Alert #176: 5/10/2011

USANA Corporate Exodus
Four Members of Senior Management Resign

Usana Health Sciences (NYSE:USNA) publicly announced today that President and COO Fred; CFO Jeffrey Yates; Executive VP of Sales Mark Wilson and Investor Relations Manager Riley Timmer have all resigned their positions to pursue other business endeavors.”

Read the announcement here:

Usana promptly promoted from within the company to fill the vacated positions. Kevin Guest was appointed President of North America, Deborah Woo as President of Asia Pacific, G. Douglas Hekking as CFO, and Roy Truett as COO. Dave Wentz, Usana’s CEO, commented, “On behalf of the board of directors and the management team, I want to offer my congratulations and gratitude to these outstanding executives who are taking on greater leadership roles within our company. They are all highly talented and proven executives who have played significant roles in USANA’s growth for many years. USANA’s management team is one of the most experienced in the industry and will continue to grow USANA.” He thanked the departing members of the executive team and wished them well “in their future endeavors.”


Earlier today Usana conducted a live conference call for investors to discuss the shake up in the executive team. Few details were provided other than the resignations were not requested, nor were they due to any unethical activity or major disagreements, and that the remaining members of the executive team were taken by surprise by the resignations. When asked directly what the nature was of the departing executive’s new opportunity, Dave Wentz replied, “They came across an opportunity that they felt they would like to take on. We don’t have specifics. We don’t know details.” Another participant did ask if the company had any non-compete agreements in place with those who departed. The answer was, “No, we do not.”

While we can only speculate at this point, it seems most likely that Cooper, Yates, Wilson and Timmer will be involved in a new network marketing venture. Based on the known facts it’s the only scenario that seems to make sense.

This would not be the first time that Usana has lost experienced members of their senior management to a competitor — or to create a competitor. In 2000 Dallin Larsen, who had been Usana’s VP of Sales since 1991, left to take a corporate position with Dynamic Essentials, and then went on to found Monarch Health Sciences — which metamorphosized into MonaVie.

In July of 2008 Bradford Richardson, their Executive Vice President of Asia Pacific, accepted an offer to be the President of Shaklee International. Richardson joined USANA in December 1997. 

Nor would this the first time a group of executives have left to form a new network marketing company, and the departure of top distributors to pursue such ventures has been fairly common over the past 20 years. This doesn’t necessarily mean there is anything wrong, or going wrong, with the company they departed from. For example, Tahitian Noni did just fine after key members of their management team left to create XanGo, and XanGo did just fine when three of their executives left to help form Qivana. About 18 months after Dallin Larsen’s departure Usana began a run of 23 consecutive quarters of net sales growth in the United States. I could go on.Of course, the anti-MLM critics are already trying to spin this like it’s the death knell for Usana, rather than simply a group of guys aspiring to do their own thing, in spite of Usana having just reported their 70th consecutive quarter of profitability, and all time record quarterly sales in their 10-Q published just two weeks ago.

Usana will be just fine even if Cooper, Yates, Wilson, & Timmer do start their own M.L.M. company and the inevitable migration occurs of those looking to get in on the “ground floor”. But again, this is just speculation. Let’s not start the office pool on what date Usana files their Temporary Restraining Order just yet. I can attest that these gentlemen know what they’re doing. They are very talented and competent managers, and they are also well aware of the current condition of the network marketing industry. That is, in a condition that can ill-afford yet another fracturing of a major, successful company’s distributor base, and the addition of yet another option to the growing glut of B-grade opportunities that are swamping this profession. While we’re a long way from a saturation in demand, the supply of opportunities in the U.S. is far in excess of that demand. While the number of total distributors continues to grow to record highs, they are being spread thinner and thinner across more and more companies thus decreasing the average downline size. What ever was the catalyst to their leaving it must be something pretty enticing.

What ever their intentions are, it will likely still involve M.L.M. — the world’s largest, fastest, although not always most accurate, ready made grapevine. No one keeps a secret in this business for long.

Len Clements
Founder & CEO
MarketWave, Inc.

Breaking News: Troy Dooley just announced (literally as I was about to send this Alert) that Ignite 360 has decided to abandon the MLM model and go direct sales. This is just a couple days after Tru Chocolate did the same thing (Tru Chocolate is not the same company that is now part of Youngevity), as did EIRO Research five months ago, and Xelr8 back in January of 2010. The last major move of this sort previous to that was when Metabolife started selling their products in stores back in 2000 and dumped all their distributors in 2002.

Although this sucks for the reps within these companies, the industry does need more supply-side contraction, for reasons just described. But this will only benefit the industry if those abandoned reps move to another opportunity rather than give up on M.L.M. in disgust. That’s a big if.