Industries: State of Reliefs

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The MLM model has been upgraded with sophisticated tracking software, video blogs and other high-tech means to tell the story of the product's value, which distributors say is the key to clinching sales. Utah companies like XanGo reach far beyond state boundaries with evangelists like Francine Blain, a single mother and former contract attorney from Santa Monica, Calif. Blain signed on two years ago as a XanGo distributor. When not tending to her 5-year-old son, she's immersed in all things XanGo--tinkering with her eponymous website, talking to the "upline" sponsor who signed her, recruiting more "downline" distributors, listening to motivational training sessions and using an automated dialing system to cold-call strangers who have expressed interest in supplements or owning a home business.

Blain is a manic, mouthy merchant of mangosteen. "No commute. No dress code. I never have to leave the house. I've found my dream job," she says. She envisions XanGo paying for her son's education, homes in Manhattan and Paris and "the freedom to pursue my artistic side." As for XanGo's health benefits, Blain is a believer. "My friend's father had pancreatic cancer," she says. "After XanGo, he had much more energy."

Gung-ho marketers like Blain have helped propel XanGo to the fore of the business. The privately held company aims to hit sales of $1 billion by decade's end. "We're ahead of projections on our fourth year," says co-founder Gordon Morton at his orange-hued headquarters in Lehi, Utah. "We're very bullish we'll hit our goal." (Some publicly traded supplement firms also use MLM sales, among them Usana and Nu Skin, with fiscal 2005 revenues of $328 million and $1.2 billion, respectively.)

Though wildly successful, the MLM business model has opened supplement companies to a persistent complaint: the stuff doesn't work as claimed. Because independent marketers are not scrutinized by the Food and Drug Administration (FDA), the business has long been criticized for pushing unwarranted claims through its network of sellers. "While you have the FDA breathing down your neck about what your company can legally say, distributors like Bob and Mary can tell their friends whatever they want," says Dan Hurley, author of the forthcoming exposé Natural Causes. He writes that aside from fish oil, vitamin D and a handful of other vitamins and minerals, "the vast majority of supplements taken by Americans have been proven to be unsafe, ineffective or both."

In the case of XanGo, "no published clinical trials [show] evidence that either the fruit or its juice is an effective treatment for arthritis, cancer or any other disorder in humans," writes Dr. Brent Bauer, the Mayo Clinic's alternative-medicine specialist. Mangosteens contain antioxidants called xanthones that have been shown to stop certain bacteria and fungi in lab tests. Yet independent-distributor sites claim the juice helps everything from Alzheimer's disease to kidney stones. XanGo's Morton concedes that wild claims are being made. "With 600,000 distributors, some stuff gets past our compliance [measures]," he says. "Overpromising and underdelivering is a problem in any company, from painting houses to selling cars."