Natural Foods Merchandiser

Elwood Richard: The spirit of science

Elwood Richard has an image problem.

Some see him as the Sam Walton of the natural foods industry, undermining his competitors by churning out thousands of low-price, low-quality foods and supplements under the NOW Natural Foods label.

Others receive his daily activist e-mails and envision a despotic crackpot, taking on everyone from the federal government to the media in his quest for better industry standards.

The real Richard is nothing like these characterizations. Gentle and soft-spoken, he is a lifelong natural foods fan, a devoted Christian, a brilliant scientist and a passionate advocate of good-quality natural products for the masses. He's worked in natural foods for more than 60 years, starting as a packer at his father's company, Fearn Soya Foods. Later he founded Bloomingdale, Ill.-based NOW Natural Foods, HealthCo, a private-label raw material suppler, and Fruitful Yield, a Chicago retail store chain.

"His companies have served a very important need for natural products consumers. NOW has always been a low-price value leader," says Elliot Balbert, president of Natrol nutritional products. "He's a formidable competitor—I know the value he places on the quality of his products."

Richard is so committed to health and well-being for everyone that he offers all 600 NOW employees subsidized health club memberships, free nutrition counseling and 35 percent discounts at Fruitful Yield stores. His $150 million company gives 2.5 percent of its before-tax profits to charity, and its employees are active in community and industry organizations. He's a lifelong advocate of quality standards: NOW was one of the pioneer businesses to receive the National Nutritional Foods Association's good manufacturing practices certification, and Richard and his brother Lou helped start the NNFA Standards Committee 35 years ago.

Richard has received a slew of honors, including the 2004 NNFA Crusader Award, as voted by his industry peers. But perhaps his biggest influence on the natural foods industry is through his own lifestyle. At age 74, Richard could star in a Nike ad. Even though he jokes that "my game has gone downhill pretty much since I hit 70," he still plays full-court basketball on his lunch breaks and regularly challenges his grandchildren to 40-mile bike rides.

Still, the negative images dog Richard. Most of the time, he's so bemused by the criticism he has trouble taking it seriously. "I go to [trade] shows and bring up the quality and price issues to the Richard family, and they just laugh about it," says Marty Burman, NNFA Northeastern regional vice president and owner of Burman's Natural Foods in Brookhaven, Pa. Richard personifies his company's mission statement: "To provide value in products and services that empower people to lead healthier lives." Anything else?be it a desire to make money, gain fame and influence, or kowtow to what others think?is a wasteful indulgence, in Richard's opinion.

"He's just a really humble man. His briefcase is a milk carton, and the car he drives is a hand-me-down from his children," says Bruce Parker, NOW's director of business development. Richard, who once wrote in a poem that "… wearing ties now really means/The wearer reads men's magazines," prefers to conduct business in a flannel shirt, khakis, white socks and black walking shoes in the winter, and Bermuda shorts and sneakers in the summer. "He has no vanity," Parker says. "He'll go visit natural foods stores, and sometimes people think he's a bum walking in off the street."

For Richard, the bottom line is simply living the golden rule: Do unto others as you would have them do unto you. "Something that you've probably seen by now is that most companies aren't nice," he says. "Everybody has the idea that it's all about making money and doing it in a hurry. I think if we do what we're supposed to do, we'll thrive and be focused. And if people understand what we are doing, they will buy our products."

Adds his brother Lou: "To offer quality products at low prices, you have to work hard; you have to do a lot right. And Elwood does a lot right."

Father knows best
Richard grew up as the eldest of three boys in Oak Park, Ill. His father, Paul, was a printing salesman who bought his friend's nearly bankrupt soy food company in 1949 as a favor. Richard and his siblings spent school vacations working at Fearn Soya, doing everything from making pancake mixes to staging soy-ball fights in the warehouse. Along the way, Richard learned life lessons from his dad.

"His attitude was, 'I am what I am—take it or leave it,'" Richard says. "I remember how he'd go to the bank with flour dust on his outfit and his belt flap sticking out. I'd say, 'We're at the bank; why don't you dress up?' And he'd say, 'We're the customer. We don't have to please them; they have to please us.' "That gave me the idea that you could please yourself."

But from an early age, Richard understood that pleasing himself didn't mean displeasing others. "My dad would spend a good hour a day working on the production line, and his employees would tell him, 'You can't waste time working on the production line.' But he'd say, 'This is the most important time of my day?people here know that I'm no better than anyone else.'

"He'd keep records on the wall and keep track of who was fastest [on the production line]. He held a lot of the records himself. And even when he was 69 years old, he'd still take in full truckloads of soy materials—200 100-pound bags. He and the driver would unload the whole thing."

Richard also learned thrift from his dad.

"My father would tell us to never put out more than one can of garbage because people will think you're prosperous," he says. "Instead of throwing away the burlap bags the flour came in, he'd sell them for a nickel each. And he'd do floor sweeps. There'd be 20 to 30 pounds of food on the [warehouse] floor, and he'd sweep it up and take it home and sprinkle it on the lawn as fertilizer. "I went along with it, but my two brothers were kind of embarrassed."

Richard learned more than character traits from his dad's stint with Fearn. He also realized the power of soyfoods. All three brothers augmented their diets with Fearn's high-protein soy powder. Richard says the soy supplement was so effective, he improved from 25th best on his high school cross-country team to 4th best by season's end. "I could see how taking protein powder at an early age helped a lot. I think a lot of people don't take responsibility for their health until something like that happens that just takes all the doubt away. The average person thinks, 'I can eat anything, and I deserve to be healthy.'"

Richard pauses. "That was the case with my [younger] brother Bill. He died of smoking last year," he says quietly. "He finally got to the point where he said, 'It may kill me, but I'm going to smoke.'"

Food science
Despite his devotion to health foods, Richard had no intention of going into the family business. He majored in physical chemistry, with a minor in biochemistry, at Monmouth College in Illinois. He studied physical chemistry in graduate school at Indiana University and worked as an associate physicist at Nuclear Chicago from 1957 to 1960. That, along with his college research project, had a profound impact on him.

"This may not be easy to understand," Richard says, launching into an involved explanation about his research into the half-life of free acetate radicals, while sketching for a befuddled visitor how a radiation detector works. "I think having this background has helped me to figure out things that would protect customers. After [my work with radiation], no one can talk to me and say irradiation is harmless stuff."

Part of Richard's charm is that he modestly assumes that if everyone else doesn't have his scientific knowledge, they can easily acquire it. While explaining how a polar imager rotation machine can measure the percentage of natural vitamin E in a product, he looks genuinely surprised when asked how he learned this. "It's common knowledge," he says. The look turns to disbelief when Microbiology Lab Manager Jon Cassista, a former Dartmouth professor of plant biology, laughs and says, "No, it's not."

"Really?" Richard says, disagreeing, but too polite to challenge Cassista in public.

Richard faced a crossroads in his science career in 1960. He was 29 years old and had been trying to develop a company to make scientific instruments. But after his parents died within six months of each other, he and his brothers inherited a business that none of them really wanted. As the eldest, Richard took over Fearn Soya by default.

"I really wanted to go back to graduate school and finish my degree," he says. But in retrospect, Richard believes that life in a lab wasn't for him. "I had this concept that research was some holy concept, pure and untouched by economic bias," he says. "But one of the things that happened to me at Nuclear Chicago showed me that management is important." Richard developed a smaller, more efficient and cheaper radiation detector than the one Nuclear Chicago was producing. But rather than receive praise for his discovery, "I embarrassed the company, and it was a blot on my career," he says. "It made me think, 'Do I really belong here?' I found out if you can't control your own destiny, then you're going to be doing dumb stuff or doing something that has questionable value."

Richard's eldest son, David, thinks his dad's move from the lab to the office suite was good for him.

"He's very intelligent and articulate and loves to talk to people," David says. "I think it's a good thing he didn't end up in a lab. He would have wasted away if he couldn't see people."

David also believes timing worked in his father's favor.

"People in one sense are a product of their times—my dad was very fortunate to have his career formulated in the '60s, when social consciousness was higher and the health food industry really started taking off. He had an opportunity to be a part of something much larger than himself—something so wonderfully alive—and it gave him a purpose. Many people aren't really passionate about their work, but I think my dad is guided by his passion."

Lou Richard agrees. "Elwood just got totally immersed in the company. A store gets flooded—who's there cleaning it up? It's El. His philosophy is to do whatever it takes. He worked 80 hours a week for years. It's his life blood, he's put so many years into it."

'A retail store for retailers'
After taking over Fearn, Richard quickly discovered there were problems with the business. He realized if he added a health food store to the company, he would be better able to discover what the public really wanted and could keep an eye on distributors, who were duplicating Fearn's products. In 1962, he opened Health House in Elmhurst, Ill. The store struggled, with sales as low as $15 some days. But by 1968, revenues had increased to $79,000 a year, and Richard opened a second store in Lombard, Ill., in 1969.

As Health House grew, Richard noticed a trend: Distributor markup and sales commissions were forcing his stores to sell Fearn products at prices higher than he wanted. But he couldn't ship Fearn foods directly to his stores without angering his distributors. So in 1968, Richard decided to package some Fearn products under a different name and label. He chose the acronym NOW—natural, organic and wholesome—and launched one of the first private labels in the naturals retailing industry.

NOW's debut products for Health House were nonfat dry milk powder, soy powder, soy protein, whole wheat flour, cornmeal and vitamin E. By 1972, the product list had expanded to 120 SKUs, and NOW was providing private label foods and supplements to other local health food stores.

But the Richard family was hardly rolling in cash. NOW lost so much money between 1972 and 1976, the family home was used as collateral to prop up the business. Finances were so tight that in 1974, Elwood's check to pay David's tuition at Illinois State University bounced. "Elwood had wanted NOW to provide such good value to customers that he didn't make it a top priority to be overly profitable," writes Elwood's youngest son, Dan, in his book NOW—Beating the Odds (Vital Health Publishing, 2005).

Fearn and the Health House stores were basically supporting NOW, but they had problems of their own. Health House had expanded to five stores by 1972, with almost $1 million in total yearly revenue, but employee theft was sapping profits.

NOW President Al Powers, who was hired in 1974 to manage the Health House stores so that Richard could devote all his attention to NOW, says one of his first jobs was going on a stakeout with a gun-toting private detective. They spent the night hiding behind a Dumpster to catch an employee who was transferring Health House inventory to his own store. To add insult to injury, the employee took advantage of the fact that Richard had never properly registered the Health House name. The employee incorporated his store as Health House, forcing the Richards to rechristen their stores Fruitful Yield to avoid a lawsuit.

Meanwhile, Fearn, which was being run by Lou Richard, was near bankruptcy, and the Richards were eventually forced to sell it in 1985. "I would say, 'We have to raise prices; we're not making enough money,' and El would really labor over this. He didn't want to ever raise prices," Lou says. Adds Elwood, "When you've been in a retail store, you know how the customer feels when the prices go up. Nobody likes sudden change that is significant, so if we have to raise prices, we do it gradually."

The 1980s marked a roller coaster of success and failure for NOW. By 1980, the company was carrying more than 800 natural food products, ranging from carob pod pieces to Uncoffee. It was also expanding its supplements line, offering 41 different types of vitamin E products alone. The goal, says Richard, was to "make NOW Foods important to the average health food store. We want to be a retail store for retailers.

"I ran stores for 12 years, and that helped me understand you have to have products the customer wants. If it's a legitimate health product, you really have to make an effort to carry it." "Getting him to drop a product line is like pulling teeth," says NOW Purchasing Manager Dave Lendy. NOW currently carries more than 6,500 SKUs. "Mr. Richard likes to have a one-stop shopping center," Lendy says.

But carrying all that product sometimes meant slow-moving inventory. That, combined with low sales and small margins, created a crisis at NOW in 1985. The company posted $750,000 in sales and $100,000 in debts. The Richard family seriously considered closing the business. But Elwood decided to persevere.

"It was one of those times in his life when he just wasn't going to quit. That's part of his charm," says David Richard. "He has an incredible commitment to his vision. I think it was formed by being a long-distance runner in high school. He just keeps going. He's stubborn, determined, and he has perseverance and endurance."

Adds Powers, "El has a commitment to never give up. He believes the only way you'll become a failure is if you give up."

Richard's persistence paid off. Hot new supplements like MaxEPA, shark cartilage and guar gum pumped up sales. By the end of 1992, NOW hit the magic mark of $10 million in revenue. At the urging of Elwood's son Dan, it also changed its labels. Elwood had seen no reason to spend money on "frivolous things like labels," Dan says. "[He] had come up with an excellent game plan for making healthy foods and vitamins affordable by selling direct to stores and packaging inexpensively, but marketing proved to be the weak point of his game plan." Elwood typeset the company's black and white labels himself. "Every customer clamored for a label that would not be such an embarrassment," Dan says. So NOW hired a graphic artist and produced its first colored label, which was later replaced with the company's distinctive orange and purple packaging.

NOW's new Marketing Manager Jim Ritcheske says the company still "needs to do a better job of marketing. There's been a reluctance in the past to toot our own horn." Future plans include labels that explain how a product is used and a new ad campaign that touts NOW as an industry leader. Ritcheske says NOW's Co-Q10 and glucosamine are No. 1 sellers in their categories, according to data from marketing firm SPINS. Overall, NOW is the top-selling supplements brand in independent health food stores, according to data from the OrderDog point-of-sale system.

Quality at any cost
The new marketing campaign will also address NOW's quality measures. Richard believes it's a necessary evil.

"It's a shame that our company has to say we're as good as other companies," he says. "The general idea is that our prices are lower, so our products can't be good. But the question should be not why isn't our quality good, but why do other companies charge 30 to 40 percent more for their products?"

With hurt in his voice, Richard recounts a story one of his delivery drivers told him. "He said, 'Do you know when I drive up to a store, they say, "Here comes the garbage," because so many reps from other companies say our products are garbage.'"

Parker, NOW's director of business development, admits, "There are still people out there with lingering memories of issues [from] 10 years ago," such as the charges that NOW's vitamin E isn't natural. Richard says NOW has scientific evidence refuting that claim.

Parker cites six factors why NOW can have lower prices without lower quality: It sells directly to stores without brokers or distributors; its sales staff works exclusively by phone, saving travel costs; manufacturing operations are so efficient the company has a 98 percent fill rate; buyers work to get the best price from every vendor, from raw material suppliers to FedEx; employees are cost-conscious and "try to spend our money like it's the retailers' money;" and Richard is willing to accept gross profit margins as much as 40 percent lower than some other manufacturers.

Many of NOW's cost-cutting and efficiency measures were implemented by Richard himself. "He'll come by and he'll have this whole series of ideas—he's very much out of the box in terms of suggestions, and he's unafraid of suggesting things," says Cassista of the microbiology lab. Adds Powers, "El has a sense of stewardship around money, the environment, resources. He sees a lot of waste, and he's driven to reduce that waste in his personal life and in the company."

Some of Richard's ideas include buying used production equipment and refurbishing it, "sometimes to better specifications than the equipment manufacturer's original specifications," says Chief Operations Executive Jim Emme. Not only does that willingness to tinker with equipment save money, but NOW's engineers can design capabilities into a machine that allow it to do different tasks—an important flexibility for a company that produces more than 6,500 products in 24 different packages. Buying used products saves the company about a third in equipment costs, Richard says—as much as $100,000 per production line. But it takes a special kind of CEO and staff to think that creatively. "We buy forklifts on eBay," Emme says.

NOW's 203,000-square-foot facility in Bloomingdale boasts many El innovations, including brighter lighting—"It's a more pleasant work environment; people aren't fatigued, so they make fewer mistakes; and it's easier to see into the nooks and crannies and keep them clean," Emme says—and a cooling system that relies on fans on the roof running throughout the night. "It can drop the temperature 20 degrees inside the building," Emme says. Richard designed a two-story processing system where the heavier materials are on the second floor and rely on gravity, rather than a conveyor belt, to drop into machines on the first floor.

Recirculating water heaters means there is instant hot water on demand, so an operator doesn't have to waste water waiting for it to warm up. Boxes or containers are reused up to three or four times and then 99 percent of them are recycled.

Other inventions include an electronic eye on bottling machines that can sense if a bottle doesn't have a cap. A siren sounds, allowing operators to instantly stop the bottling machine and find the problem. Richard also developed a small proprietary packet called Ageless that can be dropped into a bottle or jar to absorb oxygen from a product, extending its shelf life.

"He's constantly a source of new ideas and thought-provoking questions," Cassista says. "If I say something can't be done, I really have to do my homework. He's slow to accept 'no' unless he knows the science-based rationale behind it. It's made the quality job easier having someone who is science-literate as president of the company."

Richard was instrumental in developing NOW's $1.5 million testing facility, which includes a state-of-the-art microbiology lab. Before the lab was completed five years ago, NOW relied on third-party testing, which could be inaccurate and time consuming. Technical Director Michael Lelah says NOW products may be tested as many as four times—"before they come in the door, once they're in the door, during production and in the storeroom." In addition, NOW has specification sheets for each product and raw material, including assay specs, physical properties and allowable impurities.

Richard believes the testing not only improves NOW quality; it helps improve the quality of supplements in general. "It's important that people have good information so they can make good choices," he says. That's why he sends e-mails on issues he thinks are key to the industry, why he helped found the National Health Research Institute and why he hired a "truth advocate" to respond to inaccurate information in the media and in studies of natural and organic products.

"So much work has been done in nutrition research, and there's so much to say about it, but people don't know how to say it," Richard says. "I hope to get that research out to the public. Sometimes people say, 'Why are you messing around with that?' I think if people had as much experience as I do, if they read the same literature, they would be using 10 times as many products."

Retirement—sort of
On Jan. 1, 2005, Richard resigned as NOW president. As chairman of the board, he still is involved in operations, but Powers is in charge of the company. Richard spends much of his time visiting natural food stores—200 last year. "He's just a wonderful gentleman when he comes in. He's not pushy; he's more interested in the person rather than himself or what he's selling," says Susan Adkinson, owner of K & S Nutrition in Orlando, Fla.

David Seckman, executive director and CEO of NNFA, believes "retirement's not going to stop Elwood. I don't think he's every really going to retire, and that's a good thing for the industry. He's always thinking about what's best for the industry, what's best for the consumer."

Richard still has time left over to concoct new ideas, however. His latest project is mobile health food stores. "You can put up a prefab store in a weekend," he says. Then as neighborhoods diversify or the store's needs change, the building can be moved, expanded or collapsed.

NOW—which recently changed its name to NOW Health Group—is likely to remain in the Richard family: Dan Richard works in sales, and Bill Richard's two children are also on the payroll. The company is growing 20 percent to 30 percent a year and continues to expand globally—it sells online in 23 countries and has manufacturing and distribution facilities in Canada. Through its 2005 purchase of Burnham Labs, NOW entered the personal care arena and is launching three to four new health and beauty products each month.

"I think that NOW will raise the bar for natural personal care," Parker says. "Traditionally NOW was a 'fast follower.' Now I think we're an industry leader."

Through all the changes, Richard has remained the same. "He's always trying to help people," says his brother Lou. "Say someone calls him up and wants to buy the company. El would be done with him in 30 seconds. But if someone calls him up and says, 'I want to lose weight,' El will spend half an hour to an hour on the phone with that person. He always believes there's a solution to a problem, and he never gives up until he finds a solution."

Lou pauses. "If you get all the people Elwood's helped together, they could probably form a city."

Vicky Uhland is a freelance writer and editor in Lafayette, Colo.

Retailing NOW

When NOW Director of Business Development Bruce Parker took over operation of the company's 11 Fruitful Yield retail stores a year ago, they were losing money and customers. He made the stores profitable by using a simple system:

  • Better pricing. "We offer 20 percent off on everything in the store, and 35 percent off on key items," Parker says.
  • Fewer supply costs. "We went to our big vendors and said, 'We'll increase sales of your product by one-third within a year if you give us a discount. If within a year we haven't met that goal, you can take your discount back,'" Parker says. If that didn't sway vendors, NOW threatened to go with a supplier's competitor.
  • Ordering more efficiently. Fruitful Yield switched to the OrderDog point-of-sale system, which is "just the right size for little, independent stores," Parker says. "We have 25 percent fewer employees than a year ago because we're more efficient."
  • Emphasizing customer service. "I think we'd gotten careless—I think people had adopted an attitude with customers of 'Don't bother me now, I'm ordering.'" Parker says.


The poet knows it

Elwood Richard believes there are many ways to deliver a message. Since his retirement as president of NOW, Richard is increasingly choosing poetry as a fun but effective method to make a point. Following is one of his humorous poems.

Fast Food Guy

Big fast food guy, each day walks by
My fruit and yogurt hut.
Says to my face, "You big disgrace,
You are a health food nut."

And when I say that's not okay,
It makes him pleased as punch.
He says it's rude to spurn good food,
Like Taco Bell for lunch.

He says "health nut" is slander but,
Appropriately applied.
"For each one knows all food that grows,
Is better deep fat-fried."

He is so bad, it makes me mad
To call my food so funky.
So next day I make my reply
"You big bad fast food junky.

Your stomach noise can scare small boys.
A mess is your complexion.
Your body weight is much too great;
Your mind a vast perplexion.

I'll bet you if, you great big stiff,
You use my food ten days,
Your stomach would feel twice as good,
And clear your brain and gaze."

I thought the guy would never try,
My smoothies and my diet.
He said to me if it was free,
He'd be the first to try it.

Now each day we contentedly,
Eat yogurt, nuts and fruit.
The guy that I gave my reply,
Became a health recruit.

Natural Foods Merchandiser volume XXVII/number 3/p. 48, 50, 52, 54, 56

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