IT'S 9 A.M. ON A SATURDAY MORNING IN A warehouse on the western edge of Mexico City. The last members of a 4,000-strong audience file into the building. To get the good seats, some people have been waiting for up to three hours. Music by Mexican rock groups such as Plastilina Mosh pipes through a state-of-the-art sound system. The stage is lit with colored spotlights, and a large concert screen hovers above.
These people are not waiting to see the Rolling Stones. Rather, they are here for Mexican entrepreneur Jorge Vergara Madrigal. And Vergara's backup is not a bevy of vocalists, but towers of vitamin formulas.
The mood is a mix between a high-school pep rally and a political convention, leaning more toward the former. Banners are held aloft throughout the audience, decorated with the logos of different sales groups. In the center about 50 people are standing on plastic chairs chanting "Jor-ge, Jor-ge." Omnilife soft drink cans turned into makeshift noisemakers further heat up the ambiance, and Omnilife products are everywhere, for self-consumption as well as for sale.
Like a rock star, the man of the hour lets his crowd warm up, then makes his entrance as smoke spews from stage jets and the lights turn purple in a focused spot. The crowd roars, and then calms down as Vergara assumes a casual stance on a stool, a posture you would expect from a talk show host. Dressed in a well-fitting black suit and a tie, his black loafers are worn without socks, a trademark feature of that, like many of Vergara's business decisions, is hacked by a firm belief in its health-giving effects.
"Today we're going to give away 10 cars, introduce a new product--and I have a surprise," says Vergara. The crowd cheers. He pauses to sip a brightly colored vitamin concoction.
It is this kind of enthusiastic support that helped push Guadalajara-based Omnilife to US$660 million in sales last year, and made Vergara a rising star in the Mexican business world.
Rallies like this one in Mexico City will be repeated in Medellin, Lima, Caracas, San Jose, Guatemala City and Los Angeles, as well as in more than eight cities in Mexico, during Vergara's two-month tour this summer. They are the motivational bread-and-butter for a 600,000-strong sales force that has propelled the Omnilife brand to the top of the health products industry in Mexico, with pan-regional ambitions.
An integral part of Vergara's 8-hour presentation is his bootstrap story He tells the captive audience how he started Omnilife in 1991 with US$10,000, how he launched the company in a ran-down warehouse without enough money to pay for the lease guarantee, how he sent the landlord a copy of a blank contract with some scribbles on it instead.
Today Omnilife is a multi-level organization not unlike Mary Kay, Tupperware or Amway Vergara prefers to use the term "multi-development," instead of multi-level, in an attempt to stress fair income distribution. He describes his business as one-third product, one-third organization and one-third distributors. To date, Omnilife products are sold in 10 nations (the sites of the summer tour plus Argentina, Spain and El Salvador). This year, Omnilife plans to expand into Bolivia, Canada, India and Hong Kong.
Although Vergara's resume makes him look like a salesman par excellence, his experience has convinced him that the hard sell is not the way to go. "I don't believe in salespeople, period," he says. Following a stint as a car salesman in the early 1970s, he worked his way up the ladder at industrial conglomerate Grupo Alfa, in its now defunct Casolar real estate division, becoming assistant sales director by 1984. 'When he was laid off after the group scaled back operations that year, he went on to sell wholesale meat, and then opened an Italian restaurant. Although the meat business left Vergara little more than overweight (about 240 pounds), the restaurant was sold and still exists in Guadalajara.
In 1986, he began working at Herbalife, a Los Angeles-based health products company lost weight, and was sent to France to open operations. Recognizing the business opportunities of multi-level sales schemes, he returned to Mexico to market his own vitamin products, which could be taken as a liquid instead of in pill form.
"I learned many things from Herbalife," says Vergara. "I learned what not to do." Despite its late entry into the market, Omnilife now outsells Herbalife in Mexico, one of the US-based company's strongest markets.
Aside from changing the product, Vergara also tweaked the approach to be more in line with the reality of Mexico. "Herbalife came here and tried to sell the American dream -- a Mercedes Benz, a house in Beverly Hills -- as if it were the ultimate achievement, when Mexicans are looking to eat, pay rent and clothe themselves," he says. "You can't sell a dream that doesn't exist."
Omnilifie's products are modern-day elixirs -- a mix of vitamins and minerals, and in some cases fiber and soy meal. Omnilife products to a large extent complement traditional diets and even substitute for them. A vendor at the Mexico City rally said that a person commonly takes five to six products daily However, some sellers claimed to regularly take 10 to 20 products per day Assuming consumption of six powder packets a day, at US$0.60 per packet, the daily cost would be a very high portion of Mexico's minimum wage of US$4 per day The price tag converts many users into sellers to maintain their own consumption.
The products are mostly powders that are mixed with water to create a vitamin-packed, orange-flavored drink. Vergara says his company grinds only organic fruits, vegetables and plants to make the powders. Omnilife also has a line of colas and instant coffees called "thermogenics," which supposedly stimulate the metabolism and aid in food digestion.
However, any product description falls short of product testimonies. In Mexico City, a woman named Toni from a small town in Veracruz stands up to tell how she had suffered from arthritis throughout her body since she was 12 years old. The camera zooms in on her crippled fingers, the joints of which are swollen to twice their normal size, projecting the image on the concert screen above the stage. Toni talks about how she was given medicine after medicine that had side effects such as loss of appetite, with one even drying up her tear ducts. Bedridden for years, "My dream was to walk," she says. After a difficult first three months using Omnilife products, Vergara chimes in that her body cleaned itself of all the accumulated mugre or muck, enabling her to walk and participate in normal activities. "This is life, hope and everything," she says, adding that her Omnilife experience restored her faith in God.
The mention of the Lord is perhaps not so strange, given how much of Omnilife's promotional structure resembles an evangelical religious group. Although Vergara doesn't mention God specifically, he does make subtle references that seem to feed on the salespeople's own convictions. "The one that designed the body designed it perfectly" says Vergara. Disease, he adds, comes from what we eat, drink and breathe. When the next testimonial comes to the stage and begins by saying her story is not as dramatic as the prior one, Vergara grinds everything to a halt. "Never underestimate your own testimony!" he says to the crowd.
To understand just how potent a business Omnilife has become in a few short years, it's only necessary to look at the deal that didn't happen this past summer.
Vergara hit the international business spotlight in June when it was reported that he was in acquisition talks with Anita and Gordon Roddick, the founders of UK-based health products chain The Body Shop. The news skyrocketed the price of The Body Shop to 126.5 pounds sterling on the London stock exchange. When the deal fell through a few weeks later. 24 percent of the value of The Body Shop was wiped out almost overnight. By September, The Body Shop was selling for just 71.5 pounds sterling, though the price has risen since then.
According to the The Wall Street Journal, the agreement depended on raising US$250 million in financing for the US$600 million deal. While one source close to the transaction suggested that it failed because Omnilife could not secure enough funding, Vergara says he had the support of international banks, but rescinded because he didn't have the time and energy to dedicate to both Omnilife and The Body Shop.
The acquisition would have more than doubled the size of Vergara's empire, given that The Body Shop reported sales during its fiscal year ending in March of US$963 million.
