Can fast-growing Eniva keep positive vibe?

Over the past 10 years, Eniva Corp. has emerged as one of the rising stars of the dietary supplements industry. So when the founders of the fast-growing company went looking for a new headquarters, Anoka stepped up with a tax abatement.

But the company created by Andrew and Benjamin Baechler, identical twins from Winona, appears to have hit a financial soft spot as it prepares to move into its new $14.5 million location early next year.

Sales in 2007 came in well below projections that Eniva presented to Anoka officials in its successful application for a tax break. The company fired some of its top independent salespeople last fall, and attendance at Eniva's annual sales conference in Las Vegas this year was down by about 50 percent from a year ago.

Mary Veloske, Eniva's director of sales development, blamed the slowing growth on a weakening economy. And Bob Kirchner, Anoka's community development director, said the city's not concerned about its investment. "Our agreement isn't tied to sales numbers, it's about job creation," he said.

At the new headquarters, Eniva expects to increase its workforce from 170 to 380 by 2011, according to documents filed with the city.

To qualify for the $50,000 annual property tax abatement, Eniva has to create at least 75 jobs in two years.

Until last year, Eniva's growth was meteoric. From $6.5 million in sales in 2000, revenue skyrocketed to $30 million in 2005 and $60 million in 2006. But 2007 sales were just $67 million, a growth rate less than half what was projected in figures given to Anoka. In those documents, Eniva anticipated revenue of $75 million last year.

Eniva's 12 percent growth rate last year was somewhat in the middle of the pack when compared with publicly traded companies for which annual financial reports are available. Weight management and fitness giant NutriSystem reported that its revenue jumped 37 percent, while sales at General Nutrition Centers rose 4.4 percent.

10-year-old roots

Acknowledgement of slower-than-expected growth is not easy for a company such as Eniva, which is built on motivation and centers on the personas of the Baechler twins.

"We help people who want a home business and want to be successful in that arena," Andrew Baechler said in an interview. "We want to develop that entrepreneurial spirit and find a way through Eniva to find success."

The Baechler brothers are the company to Eniva loyalists. At the annual sales meeting in 2006 in Daytona Beach, Fla., they addressed the assembled sales force wearing NASCAR driving suits. At the 2007 sales meeting in San Antonio, they walked onstage as cowboys, from the hats down to the leather chaps. For an in-house promotion for managers and distributors, the brothers did an imitation of "Saturday Night Live" body builders "Hans and Franz," in which they said with heavy Austrian accents, "We want to pump you and your business up."

Eniva's principal product is Vibe, a liquid dietary supplement that retails for $49.95 for a 32-ounce bottle. Vibe also is available in 1-ounce disposable packets that come 20 to a box for $49.95. The company touts Vibe as an energy drink that provides nutrients to slow the aging process and improve overall health. With a recommended dosage of 1 or 2 ounces a day, consumers who use and like the product need to buy refills every four to six weeks.

Vibe is marketed as an anti-aging product that includes vitamins and nutrients that are good for the heart, the body's immune system and skin. Like other dietary supplements, Vibe is not tested or regulated by the federal Food and Drug Administration unless a post-marketing problem arises.

The company also sells products for the heart, circulation, immune system, joint support, weight management, eye care and relief for sore muscles. It recently unveiled a skin-care line of products called Ageless Radiance.

Companies such as Eniva use multilevel networks to sell products to independent distributors who build customer bases and recruit other distributors. The distributors are paid by commission, and the more distributors they have down the line, the greater for potential income. Companies such as Amway, Mary Kay and Tupperware market in the same way.

Eniva has tapped into a potentially lucrative niche. Nutritional supplements generate more than $4 billion a year in sales, according to Dr. Tod Cooperman, president of Consumerlab.com, which tests the products. "It's a huge business," Cooperman said.

The Baechlers started Eniva in 1998 on the strength of Benjamin Baechler's medical background and his belief that there would be strong demand for liquid nutritional supplements because they are absorbed by the body faster than tablets and powders. Vibe hit the market in 2003 and quickly became Eniva's biggest seller, eventually accounting for half or more of the company's business.

But the company has hit a few potholes in recent months.

Eniva's decision last fall to terminate six of its national sales directors raised eyebrows, because they were among the top salespeople in the organization and proven moneymakers for Eniva.

"We thought we'd found a home with Eniva," said Gary Thompson, one of the former executive national sales directors. "I don't know what was going on in the back room, but to dump six of us [and, in most cases, spouses] didn't seem like the right thing to do."

Andrew Baechler said the six had violated company rules, including the cross-recruiting of Eniva distributors to sell other products.

"They had performance issues," Baechler said. "We have rules at Eniva that protect people's customers, and when people break those rules there are consequences."

Three of the six reached by the Star Tribune declined to comment for this report, but denied cross-recruiting. Thompson, of Hope Mills, N.C., also denied that he did any cross-recruiting.

Eniva also has devoted supporters.

William Ice, an Eniva distributor with 12 years of experience in network marketing, called the Baechler brothers "men of integrity," and said the company is "the best opportunity I've ever come across."

Eniva markets Vibe and other products by word of mouth through its network of independent distributors. Andrew Baechler said the company has 120,000 active distributors, and the top producer makes more than $1 million a year.

Unnecessary supplement?

But critics say that level of income is the exception in multilevel marketing. Most distributors earn significantly less, according to Dr. Stephen Barrett, a retired psychiatrist who maintains a website called MLM Watch. Barrett also is critical of health products sold in the multilevel distribution manner.

Barrett noted that Vibe offered twice the recommended daily allowance of several vitamins, including vitamin C.

"It's pointless to have more than twice the amount of the recommended daily allowance. Vitamin C is not in short supply. People are paying 25 times as much as they need to when they're buying this nutrition insurance," Barrett said. "Most [over-the-counter] vitamins are sufficient to do the job."

Baechler counters that, if most people "were eating correctly, the doctor would be right. But people don't eat the right foods, and a majority of foods do not contain the nutrient levels they once had. This is a supplement, not a replacement."

Baechler believes that the potential marketplace for Eniva remains considerable.

"We're still on the ground floor of our potential. Most companies in the nutrition industry don't have their own [research and development] lab," he said. "We have control over our future."

David Phelps • 612-673-7269