Thursday, December 3, 2015

USANA Distributors Overcharged For Product In Order To Fund Pyramid Scheme



See what USANA products could cost if manufactured by a non-MultiLevel Marketing company.
View the PDF version of this article: 

By using USANA’s cost to manufacture each product and applying that same figure to NBTY’s costs, you can see how much more USANA charges it’s distributors for their products, which is primarily due to USANA’s very high distributor incentive expense (distributor commissions and bonuses). This also eliminates quality, potency, and pharmaceutical GMP differences the two companies might have by using the same manufacturing cost. See full detailed explanation at the bottom of this article.

USANA DISTRIBUTOR PRICE represents the discounted price USANA gives their distributors. (10% below preferred pricing)

NBTY DISTRIBUTOR PRICE represents the equivalent price if NBTY manufactured the same product instead.

USANA 2014 10K SEC Filing – Average Cost of Sales: 17.81%
NBTY 2014 10K SEC Filing – Average Cost of Sales: 54.29%

ESSENTIALS 107 MyHealthPak Custom Custom * 0.328%
100 HealthPak $108.00 $35.43
101 Essentials $44.06 $14.45
101 Essentials Kosher $44.06 $14.45
101 Essentials Green $44.06 $14.45
102 Chelated Mineral $14.81 $4.86
103 Mega Antioxidant $34.16 $11.21
106 Mega Antioxidant without Vitamin K $34.16 $11.21
OPTIMIZERS 109 Vitamin D $17.96 $5.89
110 Proflavanol C100 $35.96 $11.80
120 Active Calcium $17.06 $5.60
121 Active Calcium Chewable $22.46 $7.37
122 BiOmega $20.21 $6.63
123 CoQuinone 30 $35.06 $11.50
126 Ginkgo-PS $29.65 $9.73
128 Palmetto Plus $22.01 $7.22
129 PhytoEstrin $18.86 $6.19
131 Procosa $27.90 $9.15
134 Visionex $28.31 $9.29
141 Pure Rest $14.36 $4.71
143 Booster C 600 $28.31 $9.29
DIGESTION/DETOX 108 Probiotic $23.36 $7.66
111 Digestive Enzyme $26.96 $8.84
135 Hepasil DTX $30.56 $10.02
226 Fibergy Plus $26.96 $8.84
MOTHER/CHILD 104 Body Rox $20.25 $6.64
105 Usanimals $12.56 $4.12
144 BiOmega Jr. $15.26 $5.00
151 BabyCare Prenatal Essentials $44.06 $14.45
165 Children’s Complete Duo $22.46 $7.37
NUTRIMEAL 209 Nutrimeal Free, Protein Drink Mix $26.96 $8.84
202 Nutrimeal Chocolate Whey, Protein Drink Mix $26.96 $8.84
210 Nutrimeal Dutch Chocolate, Protein Drink Mix $26.96 $8.84
211 Nutrimeal French Vanilla, Protein Drink Mix $26.96 $8.84
212 Nutrimeal Wild Strawberry, Protein Drink Mix $26.96 $8.84
SNACKS & BARS 236 Peanutty Bliss, Protein Snack $27.86 $9.14
235 Choco Chip, Protein Snack $27.86 $9.14
237 Fudge Delite, Protein Snack $27.86 $9.14
238 Berry Nutty™ Nutrition Bar $35.96 $11.80
RESET 251 5-Day RESET Kit $99.86 $32.76
251 RESET Kit 4-Pack $346.50 $113.68
ACCESSORIES 752 BlenderBottle $5.36 $1.76
754 Pedometer $13.46 $4.41
291 Pedometer / BlenderBottle Duo $16.16 $5.30
REV3 138 Rev3 Energy $28.76 $9.43
139 Rev3 Energy Surge Pack $28.76 $9.43
139 Rev3 Energy Surge Pack $47.70 $15.65
SKIN CARE 300 Gentle Daily Cleanser $15.26 $5.00
301 Hydrating Toner $12.56 $4.12
302 Daytime Protective Emulsion w/ SPF 15 $31.73 $10.41
303 Night Renewal Crème $30.15 $9.89
304 Serum Intensive $35.33 $11.59
305 Perfecting Essence $41.63 $13.66
306 Eye Nourisher $20.66 $6.78
307 Rice Bran Polisher $13.46 $4.41
308 Nutritious Crème Masque $15.26 $5.00
BODY & HAIR CARE 311 Energizing Shower Gel $14.36 $4.71
753 Shower Gel Pump $0.23 $0.07
312 Revitalizing Shampoo $14.36 $4.71
313 Nourishing Conditioner $15.08 $4.95
314 Firming Body Nourisher $19.94 $6.54
315 Intensive Hand Therapy $12.15 $3.99
391 Natural Loofah Glove $4.05 $1.33
391 Body Polishing Glove $3.56 $1.17
399 Natural Whitening Toothpaste $7.47 $2.45
760 Mirror $4.95 $1.62
COMBINATION PACKS 350 Deluxe Pack w/ Perfecting Essence $145.67 $47.79
350 Deluxe Pack w/ Serum Intensive $145.67 $47.79
350 Deluxe Pack 4-Pack w/ Perfecting Essence $382.50 $125.49
350 Deluxe Pack 4-Pack w/ Serum Intensive $382.50 $125.49
351 Sensé Basic Pack $72.90 $23.92
351 Sensé Basic 4-Pack $190.80 $62.60
354 Sensé Hair & Body Pack $67.95 $22.29
360 Sensé Shower Pack $37.80 $12.40

By calculating USANA's estimated cost to manufacture each of their products, we can have NBTY manufacture the same exact product at USANA's estimated cost and determine what a distributor could pay if purchased from NBTY rather than USANA. This reveals how USANA distributors are paying way too much for USANA product so USANA can fund their pyramid scheme (see associate incentive expense below).

USANA HealthPak sold to their distributors for $108
It costs USANA approximately $19.24 to manufacture the HealthPak ($108 * 17.81%)
Now have NBTY manufacture the same exact product and have it cost them $19.24 to manufacture
NBTY could sell the HealthPak to their distributors for only an estimated $35.43 ($19.24 / 54.29%)

Why should USANA distributors be overcharged and left holding the bag?

10-K 2014 SEC Filings
Dollar value in thousands
% of Net Sales
Net Sales
Cost of Sales
Associate Incentives (Commissions & Bonuses)
Selling, General and Administrative (SG&A)
Advertising (part of SG&A)
Research and Development (part of SG&A)
Earnings from Operation

10-K 2014 SEC Filings
Dollar value in thousands
% of Net Sales
Net Sales
Cost of Sales
Advertising, Promotion and Catalog
Selling, General and Administrative (SG&A)
Goodwill & Intangible Asset Impairment Charges
Earnings from Operation

Detailed Explanation:
As a distributor, your job is to retail product to customers and the reward is a decent profit margin on the sale. However, USANA has chosen to make commissions and bonuses (distributor incentives) the primary reward. USANA pays commission to distributors who have generated "Group Sales Volume" points from product purchases made by either preferred customers or downline distributors. As a result of USANA's compensation plan, USANA pays out 43.5% of their sales as distributor incentives, which is reported in USANA 2014 10-K SEC filings. To put in perspective, the HealthPak sells to USANA distributors for $108. From that, $46.98 is used to pay commissions, which does not go toward the distributor who retails product, but rather primarily to those with the largest downlines.

This enormous expense forces USANA to drastically raise the price their products are sold to their distributors to the point distributors cannot realistically retail the product, not to mention preferred customers get the product at the same price distributors get it. This causes distributors to focus on selling a business opportunity and recruit new distributors rather than selling product. In order for distributors to participate in USANA’s compensation plan or contests, you must personally purchase over $100 worth of product every four weeks. Unfortunately, even though USANA pays out almost half of their net sales as distributor incentives, the vast majority of distributors never earn a profit and only a few at the top of the distributor network hierarchy make enough to recognize a profit. The result is a pyramid scheme. The more distributors in one's downline, the more commission one is likely to receive. Because distributors are required to personally purchase product, commissions are almost guaranteed to those who joined earlier and are higher up the chain.

Now that you have a basic understanding of the distributor incentives as a percentage of USANA's net sales, we must now look at USANA's average cost to manufacture the product. This is known as the "cost of sales" and is reported in USANA's 2014 10-K SEC filings as 17.81%, which consists of expenses related to raw materials, labor, quality assurance, and overhead costs directly associated with the production and distribution of the product. So a $108 HealthPak is estimated to cost USANA $19.24 to produce. In other words, USANA sells the HealthPak to their distributors at 5.6 times their cost to manufacture and produce that HealthPak.

In contrast, dietary supplement manufacturer NBTY is not a multilevel marketing company. According to their 2014 10-K SEC filings, NBTY’s cost of sales represents 54.29% of the net sales. As a result, NBTY sells product to their distributors at only 1.8 times their cost to manufacture. One glaring difference is that they do not have a very large distributor incentive like USANA does. If the same HealthPak product was manufactured at NBTY at the same cost of $19.24 as it did with USANA, then NBTY would be able to sell it to their distributors for an estimated $35.43 instead of USANA's $108 price tag.

By removing the focus of recruiting an endless chain of distributors (in what I believe is a massive pyramid scheme) by greatly reducing or eliminating altogether the distributor incentives, product sold to USANA distributors could be much more affordable and allow distributors to retail the product for a substantial profit margin. In fact, if USANA distributors purchased the HealthPak for $35.43, they could resell it for a 100% profit margin and it would still be much cheaper than the $108 USANA distributors currently pay.

This document shows all USANA products sold in the United States, the price USANA distributors pay for each product from USANA (MultiLevel Marketing company), and the estimated price distributors could pay if the same product was instead manufactured and distributed by NBTY (non-MultiLevel Marketing company).

Monday, October 12, 2015

USANA HealthPak vs USANA Essentials – A $2.00 Raw Material Difference That Costs Associates $63.95

USANA HealthPak versus USANA Essentials

The associate auto-order cost for the HealthPak is $108.00 whereas the cost for the Essentials is $44.06

USANA HealthPak contains a dosage increase of the following ingredients:
Vitamin D3: 200 IU (11.1% increase)
Vitamin K: 30 µg (50% increase)
Calcium: 400 mg (148.1% increase)
Magnesium: 200 mg (66.6% increase)
Boron: 660 µg (22% increase)

The HealthPak also contains the following additional ingredients:
Alpha-Lipoic Acid: 200 mg
Grape Seed Extract : 90 mg
Resveratrol: 30 mg

Raw material cost for the added ingredients contained in the 28 day supply of HealthPak are as follows:
Vitamin D3: 5600 IU costs $0.0028
Vitamin K: 840 µg costs $0.000042
Calcium: 11,200 mg costs $0.113
Magnesium: 5600 mg costs $0.0178
Alpha-Lipoic Acid: 5600 mg costs $0.336
Grape Seed Extract: 2520 mg costs $1.26
Resveratrol: 840 mg costs $0.252
Boron: 18,480 µg costs $0.0055

That's a material cost increase of only about $2.00 to go from the USANA Essentials to the USANA HealthPak. However, USANA charges an additional $63.95 for the HealthPak than the Essentials. Would USANA care to explain?

Update November 3, 2015:
For those who think the different packaging (box with individual daily packets versus the standard bottles) explains the $63.95 cost difference, I have a rude awakening for you. Go onto USANA's product page and choose "MyHealthPak". This allows you to build a custom box of morning and night time packets of your USANA vitamins. Choose only the Chelated Mineral and Mega Antioxidants (USANA Essentials) for your custom box and see the price you get. It is only $11.95 more for the Essentials to be packaged into a customized box similar to the one you get from the HealthPak.

This is very bad new for those who are struggling trying to defend the massive price increase from the $44.06 Essentials to the $108.00 Healthpak when the ingredient cost difference is only about $2.00!

USANA will have as hard of time explaining why it is ripping off its associates with the HealthPak as the US government has trying to explain why they spent $43,000,000 to build a gas station in Afghanistan that should only have cost $500,000 to build that eventually shut down anyway.

Vitamin D3 -

Vitamin K -

Calcium (Citrate) -
Calcium (Carbonate) -

Magnesium (Citrate) -
Magnesium (Amino Acid Chelate) -
Magnesium (Oxide) -

Alpha Lipoic Acid -

Grape Seek Extract -

Resveratrol -

Boron -