household and cleaning products because they claim those products help to make the world we live in cleaner and safer.
Lastly, the company wants to help improve the financial well-being of its customers and members. They are on a mission to help households reduce debt and earn extra income. They encourage their distributors to recruit others so that as many people as possible can reap the benefits of their system. Most of this recruitment is done through old-fashioned networking and sales.
Making Money with Melaleuca
With the company’s lofty ambitions of helping people achieve financial success, it must mean that lots of people are making good money with the company, right? The products that the company sells are part of a multi-billion dollar industry, its salesforce must be successful right? In short, some of their distributors do very well, while the majority end up making very little or even losing money.
According to Melaleuca’s Income Disclosure Statement, 80% of its customers are not interested in the financial opportunity and simply buy the products because they love them. The other 20% fall into two categories – those who refer an occasional customer and earn a very small commission (9%) and those who want to build a successful business (11%).
Of those customers who decide to build a business, roughly 90% fall into the lowest level of the business. These people earn an average of $2,101 per year. Earnings begin to increase as distributors make their way up the leadership ladder, but the number of distributors attaining that status gets fewer and fewer as you climb. At the top of the ladder is the Corporate Director status, which averages over $1.1 million per year. However, this status accounts for less than 0.1% of all people building a business with Melaleuca.
How to Enroll
Enrollment with the company is easy, as is the case with most MLM companies. Anyone wanting to enroll with the company simply needs to complete the Independent Marketing Executive Agreement and Customer Membership Agreement and pay the $19 fee. Memberships automatically renew on an annual basis at the same $19 rate. This fee entitles you to enroll new customers to build your business and provides access to Melaleuca’s marketing materials and plans.
The Melaleuca compensation plan is quite complicated and consists of commissions from personal sales, commissions from others, and many different types of bonuses. When first starting, you will earn commissions from sales to customers that you enroll. You will earn 50% commission on sales during the customer’s first month, and then tiered commissions going forward based on how many active customers you have. The tiered commissions range from 7% to 20%.
Next, as others in your organizations begin to enroll customers, you will earn a commission on their sales. You can earn commissions 7 levels deep in your downline once you reach Director status or above. Lastly, you have the potential to earn many different types of bonuses. This is where things get a little more complicated. The bonuses are based on points that you earn, how quickly you achieve certain statuses, and how well others in your downline are advancing.
Melaleuca Sales and Marketing Techniques
Melaleuca still relies heavily on a word of mouth sales model. People love the products, and then they start to tell their friends and family about the products. While some distributors do utilize social media to market and sale the products successfully, selling with Melaleuca is typically much more traditional than many newer MLM’s. The more people you know and talk to, the higher your odds of success with the company.
Melaleuca Compared to Other MLM’s
Melaleuca primarily does business in the health and wellness space, which is a popular arena for other MLM companies. They are performing much better than many other companies though, as they are ranked the 6th largest MLM company in the world and the largest online wellness shopping site in North America. Of the customers who decide to start a business, the earning potential is quite high. It is very easy to sign up, and average earnings are higher than most other MLM’s.
Conclusions For Melaleuca
Overall, Melaleuca is a reputable company with quality product lines. Customers tend to keep returning to buy more products, and earning money is as simple as referring other customers. If you decide to seriously start working on your Melaleuca business, there is great income potential on the upper end. However, as with most MLM’s, very few people reach the upper echelon of distributors. If you do not enjoy networking and traditional sales methods, then Melaleuca may not be a good fit. However, if you have a large network of friends and family to get started, you may find the opportunity to be a great one.