MonaVie

Last updated

MonaVie
Private
Industry
Fate Foreclosed in 2015
Founded(January 2005;14 years ago (2005-01)) in South Jordan, Utah, United States
Headquarters,
United States
Area served
Worldwide
Key people
Products
  • MonaVie Active
  • MonaVie Essential
  • MonaVie Pulse
Number of employees
450 (from 2009)
Subsidiaries The MORE Project
Website www.monavie.com
Footnotes /references
[1] [2] [3] [4]

MonaVie is a defunct, American multi-level marketing company that manufactured and distributed products made from blended fruit juice concentrates, powders, and purées. The company was the subject of several controversies. Health claims for its products had not been scientifically confirmed or approved by regulatory authorities, [5] [6] [7] [8] [9] and its chairman had been previously involved in false health claims concerning another beverage company. [10] [11] [12] [13] According to Forbes , MonaVie's business plan resembled a pyramid scheme. [12] [14] In 2015, the company defaulted on a US$182 million loan and went into foreclosure. [15] [16]

Multi-level marketing (MLM), also called pyramid selling, network marketing, and referral marketing, is a marketing strategy for the sale of products or services where the revenue of the MLM company is derived from a non-salaried workforce selling the company's products/services, while the earnings of the participants are derived from a pyramid-shaped or binary compensation commission system.

Purée cooked food, that has been ground, pressed, blended or sieved to the consistency of a soft creamy paste

A purée is cooked food, usually vegetables, fruits or legumes, that has been ground, pressed, blended or sieved to the consistency of a creamy paste or liquid. Purées of specific foods are often known by specific names, e.g., applesauce or hummus. The term is of French origin, where it meant in Old French purified or refined.

<i>Forbes</i> American business magazine

Forbes is an American business magazine. Published bi-weekly, it features original articles on finance, industry, investing, and marketing topics. Forbes also reports on related subjects such as technology, communications, science, politics, and law. Its headquarters is located in Jersey City, New Jersey. Primary competitors in the national business magazine category include Fortune and Bloomberg Businessweek. The magazine is well known for its lists and rankings, including of the richest Americans, of the world's top companies, and The World's Billionaires. The motto of Forbes magazine is "The Capitalist Tool". Its chair and editor-in-chief is Steve Forbes, and its CEO is Mike Federle. In 2014, it was sold to a Hong Kong-based investment group, Integrated Whale Media Investments.

Contents

Company overview

Dallin Larsen, who held senior executive positions with the multi-level marketing companies Dynamic Essentials and USANA, founded Monarch Health Sciences in 2003 as a distributor of diet and weight loss supplements. Monarch Health Sciences launched MonaVie juice in January 2005, and the same year founded MonaVie LLC/MonaVie Inc., a privately held multi-level marketing company based in South Jordan, Utah. The newly formed company took over the bottling, distribution, and marketing of MonaVie juice products. [10] [17] MonaVie also owned and operated a charity organization, The MORE Project. [4]

Dietary supplement product that provides additional source of nutrients

A dietary supplement is a manufactured product intended to supplement the diet when taken by mouth as a pill, capsule, tablet, or liquid. A supplement can provide nutrients either extracted from food sources or synthetic, individually or in combination, in order to increase the quantity of their consumption. The class of nutrient compounds includes vitamins, minerals, fiber, fatty acids and amino acids. Dietary supplements can also contain substances that have not been confirmed as being essential to life, but are marketed as having a beneficial biological effect, such as plant pigments or polyphenols. Animals can also be a source of supplement ingredients, as for example collagen from chickens or fish. These are also sold individually and in combination, and may be combined with nutrient ingredients. In the United States and Canada, dietary supplements are considered a subset of foods, and are regulated accordingly. The European Commission has also established harmonized rules to help insure that food supplements are safe and properly labeled.

Weight loss Reduction of the total body mass

Weight loss, in the context of medicine, health, or physical fitness, refers to a reduction of the total body mass, due to a mean loss of fluid, body fat or adipose tissue or lean mass, namely bone mineral deposits, muscle, tendon, and other connective tissue. Weight loss can either occur unintentionally due to malnourishment or an underlying disease or arise from a conscious effort to improve an actual or perceived overweight or obese state. "Unexplained" weight loss that is not caused by reduction in calorific intake or exercise is called cachexia and may be a symptom of a serious medical condition. Intentional weight loss is commonly referred to as slimming.

Utah U.S. state in the United States

Utah is a state in the western United States. It became the 45th state admitted to the U.S. on January 4, 1896. Utah is the 13th-largest by area, 30th-most-populous, and 11th-least-densely populated of the 50 United States. Utah has a population of more than 3 million according to the Census estimate for July 1, 2016. Urban development is mostly concentrated in two areas: the Wasatch Front in the north-central part of the state, which contains approximately 2.5 million people; and Washington County in Southern Utah, with over 160,000 residents. Utah is bordered by Colorado to the east, Wyoming to the northeast, Idaho to the north, Arizona to the south, and Nevada to the west. It also touches a corner of New Mexico in the southeast.

MonaVie products were sold by non-employee distributors who were eligible to receive commissions based on product sales. Individual distributors were encouraged to build their own sales networks by recruiting new distributors to sell the products (referred to in multi-level marketing parlance as a "downline"); the recruiter could have, in theory, received additional commissions based on sales by their downlines. [12] [18]

Products

MonaVie produced a variety of blended bottled fruit juices, carbonated energy drinks, dietary supplements and dieting products. [19] MonaVie Kosher, one of the company's juice products, was certified as kosher according to Jewish dietary laws by the Orthodox Union of North America and the Chief Rabbinate of Israel. [20]

Carbonation is the chemical reaction of carbon dioxide to give carbonates, bicarbonates, and carbonic acid. In chemistry, the term is sometimes used in place of carboxylation, which refers to the formation of carboxylic acids.

Energy drink Type of beverage containing stimulant drugs such as caffeine and marketed as providing mental and physical stimulation

An energy drink is a type of drink containing sugar and stimulant compounds, usually caffeine, which is marketed as providing mental and physical stimulation. They may or may not be carbonated and may also contain other sweeteners, herbal extracts, taurine, and amino acids. They are a subset of the larger group of energy products, which includes bars and gels, and distinct from sports drinks, which are advertised to enhance sports performance. There are many brands and varieties in this drink category.

Dieting is the practice of eating food in a regulated and supervised fashion to decrease, maintain, or increase body weight, or to prevent and treat diseases, such as diabetes. A restricted diet is often used by those who are overweight or obese, sometimes in combination with physical exercise, to reduce body weight. Some people follow a diet to gain weight. Diets can also be used to maintain a stable body weight and improve health.

Product research and physiological context

An analysis conducted by contract laboratory ChromaDex indicated that MonaVie contained low levels of antioxidant vitamin C and of phytochemicals such as anthocyanins and phenolics associated with antioxidant activity in test tubes. [7]

ChromaDex is a dietary supplement and food ingredient company based in Los Angeles, California founded in 1999 that is publicly traded on the NASDAQ.

Vitamin C nutrient found in citrus fruits and other foods

Vitamin C, also known as ascorbic acid and l-ascorbic acid, is a vitamin found in various foods and sold as a dietary supplement. It is used to prevent and treat scurvy. Vitamin C is an essential nutrient involved in the repair of tissue and the enzymatic production of certain neurotransmitters. It is required for the functioning of several enzymes and is important for immune system function. It also functions as an antioxidant.

Polyphenol Class of chemical compounds

Polyphenols are a structural class of mainly natural, but also synthetic or semisynthetic, organic chemicals characterized by the presence of large multiples of phenol structural units. The number and characteristics of these phenol structures underlie the unique physical, chemical, and biological properties of particular members of the class. Examples include tannic acid and ellagitannin. The historically important chemical class of tannins is a subset of the polyphenols.

MonaVie promoted that the juice had key polyphenol antioxidants from açai and other fruits in the blend; [21] However, there is no physiological evidence that any fruit polyphenols have such actions in humans or that oxygen radical absorbance capacity (ORAC) has any relevance in the human body. [22] Research shows that although polyphenols are good antioxidants in vitro, antioxidant effects in vivo are probably negligible or absent. [23] [24] As interpreted by the United States Food and Drug Administration, Linus Pauling Institute and European Food Safety Authority, dietary polyphenols have little or no direct antioxidant food value after digestion. [23] [25] [26] [27] Unlike controlled test tube conditions, most polyphenols are not absorbed following digestion, and what is absorbed is metabolized and excreted. [24] [24]

Studies that are in vivo are those in which the effects of various biological entities are tested on whole, living organisms or cells, usually animals, including humans, and plants, as opposed to a tissue extract or dead organism. This is not to be confused with experiments done in vitro, i.e., in a laboratory environment using test tubes, Petri dishes, etc. Examples of investigations in vivo include: the pathogenesis of disease by comparing the effects of bacterial infection with the effects of purified bacterial toxins; the development of non-antibiotics, antiviral drugs, and new drugs generally; and new surgical procedures. Consequently, animal testing and clinical trials are major elements of in vivo research. In vivo testing is often employed over in vitro because it is better suited for observing the overall effects of an experiment on a living subject. In drug discovery, for example, verification of efficacy in vivo is crucial, because in vitro assays can sometimes yield misleading results with drug candidate molecules that are irrelevant in vivo.

Oxygen radical absorbance capacity (ORAC) was a method of measuring antioxidant capacities in biological samples in vitro. Because no physiological proof in vivo existed in support of the free-radical theory or that ORAC provided information relevant to biological antioxidant potential, it was withdrawn in 2012.

Antioxidants are compounds that inhibit oxidation. Oxidation is a chemical reaction that can produce free radicals, thereby leading to chain reactions that may damage the cells of organisms. Antioxidants such as thiols or ascorbic acid terminate these chain reactions. To balance the oxidative stress, plants and animals maintain complex systems of overlapping antioxidants, such as glutathione and enzymes, produced internally, or the dietary antioxidants vitamin C and vitamin E.

Interactions and adverse effects

A clinical case report showed an association between MonaVie ingestion throughout pregnancy and prenatal closure of the ductus arteriosus resulting in cardiac hypertrophy and dysfunction (pulmonary hypertension) at birth. [28] Another case report noted that MonaVie Active may cause fluctuations in blood clotting (prothrombin time) in patients treated with warfarin or other coumadin blood thinners, and it was recommended that this combination should be avoided. [29]

Distributor earnings

Around 14% of distributors made a profit, according to MonaVie Executive VP Henry Marsh quoted from a 2009 Deseret News article. [30] A Newsweek article, reporting on MonaVie's 2007 Income disclosure statement, stated "fewer than 1% qualified for commissions and of those, only 10% made more than $100 a week." More than 90% were counted as wholesale customers, whose earnings were mostly discounts on sales to themselves. According to a top recruiter, the dropout rate in 2008 was around 70%. [12] An article published in the Hartford Courant reported that about 45% of the company's distributors earned an annualized average check of less than $1,600, and 37% took home about $2,000; roughly 2% earned an annualized average check of more than $29,000, and just 7 out of 80,000 distributors (<0.01%) took home more than $3 million, according to MonaVie's 2008 Income Disclosure statement [31] [32] According to a 2011 article in The Salt Lake Tribune , 85% of MonaVie's distributors earned commission checks in 2009 averaging $35 a week or less, while the company's top seven distributors earned an average of $3.4 million a year. [33]

Criticism

Nutritional value

Physician Andrew Weil and nutritionist Jonny Bowden claimed that the nutritional and health benefits of MonaVie juice were unproven and that the product was overpriced relative to more cost-effective conventional polyphenol-rich foods. Weil and Bowden also criticized the product for being sold through multi-level marketing. [5] [6] A Men’s Journal nutritional analysis showed that MonaVie Active juice "tested extremely low in anthocyanins and phenolics" and that "even apple juice (which also tested poorly) has more phenolics". The report also noted that "MonaVie’s vitamin C level was 5 times lower than that of Welch’s Grape Juice", a product priced at a fraction of the cost of MonaVie for the same serving volume. [7] Ralph Carson, the original developer of MonaVie and the company’s chief science officer cautioned that the juice was "expensive flavored water" and that “any claims made are purely hypothetical, unsubstantiated and, quite frankly, bogus." Carson added that he did not know how much açai was in the product. [10]

Misleading advertising and health claims

Bowden, [6] Newsweek correspondent Tony Dokoupil, [12] Palm Beach Post reporter Carolyn Susman, [8] and Salt Lake City Tribune correspondent Tom Harvey [10] commented on the use of misleading promotional testimonials by MonaVie distributors in which the product was said to prevent and treat a variety of medical conditions. Harvey also stated that MonaVie's rise, based on odds "stacked against low-level distributors who poured in the billions of dollars that fueled the company's spectacular growth," raised questions about the foundations of other companies in Utah's nutritional supplement industry. In 2007, the US Food and Drug Administration (FDA) issued an FDA Warning Letter to MonaVie distributor Kevin Vokes, for violations of the Federal Food, Drug and Cosmetic Act relating to online promotional material claiming that MonaVie was an effective treatment for inflammation, high cholesterol, and muscle and joint pain. [9] The FDA considered the issue resolved after therapeutic claims on the offending website were scaled down. [8] [12] In a 2008 Forbes magazine article, reporters Emily Lambert and Klaus Kneale described MonaVie as a pyramid scheme, referencing a video testimonial by distributor Louis "Lou" B. Niles that implied the product could cure cancer. [14]

Company executives had repeatedly acknowledged ongoing problems with MonaVie distributors making unlawful claims that the juice can treat and prevent diseases. In a 2008 Newsweek article, CEO Dallin Larsen stated that "his sales team can get him in hot water with the Feds", and that it was "next to impossible" for the company to investigate distributors suspected of making false claims. [12] Later in 2008, the company issued a statement acknowledging that many of its distributors, "perhaps unwittingly," violated its advertising policies. [34] In a 2009 Bloomberg News article, MonaVie executive vice-president and cofounder Randy Larsen stated that "the company is struggling with independent distributors who promote the juice as a miracle drug." [35]

Dallin Larsen and Dynamic Essentials/Royal Tongan Limu

MonaVie CEO and founder Dallin Larsen was a senior executive with an multi-level marketing company that sold a similar juice product prior to being shut down by the FDA for illegal business practices. [10] [12] In 2001, Larsen became vice president of sales for Dynamic Essentials, a Florida-based company selling a fruit juice called Royal Tongan Limu, [11] [12] where Larsen claimed to have increased revenue 300%. In 2002, during Larsen’s tenure, the FDA warned Dynamic Essentials that claims on the company’s website that the juice could "treat various diseases such as cancer, arthritis, and attention deficit disorder" were illegal. [13] Dynamic Essentials ceased operating soon after. In 2003, the FDA saw the voluntary destruction of 90,000 bottles of Royal Tongan Limu. [10]

Pyramid scheme allegations

In 2008, Larsen formed a business partnership with former Amway distributor (Quixtar in the US) Orrin Woodward, founder of an Amway distributor sales network company known as TEAM. Woodward subsequently became a distributor and speaker for MonaVie, mixing his TEAM organization structure and distributor sales tools (e.g. sales brochures, audio/video recordings, etc.) concept with MonaVie's compensation plan. Woodward received a $3 million loan from MonaVie which he did not have to repay if he met certain recruiting distributor goals, according to a lawsuit Amway filed against MonaVie in 2008. [10] A Forbes magazine article in 2008 described MonaVie as a pyramid scheme, and TEAM as "a pyramid atop a pyramid," in which MonaVie vendors were sold motivational lectures, using a multi-level model, which were purported to help them increase their sales of MonaVie's products. The article proposes that this system takes advantage of ambiguities in the Federal Trade Commission's regulation of pyramid schemes, and that only 1% of members make any money from their involvement with the company. [14]

Litigation

The company, its executives, and various senior distributors have been part of significant lawsuits since the company's founding. MonaVie was the defendant in a false-advertising/trademark infringement suit against Imagenetix, Inc (2008), [36] a multi-issue legal battle with Quixtar/Amway (2008), [11] [37] a false advertising suit by Oprah Winfrey and Mehmet Oz (2009), [38] [39] two class action lawsuits (2010, 2013), [40] [41] [42] [43] [44] [45] and a copyright infringement suit against Zrii (2010). [46] Also, MonaVie filed several suits against former sales representatives for breach of contract. [47]

Trademark infringement and false advertising cases

In 2008, Imagenetix, Inc. sued the MonaVie company, its board of directors, and several of its senior distributors for $2.75 billion over trademark infringement alleging that MonaVie Active juice contained the ingredient Celadrin. [36] [48] [49] The case was settled out of court and the lawsuit was dropped. [50] Soon after, Imagenetix announced that it had entered into a new business relationship with MonaVie, the terms of which were not disclosed. [51]

In 2010, MonaVie sued Zrii, a competing multilevel marketing drink company, claiming that Zrii copied its distributor compensation plan. MonaVie sought an injunction to prevent Zrii from continuing to use the plan, force the destruction of all the existing copies of the plan, and claim damages. [46]

In 2009, television celebrities Oprah Winfrey and Dr. Mehmet Oz filed lawsuits against 40 companies who sold açaí or related products. The parties alleged that the companies had fabricated quotes "falsely purporting to speak in Dr. Oz's and/or Ms. Winfrey's voice about specific brands and products that neither of them has endorsed." [38] MonaVie was one of the defendants. [39] Winfrey’s website stated that “consumers should be aware that neither Oprah Winfrey nor Dr. Oz are associated with nor do they endorse any açaí berry product, company or online solicitation of such products, including MonaVie juice products."

In 2010, a class action lawsuit was filed against MonaVie in the Circuit Court of Miller County, Arkansas, alleging that MonaVie and its distributors, through the use of false and misleading advertising had engaged in civil conspiracy and other criminal activities. [40] [41] [42]

In 2013, a class action lawsuit was filed against MonaVie in the US District Court of New Jersey alleging that the company had used unfair and deceptive business practices, and false advertising, in violation of the New Jersey Consumer Fraud Act. According to the lawsuit, MonaVie and its distributors used false and misleading claims of curative benefits to promote the company’s juice products, which were sold at an unjustly inflated price. [43] [44] [45] In 2014, a similar class action lawsuit was filed against MonaVie in the US District Court of Southern Florida. The suit alleged that the company had deceptively advertising its juices, such as MonaVie Active, MonaVie Essential, MonaVie Pulse. According to the complaint, the company had promised that its juices would provide a variety of health benefits, including increased energy and improved joint health, without scientific proof to support such claims. [52] In addition, the plaintiffs claimed that the company failed to warn consumers that the juices contain ingredients – such as arsenic and lead – that could cause health problems. [53]

In 2014, K2A LLC, a company formed by Alex Schauss and Kenneth Murdock, filed a lawsuit claiming that MonaVie owed tens of millions of dollars for infringing on a patent held by K2A for the freeze-dried açai berry used in MonaVie's products. K2A claimed that they had terminated their 2004 licensing agreement on Oct. 18, 2013 and that MonaVie continued to sell products that infringed on the patents. The lawsuit alleged that MonaVie had not made any royalty payments since June 2009 and failed to deliver shares in the company that were promised to K2A. The court was petitioned to declare that the licensing agreement has been terminated and to award K2A at least 10 percent of MonaVie’s gross sales, plus triple damages. [54] In January 2015, MonaVie announced that it had settled the case for an undisclosed sum. [55]

Dispute with Amway

In 2008 Quixtar, a sister company of Amway, filed a multi-count federal court complaint against the MonaVie company and 16 of its top-level distributors who had previously worked with Amway. The complaint alleged that MonaVie competed unfairly by making false claims about its products, and that the former distributors had violated their contracts with Amway. [11] [37] [48] Shortly after, MonaVie filed a lawsuit with the Utah district court asking for a ruling as to whether Quixtar had been over-reaching the boundaries of its non-compete agreements and to address whether or not such agreements are enforceable for independent distributors. [37] [56] MonaVie filed to dismiss the Amway/Quixtar lawsuit. [57] Later in 2008, MonaVie et al. filed a lawsuit in the Colorado District Court against Quixtar. [58] Amway and MonaVie settled in 2010 before trial. [37]

In 2009, Orrin Woodward and his wife Laurie were found liable in an arbitration case for soliciting other distributors to resign from Quixtar and join its competitor MonaVie, The Woodwards were ordered to pay a settlement of $12,736,659. Co-defendants Chris and Terri Brandy were ordered to pay $9,578,756 and Tim and Amy Marks, $3,533,230. [59]

Lawsuits with former distributors

In 2012 the company sought legal action against Joseph Licciardi and several other distributors for breach of contract by allegedly attempting to recruit MonaVie distributors to competing multilevel marketing companies. [47] [60] In April 2015, an arbitrator awarded Licciardi $1.2 million, ruling that MonaVie breached its contract by revoking Liccardi's distributorship. [61]

Loan default and foreclosure

In May 2014 it was announced that MonaVie had defaulted on a $182 million note securing assets of the company. The note was issued in 2010 by TSG-MV Financing LLC, part of TSG Consumer Partners of San Francisco and then purchased in March 2015 by multi-level marketing company Jeunesse Global of Altamonte Springs, Florida. [15] On May 11, a Federal court judge issued a temporary restraining order to halt the takeover of MonaVie by Jeunesse Global. The petition had been filed by Bankers Trust, the trustee overseeing MonaVie's employee stock ownership program (ESOP) which had become a major holder of MonaVie stock, noting that the foreclosure would render the ESOP worthless. [16]

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