Audio By Carbonatix
Battle of the super drinks! Read a comparison of miracle juice supplements on the Latest Word blog.
Sandy Greenberg likes to call his sales force a “volunteer army.” He
steps to the podium and looks out over the hundred enlistees who have
crammed into this hotel meeting room for the May 2 regional conference
of XELR8, the Denver-based nutritional supplement company. Among the
troops are nurses, real-estate agents, retail workers, construction
supervisors, homemakers, teachers, shop owners and the recently
unemployed; some have driven here from New Mexico and Arizona. Even
seated and silent, they radiate enthusiasm as if it were a commodity.
And they are just a fraction of the more than 6,400 independent XELR8
distributors across the U.S. and Canada, a number that Greenberg hopes
will soon explode, bringing in far more than the $7.4 million in
revenues his company reported last year.
Colorful banners line the room, all devoted to the company’s primary
product, Bazi. Named after the Chinese word for “eight elements,” the
liquid supplement boasts a “synergistic blend” of twelve vitamins, 68
minerals and various fruits and berries. Fervent followers insist that
drinking a shot a day of the “drink of life” will do everything from
improve athletic performance and mental clarity to fight off headaches,
allergies, arthritis and even cancer. Bazi’s ardent endorsers include
such sports celebrities as former Broncos quarterback Brian Griese and
ousted coach Mike Shanahan; even John Elway, while not an official
spokesman, told TV cameras last year that sucking down the stuff gave
him greater energy. And XELR8 marketing materials offer this
proclamation from New England Patriots quarterback Tom Brady: “I don’t
look at it like I’m buying Bazi, but as investing in myself.”
So are the people here tonight. Billboards across the metro area
feature Bazi’s distinctive red bottle and white cap alongside this
exhortation: “Increase your health and your wealth!” Call the number on
the billboard and you get a call back from a Bazi distributor inviting
you to a tasting and “opportunity presentation,” where you learn that
you, too, can be a Bazi distributor.
A sixteen-ounce bottle of Bazi sells for $25 — but you can’t
buy it in stores. Instead, hundreds of thousands of units are sold each
year through a multi-level marketing network. Distributors earn
commissions by selling Bazi directly to friends and family — and
they’re also rewarded when they enlist others in the cause.
In the late ’80s and early ’90s, when Greenberg was considered a
prince of the penny-stock trade, he managed a huge force of brokers
trained in the art of the hard sell. These days, though, the tanned
51-year-old knows that an unsalaried sales force needs a different kind
of motivational speaker, and so Bazi’s top distributors give the pep
talks. “Everybody, let’s give it up for Mark Jackson,” Greenberg says,
announcing the former Broncos wide receiver who, as one of the
legendary Three Amigos in the late ’80s, made the storied touchdown
catch from Elway in the 1987 AFC Championship.
“My rookie year, I had a chance to quit a couple times,” Jackson
tells the crowd. “What I learned in the Broncos is sometimes you need
help to be successful.” After retiring from the NFL, Jackson worked in
the mortgage industry for several years — and then some friends
helped him find his way into the Bazi business, where the money now
chases after him. “Some of you guys might be thinking about quitting,”
he says. “Sometimes you need a little help. You have to be able to
sacrifice if you want to go from good to great.”
Becoming great at XELR8 means reaching the Diamond ranks of
distributorship — with commissions in the realm of six figures a
year, as well as the chance to win tropical vacations and luxury cars
— by pushing greater volumes of Bazi through your “downline”
network of recruits, an army of Bazi-pushers who then find their own
recruits to preach the path of making your “dreams of health, success
and overall well-being a reality,” as Bazi’s marketing materials
promise.
“There’s magic inside each and every one of us,” Jackson insists,
“and it comes out in different ways with Bazi.”
Bazi has a brick-red hue and a light, carbonated froth. For anyone
who has choked down a wheatgrass shot, the taste isn’t bad; it’s
slightly sweet and mineral-y, like crushed Flintstones vitamins
sprinkled into a cocktail of various juice concentrates. And, in fact,
that’s not far off from the actual contents of Bazi, according to the
label on the bottle. It contains vitamins A, B, C, D and E; minerals
such as zinc, calcium, potassium and some unpronounceables like
dysprosium and praseodymium; and 72 other nutritional ingredients. The
“8 superfruits” include old staples like raspberry, blueberry and
pomegranate, along with more exotic produce that’s become a hot trend
in liquid supplements: the Himalayan goji berry, the Indonesian
mangosteen, the seabuckthorn berry from Russia and the Brazilian
açai berry. But it’s the jujube (pronounced joo-joob) from China
that gets top billing.
“Deep in the cool mist of China’s prized Shandong Province grows an
ancient, superior fruit of almost magical power,” begins the voiceover
on the Bazi website. “Carefully cultivated for over 4,000 years, this
amazing fruit is rich in life-giving nutrients and steeped in legend.”
Ancient healers and high priests would use the “mystical” jujube fruit
to cleanse vital organs, revitalize the kidneys, detoxify the blood,
slow the aging process and provide a “sense of immortality” to those
who drank it. With Bazi, the voice concludes, XELR8 has used the
“jujube in its most potent form so it may provide you with all its
astonishing health benefits.”
XELR8 won’t disclose how much of the magical jujube is in Bazi,
citing its “proprietary blend,” and most of the evidence offered to its
efficacy are citations from Chinese studies of the individual fruit; no
studies have been conducted on Bazi itself. But there’s no denying the
head rush and energy many report after a first gulp of Bazi —
whose ingredients also include caffeine.
That’s a “natural caffeine,” explains Sanjeev Javia, XELR8’s vice
president of product development, and it’s added to the mix to further
activate the powerful antioxidants and B vitamins in the formula
already working at toxins and radicals in the body. “I like to describe
the body system as a tree, where the roots and trunk are the base, and
all the individual branches are certain issues that one may have,”
Javia says. “When you feed your body powerful nutrients, you are
feeding the roots of this system. The indicators of how well these
roots are being fed are how strong, lively and vital the branches
become.”
Javia, a lively, affable 34-year-old with the looks of a Bollywood
star, is the “mad scientist” credited with formulating Bazi. He also
manages the relationships with the company’s athletic endorsers and
oversees their nutritional programs. While Javia is neither a scientist
nor a nutritionist, he did study biology and biopsychology during his
undergrad years at the University of Michigan, which is where he became
friends with several athletes, including Griese. After working for a
few years in California as a sales trainer for an Internet company,
Javia moved to Colorado in 2004 to help Griese set up his non-profit
charity. It was through Griese that Javia met Greenberg, who was
operating a company then known as VitaCube Systems (V3S), marketing
nutritional supplements to athletes.
Nutritional supplements were big at the turn of the new century
— too big. VitaCube’s line included more than forty different
products. One package, Elite Cube, consisted of a tackle box filled
with various pills and powders that was marketed to athletes at a cost
of $300 a month.
“It’s not easy to swallow down six or seven pills at a time,” Javia
says. “They didn’t know what to take, how much to take, when to take
it. So now all of a sudden people stopped taking their supplements and
they stopped being healthy.” Intrigued by the possibilities, Javia took
a job with Greenberg and began researching ways to fit all of the
supplements into a single dose that people might actually take. “So
that was the original concept: Okay, why don’t we put these vitamins
into a system, give them the solution,” he remembers.
To test possible solutions, Javia worked as a liaison between
VitaCube and a research and development laboratory that he declines to
name. “We went through about fifty iterations,” he says, “just sampling
and making adjustments, sampling and making adjustments, for about a
year.”
While they were working on the formula, Greenberg was working on his
company, changing the name to XELR8 to reflect its streamlined mission.
“What we learned is that if we were going to be successful as a
company, what the American public really wanted was something really
convenient they could take that had all the stuff in it and tasted good
enough,” Greenberg says.
That something was Bazi. And by early 2007, XELR8 was ready to
launch its all-in-one wonder drink.
Tell me why you love Bazi!” says Tom Chenault.
Right now, Buzz Coffee looks more like a strip-mall church during a
revival than a Longmont coffee shop. That’s because in addition to
owning Buzz, Chenault is XELR8’s “master distributor.” Colleagues call
him a “pied piper” for the Bazi cause.
“I love how Bazi gives me energy all day,” says Vikki from Boulder.
Kristy from Lafayette “hasn’t had a cold in the past two years” while
using Bazi. Alex, a part-time DJ, loves Bazi because “it helps my mom
with the Parkinson’s; she’s 88.” Bazi allowed Darlene, a mortgage
broker, to finally get rid of gnats breeding in her nasal passage: “I
started drinking Bazi, and it cleaned up the entire infection in, like,
three days,” she says.
So it works wonders for increasing your health. But these people
also love Bazi for the promise of wealth.
“Do you have dreams of being rich some day?” asks Chenault.
“Oh, yeah,” replies twenty-year-old Austin, the youngest recruit,
who works at a 7-Eleven.
Chenault, who fizzes with fellowship, pauses and looks at Austin
like he’s the only person in the room. “I can see it in your eyes,” he
says, then turns back to the crowd. “Bazi can give him that. That’s the
magic of this business. That’s why I am so committed to each and every
one of you having the kind of life that we’re talking about. The
business is about people.
“If you teach four people to do exactly the same thing and your four
people come in at five cases and they teach their four people? That
means you get paid ten dollars apiece on those people,” Chenault
continues. As he explains the Bazi distribution system, an assistant
writes numbers representing potential income on the whiteboard,
starting at the top and moving down. “And your biggest goal is to drive
this thing five levels deep, because [XELR8] doubles your commission to
10 percent and you let geometric progression take over. And you’ve got
1,024 people in your business, times a two-case auto-ship, times 10
percent, you made $20,480 on that level — and you just made
yourself that $800 a day. That’s incredible money. And that goes on
forever, and it’s happening right now.”
But money isn’t the end in itself, Chenault says. It simply buys us
the freedom to be with the ones we love. That’s the way it was for him
twenty years ago when he left his high-flying life as a stockbroker,
quit drinking and began looking for a way to work from his Littleton
home. He and his wife, Denise, wound up becoming one of the top
distributors for a health-products multi-level marketing company called
Youngevity, where they built an organization of over 93,000
distributors; Chenault also hosted a radio program focusing on
home-based businesses.
Chenault knew Greenberg from his days as a stockbroker, and when he
heard that his friend was getting ready to introduce Bazi, he got so
excited about the product and its potential for growth that he came on
board as the very first distributor. And he brought many in his network
along.
For Chenault, the beauty of the XELR8 model is that it allows
individuals to use the equity of their own effort and their
relationships to build a business. “You want to make darn sure that you
have got the ability to leverage yourself,” he says. “Denise and I get
paid a little tiny bit off of every person in this room. And you go out
and multiply and we get paid a little tiny bit on those people, and
those people and those people. You are leveraging other people’s money,
other people’s time, other people’s efforts.”
Andrea Vahl, a stay-at-home mom, recently signed up as a
distributor; she’s working hard at building a downline by using XELR8’s
“invite, taste, follow-up” recruitment method. After Chenault’s
presentation, she turns to the potential recruit she brought to Buzz.
“There are people who have a real negative attitude toward network
marketing and they don’t really understand it,” she says. “I think the
tide is turning where people are realizing it’s not a scam. It’s just a
different way to make money.”
In his XELR8 office, Sandy Greenberg points to a wall filled with
framed photos of Bazi endorsers. “Cadillac Williams at one of our
events,” he says. “He was rookie of the year and the top running back
for Tampa Bay. That’s Mike Alstott; he’s a fullback for Tampa. Darick
Holmes. Becky Quinn, she’s an amazing cyclist.” Some of the celebrities
in the photos — Arnold Schwarzenegger chilling with Greenberg,
for example — haven’t endorsed Bazi. Not yet, at least.
The supplement also has found fans among prominent Denverites. Auto
pitchman “Dealin’ Doug” Moreland was among the early investors in
XELR8, as was Denver developer/restaurateur Jim Sullivan. Steve Rosdal,
founder of Hyde Park Jewelers, is a top distributor; he recruited
former CBS4 sportscaster Les Shapiro.
Greenberg’s pictures aren’t limited to athletes and other
celebrities. He also displays tigers. “This I bought in Hawaii,” he
says, pointing to the large, brightly colored painting of a tiger’s
face in front of a full moon. “I saw this back in the day, and my thing
was ‘Eye of the Tiger.’ So I just fell in love with this picture and
had to have it. I think I bought this fifteen years ago. Now everyone
tells me it’s dated, get it out of the office. But I like it.”
XELR8 headquarters is located in a stucco building on South Holly
Street that’s actually owned by Greenberg’s father, former stockbroker
Arnold Greenberg. “It’s a pretty efficient little building,” says the
younger Greenberg, who went to George Washington High School, just down
the street. “We’ve been in there since we started. And the rent’s right
— for right now.” Bazi is actually produced in Phoenix by Arizona
Production & Packaging, which ships the bottles directly to a Bazi
warehouse near Denver International Airport. The Denver offices are
used solely for administration and presentations for potential
distributors. And there are plenty of those, recruited by friends and
those billboards promising health and wealth.
Greenberg was not a good student in high school. When it came time
to get a job, he first sold cars, but he soon decided to follow in his
father’s footsteps and go into the financial industry. And in the ’80s
in Denver, then the penny-stock capital of the country, there was one
clear choice for an ambitious young broker: Blinder Robinson, which was
headed by Meyer Blinder, the flamboyant “Penny Stock King.” Typically
costing less than five dollars a share, penny stocks were seen by
smaller companies with little history as a good way to raise capital
— but they were also considered risky investments.
“The only source of information about the company was the company
itself,” recalls former Colorado Securities Commissioner Phil Feigin.
“There were no analysts following it; it was just what the company
would tell you. All the salesmen out there were building up a lot of
hype about how this is going to be the great new this or that, the new
gold mine, the new oil processing, the new better tire, the new better
anything. And when they would build that up through their telephone
sales techniques and when it finally becomes public, you’d have to beat
off the investors with a stick if you were lucky enough to get in on
the initial offering.”
The companies often failed to live up to the hype, and the investors
lost out — but in the meantime, the broker walked away with the
commissions. “There are only two ways to make money in a corporation:
You get dividends or you sell it to somebody for more than you paid for
it,” Feigin explains. “These companies were never going to pay
dividends, so the only thing you had to do was find the greater fool.
And as long as the penny-stock firms were out there pumping the stock,
you could find that greater fool.”
In 1989, when the Securities Exchange Commission finally came down
hard on Blinder Robinson for pushing penny stocks on naive investors
and overcharging them for the service, Sandy Greenberg was the firm’s
top trader.
After a dramatic raid on his Englewood headquarters by federal law
enforcement and a seizure of his assets by the SEC, Blinder declared
bankruptcy. He was eventually convicted of several counts of securities
fraud, racketeering and money laundering and sentenced to 46 months in
federal prison (“The Harder they Fall,” August 4, 1992, and “Blinder
Rage,” December 2, 1992). Greenberg moved on and founded his own firm
in Englewood called Chatfield Dean & Co, which began snatching up
offices across the country. It quickly collected complaints, too.
Florida tried to bar Chatfield Dean for disciplinary problems in other
states, including Idaho, Illinois, Maine, Maryland and Missouri, where
it had sold unlicensed securities through unlicensed brokers. In 1992,
the National Association of Securities Dealers fined Chatfield Dean,
then the largest penny-stock brokerage in the United States, for
failing to supervise brokers, guaranteeing returns on investments and
unauthorized trading. Forbes ran a scathing piece on Greenberg,
noting that his training manual for new brokers “highlights the
familiar three-call approach to selling stock: introduction, teaser,
hard sell. The manual gives sample pitches and recommends that brokers
make 200 to 300 cold calls a day. Chatfield Dean offices are literally
sweatshops of cold-calling.”
The Forbes article noted that some of the investments
Chatfield Dean was pushing were recycled Blinder stocks, like one for
an exotic car company, Vector, that had actually ceased production.
Still, Greenberg’s brokers were able to raise $4.5 million for
Vector.
Such activities resulted in the SEC’s hitting Chatfield Dean with
over $3 million in fines in 1993, and Greenberg and a partner were
suspended from trading for six months. Greenberg vowed to clean up his
act by hiring employees who would change the Chatfield Dean culture,
but his wrangling with the SEC persisted through the mid-’90s,
prompting some major mutual-funds firms to sever their relationship
with the company. Greenberg insists that the SEC scrutiny was largely
the unfair result of his former connections with Blinder. “Their
activities were not atypical of a lot of stuff that arose in other
securities firms,” Feigin says. “Everybody had issues with the SEC in
those days.”
And Greenberg forged ahead in Denver, where his ebullient
personality made him a go-to quote for business journalists regarding
the bull market. But that bull got gored when SunAmerica backed out of
a deal to buy Chatfield Dean for $16 million, and Greenberg finally
sold his brokerage to JW Financial for the bargain-basement price of
$2.2 million.
Greenberg was down, but he wasn’t out. He soon had a new project
going with his next-door neighbor, John Elway. In 1999 they announced
plans to team up with Michael Jordan and Wayne Gretzky to launch
MVP.com, an online sporting goods
retailer that would also offer fitness and financial advice. Investors
rushed to get in, pouring $150 million into the project. But MVP.com tanked within a year, the result of
“coming in on the tail end of the dotcom bust,” says Greenberg. “It was
very difficult for MVP or any company to raise additional funds to
continue.”
By then, Greenberg had yet another company in the works. He’d teamed
with Warren Cohen, a local banker and real-estate developer, to form a
health-supplement company called V35 Systems. “I was forty years old, I
was out of shape, I had stomach problems,” says Greenberg. “I really
thought something was seriously wrong. Then I learned about nutrition
and learned that most of my problems were nutritionally based from
doing the wrong things.”
In 2004, V35 introduced its direct-selling model, bringing in
multi-level marketing veterans to tout the product line in the
time-honored manner of Amway and Mary Kay. In 2005, Greenberg took the
company, now named XELR8, public and raised $9.2 million, the
highest-ever IPO for a multi-level marketing company. But revenues
didn’t meet expectations, and the company’s stock soon slipped. In
2006, XELR8 incurred a net loss of $4.6 million.
By January 2007, the American Stock Exchange was threatening to
delist XELR8 because its value had fallen below $2 million. A month
later, though, the company launched Bazi and was able to raise an
additional $2 million in a private placement of its common stock. XELR8
was allowed to remain on the stock exchange.
All other product lines were discontinued so that XELR8’s sales
efforts could focus on Bazi. Within weeks of the launch, the company
had added 111 new distributors to the more than 2,700 already signed
on, and the number just kept growing. At Bazi’s national convention in
Las Vegas in February 2008, Greenberg presented a Lexus to the
company’s top distributors: Denise and Tom Chenault, who estimates that
he now has 10,000 distributors beneath him.
Bazi got another boost this February, when XELR8 announced “an
affiliation” with the renowned Steadman Hawkins Clinic, a specialist in
sports medicine with facilities in Vail and Greenville, North Carolina.
“We did due diligence on its quality, and now our dieticians can offer
Bazi throughout our facilities,” said Dr. Jim Silliman, CEO of Steadman
Hawkins. But the connection between XELR8 and Steadman Hawkins is not
as significant as the company’s marketing materials suggest.
“Steadman Hawkins does not have a relationship with Bazi,” explains
Dr. Richard Hawkins, who’s based at the North Carolina clinic. “Bazi
and XELR8 has signed a contract with the Greenville Hospital System,
and Steadman Hawkins doctors are employed by GHS. That’s a big hospital
system.” Although Hawkins says he drinks Bazi himself and has appeared
in XELR8 videos shown at events promoting Bazi, his clinic has not
started recommending it to patients.
The Steadman Hawkins deal — whatever it may be — wasn’t
enough to stem XELR8’s losses. Earlier this year, stock prices fell to
a low of two cents per share. In March, XELR8 was officially delisted
from the New York Stock Exchange (formerly the American Stock Exchange)
for failing to meet the requirements for shareholder equity. XELR8
stock now trades on the Over the Counter boards, known also as “the
pink sheets,” which is considered much riskier investment
territory.
David Elias, head of investor relations for XELR8, admits that any
time a delisting occurs, it “will generally not look good for the
stock.” But he notes that many good companies choose to be listed in
the pink sheets, since there are significant expenses involved with
being listed on a national exchange. “XELR8 had a very good year, a
very good quarter,” he says. “Many companies know that there are many
expenses to get to the point where you can become profitable.”
The vast majority of XELR8’s expenses are in sales and marketing,
which increased from $3 million in 2007 to $5 million in 2008. “It’s
commissions, it’s producing marketing materials, promotional materials,
events,” says Elias.
Events like the May 2 conference — and the annual convention
in Las Vegas in February, which attracted 400 Bazi distributors from
across the country for two days of seminars, presentations, ceremonies
and general cheerleading for the cause. And many of those athletic
endorsements come with a price. The XELR8 website proudly showcases
more than 350 professional and Olympic athletes, all adamant Bazi
drinkers: pitchers Curt Schilling and Randy Johnson, NHL goalie Marty
Turco, golfer Tom Pernice Jr., Super Bowl champs Marco Rivera and Mike
Alstott.
While a frequent exhortation of distributors is that “none of the
athletes are getting paid to endorse XELR8,” the company’s president,
Doug Ridley, does acknowledge that some of the athletes receive cash,
stock options and free product for appearing in marketing videos and at
promotional events. But he says that such compensation is minuscule
compared to the endorsement fees handed out by larger companies. “I
think the distinction is that most of the athletes we have are not
endorsers,” he explains. “They’re customers, and they pay for the
product because they love it.”
XELR8 is not the only multi-level marketing company built around
fruit-based supplement drinks with exotic names like Noni, Xango and
Zrii. All promise increased wellness and energy, and all follow similar
strategies of rapid recruitment. While XELR8 has signed up roughly
10,000 distributors — with 6,483 considered “active,” according
to the company’s most recent filing — the Bazi army is still tiny
compared to the force behind MonaVie, a purple superjuice that’s a
blend of Brazilian açai berries and other fruits. Sold in a
25-ounce bottle for around 35 bucks, MonaVie is slightly cheaper than
the $1.56 per ounce Bazi. Last year, the Utah-based company behind
MonaVie signed up its millionth distributor and had sales that topped
$1 billion.
The line between a legitimate multi-level marketing program and a
pyramid scheme can get fuzzy. According to Bill Reese, an attorney who
represents many multi-level-marketing companies, no specific federal
statute prohibits pyramid schemes; the job of regulating them falls to
the FTC. And when the FTC does look to see if a company is operating a
shady pyramid scheme, it considers several factors, Reese says: “Is the
company incentivizing very large or undue product purchases? Are most
of the products being sold to distributors rather than end users? Is
there deception involved in the promises of income?”
The FTC calls such offerings “Lotions and Potions” on its website
and warns consumers “to apply a healthy dose of caution before buying
products advertised as having ‘miracle’ ingredients or techniques and
guaranteed results. Many of these ‘quick cures’ are unproven,
fraudulently marketed and useless or even dangerous.” Consumers should
watch out for companies with overpriced or unviable products,
compensation plans that pay commission for recruiting new distributors,
and extreme claims about the product’s performance, the FTC
cautions.
To stay on the good side of the Federal Trade Commission, MonaVie,
which is not traded publicly, issues an official income statement each
year, detailing where the money went within the network. According to
its 2008 statement, the majority of the roughly $1 billion that MonaVie
paid in compensation went to fewer than 1 percent of its distributors.
Ninety-two percent of its sales team earned less than $1,000 a week,
mostly in discounts as “wholesale customers.” About half of MonaVie’s
distributors worked an average of 32 hours per month for an annual
check of $1,536.
XELR8 provides no such disclosure statement — but it has to
make other filings with the SEC. One such filing from April reveals
that in the prior twelve months of purchases, 6,483 came from
independent distributors and 4,530 from customers. But president
Ridley, a veteran of such multi-level marketing companies as Amway and
Quixtar, says the majority of those customers were actually onetime
distributors who had been bumped from the rolls for inactivity.
“There’s often a distinction between the people that may be registered
in the network and the number that we report in our filings,” he says.
“The way we do it in our filings is that we drop off people on a
monthly basis we deem are not active distributors because they haven’t
placed an order in a certain period of time.”
And in those filings, XELR8 acknowledges to potential investors that
the company’s survival depends on its ability to “duplicate
distributors.”
“This isn’t a sustainable business,” says Robert Fitzpatrick, a
critic of multi-level marketing companies who runs the North
Carolina-based website Pyramid Scheme Alert. “You recruit four who
recruit four who recruit four. We could only go about seventeen more
levels and we would run out of human beings. Basic mathematics. It’s
all about deceiving that crowd that everybody can build a downline and
everybody can win when the exact opposite is true.”
To Fitzpatrick, the XELR8 athletes are just part of the illusion
necessary to keep new distributors signing up. “The pyramid plan is a
lie, but it is a very potent lie,” he says. “It plays tricks with math.
It plays upon people’s greatest hopes. And it talks about wealth. Well,
we’re in a recession. Most of us struggling for salary, scared we might
not make our house payments and could lose our homes — and here’s
a guy claiming to have a system that offers unlimited wealth to huge
numbers of people. He looks like a magician!”
It may be touting a magic potion, but there’s no hocus pocus to
XELR8’s business plan, its officers insist. “We offer a sixty-day,
money-back guarantee on all purchases,” Ridley says, noting that the
company is very careful not to make specific income promises to
distributors. “If you go online and look at our business opportunity
section, we don’t create any type of income representation,” he says.
“All we do is display our compensation structure. If all you’re doing
is displaying your compensation structure, there’s no income
representation.”
In fact, the only income representation you can find in the
company’s materials is a disclaimer made three years ago that stated
the average annual earnings for all active Bazi distributors in 2005
— not including those who just consumed the supplement themselves
and recruits who never received a commission — was $692.02.
Leigh Sullivan began selling Bazi as a distributor in 2007 after
jeweler Rosdal, a longtime friend of her father’s, convinced her to try
it. She sold it for a few months and then dropped out. “Honestly, it
didn’t feel right to me. Almost dirty,” she says. “Like I really want
you to try this product, but not because it’s going to be good for you,
but because I’m going to make $20 if you buy two cases every month.”
Nevertheless, she continues to buy Bazi as a customer every month
because “I really, really like the product,” she says. “It is really
stupidly expensive, but I am one of those people who will go pay money
to go buy supplements. So I guess you pick your poison.”
But not only does XELR8’s business plan come in for criticism; so
does its product. Steven Barrett, a retired psychologist who monitors
claims made by companies that sell health products for the site
Quackwatch.org, doesn’t find
anything special in Bazi’s special blend. “What they’re selling is a
multi-vitamin, multi-mineral drink with some fruit extract, that’s
all,” he says. “For about a dollar a month, you can supplement
adequately with generic Centrum.”
XELR8 won’t say what it costs to produce Bazi, but SEC filings
indicate it’s somewhere between $5 and $6 a bottle.
Kim Gorman, a registered dietician with the University of Colorado
Denver’s Center for Human Nutrition, puzzles over the ingredients label
on the Bazi bottle. “Obviously this is about making money,” she says.
“They’re using bits of information that are science-based. If you
extract a piece of a sentence out of scientific literature, you can
pull pieces out and say, ‘Well, look, in this paper, Vitamin C did
yadda, yadda, yadda. Therefore since this product — which is
proprietary — has vitamin C in it, we can also make this claim.’
That’s hogwash; you can’t. It won’t do any harm, as long as you can
afford it. But it certainly won’t replace a healthy diet.”
I believe I am a changed person,” says Les Shapiro. “Multi-level
marketing doesn’t just teach us how to be better salespeople, it
applies to life in general — being a better father, mother,
husband, whatever. It does make you a better person.” Shapiro, who was
laid off by Channel 4 in 1999, says he never imagined getting involved
in this type of business until his friend Rosdal, who’d recently
retired, gave him a bottle of Bazi.
“I didn’t like the taste at first,” Shapiro admits. But after about
a week, he started noticing that his health was better. “I was no
longer wanting to take a nap in the late afternoon; my workouts were
longer and harder,” he says. “I play a lot of baseball, and I had a lot
of junk going on in my shoulder. It totally went away. My allergy
symptoms subsided. I had started using reading glasses in the morning
for small print, and I didn’t need them in the morning.”
Today Shapiro has 200 distributors under him and says he makes a
good residual income with Bazi.
The magic is strong. Both the FTC and the Colorado Attorney
General’s Office report that they’ve received no complaints about the
company. Greenberg says that’s because he and his executive team have
worked hard to build XELR8’s credibility, launching it as a publicly
held security and making regular financial disclosures to federal
regulators, even when those disclosures are disappointing. But the work
has paid off with Bazi’s army.
“I think we’ve paid our dues and certainly invested a lot of money
and time,” says Greenberg. “We’re right at the tipping point.” XELR8
collected $7.4 million in revenue last year, an increase of 53% over
2007, and Greenberg says it’s only going up from here.
“I’ve seen what corporate America looks like,” says Greenberg.
“They’re laying people off. The old structure is going down.”
