Sunday, August 3, 2014

MLM History: The (Not so) Secret Origins of Amway

English: Honda- Amway(AVCL)Hồ Chí Minh
English: Honda- Amway(AVCL)Hồ Chí Minh (Photo credit: Wikipedia)
You can't mention multi-level marketing without mentioning Amway, but do people actually know the real origins of Amway?

If you go to Amway's website, their timeline only goes up to 1950's, when Jay Van Andel and Rich DeVos founded "American Way" in Ada Michigan, and later shortened the name to Amway. But in reality, their history goes back a bit further.
Carl Rehnborg,
courtesy of

Origin of Amway can actually be traced back to 1930's to a gentleman named Carl Rehnborg, founder of Nutrilite (exclusively distributed by Amway). According to Nutrilite's website, Rehnborg, who lived in China as early as 1915, had experienced much of the unrest during that uncertain era in Shanghai, and experimented with soup/broth made from various locally procured ingredients, including herbs, plants and vegetables, animal bones (source of calcium), and even rust from rusty nails (source of iron) to supplement the meager army rations at the time.

It is worth noting that Mr. Rehnborg was only verified to be a salesman for Colgate in China at some time (there are some doubts, according to some sources, that he may or may not be in China at the time he claimed) and has no verifiable formal training in nutrition. There are some unverifiable or self-referential claims that he may have been a "doctor of chemistry".  According to yet another source, he's "trained in biology and chemistry" but apparently did not have a degree.

Upon returning to the US in the 1930's, healthier than others due to the broth/soup (so he claimed) but broke, he started experimenting with the beginnings of multi-vitamin / nutritional supplement market. When he felt he had perfected the formula, he started "California Vitamin Corporation" in 1934 and started selling "Vita-6" (later "VitaSol") to friends and friends of friends. What was not mentioned was upon returning to the US (he had sent back his wife and children before the unrest in China started) Rehnborg apparently turned down a job from Colgate in order to pursue his dream, which caused his first wife and two children to leave him. His second wife died at childbirth with the child.

According to Carl's son Sam (from Carl's third wife) , Carl discovered "contrafreeloading" at this time, as the supplements given to friends for "trial" was left on a shelf and forgotten. When he started CHARGING MONEY for the supplements, then people really started wanting to buy them.  When people started referring people to Rehnborg to buy his products, Rehnborg told them that they should sell the stuff themselves, and he'll give them discounts. Thus is the seed planted for multi-level marketing.

The company name was changed to "Nutrilite" in 1939, but WW2 really put a damper on things. It wasn't until after the War, in 1945, that people really started pushing the products again. Rehnberg signed an agreement with Lee Mytinger and William Casselberry making them exclusive national distributors, with Rehnborg staying in the background as "scientific adviser".

In the post-war boom, growth had been phenomenal, but it was also accompanied by extremely woo-ish claims that the vitamin can be effectiveness against almost everything under the sun, including allergies, asthma, mental depression, irregular heartbeat, tonsillitis and 20 other common ailments. And this was actually printed in booklets handed out by the sales teams. The booklet also heavily suggested that the nutritional supplement can be effective on more serious conditions such as cancer, heart problems, tuberculosis, arthritis, and so on. The product, "Nutrilite XX", was marketed at $20.00, which is a SIGNIFICANT amount of money back in 1940's and 1950's, even in the post-war boom economy.

English: Logo of the .
English: Logo of the . (Photo credit: Wikipedia)
FDA took action in 1947 and 1948 and dragged Mytinger, Casselberry, and Rehnberg to court for misleading claims. Many shipments of Nutrilite products were actually seized by the FDA. However, this did not slow down people from joining. Two new members, who joined in 1949, were Jay Van Andel and Rich DeVos. Formerly of USAAF (that's the US Air Force), they were extremely successful and accumulated sales force of 2000 people in a few years. According to sources, a new recruit were to buy a $49.50 "business kit", which contains one box of Nutrilite XX, along with a thick folders of speech (to be memorized and recited), and booklets, which was what got the company in trouble (as mentioned earlier).

In 1951, FDA obtained court judgment that banned Nutritilite salespeople from making use of ANY misleading claims, based on the original booklet, its various revisions, and over 50 other similar booklets. The case, along with prior seizure of vitamins, was appealed all the way to the US Supreme Court, where it was eventually ruled in favor of the FDA in the 1960's.

Fearing collapse of their Nutrilite business and seeking to diversify, the Van Andel / DeVos pair went out to look for new products to manufacture and sell, and to form their own company, named "American Way", in 1959, and it was later renamed Amway. Amway's organic and biodegradeable cleaner at the time was very good and growth was phenomenal. So phenomenal, that in 1972, they actually bought a controlling interest in Nutrilite, the company they used to sell for. And in 1994 the company was entirely absorbed into Amway.

In 1989, a generous donation by Nutrilite and Amway to Stanford University lead to the creation of a special endowment "The C. F. Rehnborg Chair in Preventive Medicine", mainly because Carl's son, Carl Sam (who goes by "Sam") got a degree in chemical engineering there (graduated 1958). Sam also later got a degree in "biophysics" from UC Berkeley, and it's worth noting that neither seem to have any links to nutrition.  Sam later wrote a book about his father's struggle titled "The Nutrilite Story".  Sam retired from Nutrilite in 1993.

(Sidenote: a competitor, Shaklee, paid for an endowment called "James Whittam Memorial Lecture" at Stanford also)

Today, Nutrilite is an Amway brand, nothing more.


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