For raw material suppliers, having an ingredient picked up by a multi-level marketing (MLM) company has long been considered a holy-grail opportunity. But now, with the economy in the doldrums, many ingredient suppliers are becoming even more tenacious in their quests to secure relationships with network marketers. Yet, meeting the changing needs of MLM companies is often easier said than done and presents significant challenges for suppliers as they navigate these multi-layered organizations.
Without dispute, MLMs can represent a great opportunity for ingredient suppliers, who in recent months have increased their sales efforts to these companies. In fact, network marketers interviewed by Nutrition Business Journal reported anywhere from a slight bump to a 20% increase in cold calls from suppliers in the months since the economic downturn began. Most attribute the growing interest in MLM companies to what, at least in previous downturns, has been a recession-resilient business model because of the increased distributor recruiting opportunities created by rising unemployment rates. Add to this the focus network-marketing companies put on premium nutritional ingredients and new, novel delivery systems, and it becomes clear why suppliers are eager to jump on the MLM bandwagon.
Network-marketing companies are considered optimal customers for raw material suppliers because of their interest in unique, science-backed ingredients and ability to evangelize such products. “MLMs pioneer new ingredients,” said Dan Lifton, director of business development for Maypro Industries, a supplier specializing in Japanese ingredients. “They have a channel that is optimal for product education, and they are extremely capable in new product development, so they have really fantastic in-house resources.” According to Lifton, supplying to MLMs represents a considerable portion of Maypro's business and the company's interest in working with MLMs is consistent, irrespective of the economy. But, he added, Maypro recently shifted its strategy to target MLMs as first licensees for some of its proprietary ingredients, before taking them into the retail channels. “MLMs put a premium on quality, reliability and traceability,” he said. “That makes them a good fit with our ingredient portfolio.”
“When you have a science-based story and their distributors are trained in that story, it's a nice marriage,” agreed Scott Steil, president of Nutra Bridge, an independent ingredient marketing firm that represents a handful of branded, patented, science-based products. “[An MLM] might have 100,000 people worldwide talking about their product with your ingredient. And the distributors are not just getting 30 seconds of someone's time; they're getting an hour or two.”
NBJ’s 2009 Direct Selling in the Nutrition Industry looks at the opportunities and challenges raw material suppliers face in working with nutrition MLM companies and offers guidance from both suppliers and network marketers on how to land a coveted MLM deal. To order a copy of the issue, subscribe to NBJ or download a free 32-page sample issue of the journal, go to www.nutritionbusinessjournal.com.