How a Utah-based essential oils company cornered the Oregon market

 
 

Multilevel marketing, health claims and zyto scanner biofeedback machines: How dōTERRA built an Oregon empire.

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It’s a dismal Thursday evening. Heavy rain coupled with winding country roads make getting to the remote Hillsboro farmhouse feel treacherous. Once inside, that uneasy feeling persists, at least for the uninitiated. This is a dōTERRA sales and information meeting, and “wellness advocate” Katie Adams, 35, is lecturing on autoimmune disorders. Adams’ PowerPoint slides present information faithfully culled from the National Institutes of Health. Until slide 14. Here she poses the leading question: Are you open to the possibilities of how natural solutions can help you? Adams then pitches a five-step, 60-day cleanse featuring dōTERRA oils and supplements. The price? $250.

dōTERRA, an Orem, Utah-based company, combines two elements that some people might rate high on the squeamish scale: essential oils as health-enhancing supplements and multilevel marketing. Both have been around forever. Both make lots of promises. And in today’s climate, which celebrates defiant outsiders, bad-boy business disrupters and a life-hack-DIY ethic, both might be moving into the national mainstream.

0315 doterra02 500pxOregon has a long history of letting the independent fringe fly. You could always find a new-age shaman or earth mother/witch woman tucked in among the lumbermen, fishermen and farmers, preaching a radical brand back-to-nature healthcare.

“My mom was the ‘crazy oil lady,’ ” recalls 38-year-old wellness advocate Arin Ingraham, who grew up in the mountains outside of Ashland. Homeschooled to what she calls a “ninth- grade education,” Ingraham remembers longing for a dab of Neosporin on her cuts and scrapes instead of the lavender oil her healer mother insisted on.

Even as the state moved from a flannel shirt to a high-tech economy, the ethic endured, making Oregon a perfect place for dōTERRA to plant a flag. The company already values Oregon’s mint crop as a source for one of their most popular oils. Now they value us as consumers as well.

“Oregon is one of our top 10 markets,” says Emily Wright, dōTERRA’s executive vice president of leadership development. “Growth there is trending above the national average.”

There is no precise figure on the number of essential oil companies in Oregon. But the big three manufacturers and retailers are Mountain Rose Herbs, the Essential Oil Company and Liberty Natural Products. Like dōTERRA, they all report growing consumer demand for their products. 

0315 doterra10 250px “I used to only be able to sell my oils in head shops,” recalls Robert Seidel, chief technology officer for Extractix and president of the Essential Oil Company in Portland. The 64-year-old remembers the struggle of making and selling oils in the early 1980s, when only “a few hippies knew what I was talking about.” Today the Essential Oil Company reports sales pushing into $2 million.

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 Robert Seidel, president of
the Essential Oil Company.

From his 13,000-square-foot building in the Sellwood neighborhood, Seidel, who calls himself the Gorilla Distiller, shows off the equipment that extracts oils from a variety of plant products. Three tons a year of conifers alone are processed here, along with other botanicals. With the help of five full-time employees, Seidel distributes the oils he distills and imports to a variety of customers, from large multinational cosmetic firms to independent laboratories and small-volume hobbyists and crafters, who use his products for handmade soaps, artisanal lotions or aromatherapies. 

Jim Dierking, president and CEO of Liberty Natural Products, doesn’t bother with retail. A former business partner of Seidel, Dierking employs 35 people full-time and sells wholesale from his 150,000-square-foot operation in Oregon City.

With orders that range from the $50 minimum to $50,000, 60-year-old Dierking reports sales of $8 million a year and plans to build an expanded storage facility. He sources essential oils, botanicals and herbal extracts from around the world and his own backyard, as Liberty Natural is located in his 90-acre Oregon Lavender Farm.

{pullquote}Oregon is one of our top 10 markets. Growth is trending above the national average. — Emily Wright, executive vice president, dōTERRA{/pullquote}

Both of these men grew profitable businesses out of their personal beliefs and philosophies. Dierking was a homebuilder who, when the housing market crashed in the ’80s, turned to oils as an opportunity he could feel good about. New York-born Seidel was trained in forestry (“I could identify a species of tree by tasting the resin”) and worked in Oregon’s plywood industry until the bulk of mills closed around the same time.

Both men are passionate about the oils and their benefits as natural enhancements to cosmetics, perfumes, bath products and food flavoring. 

Neither wants to comment on dōTERRA’s health claims or business model. And neither wants to comment on the irony: In a state that prides itself on the local and the homegrown, dōTERRA is the unabashed outsider, commodifying the independent fringe and promising to make wellness advocates into millionaires.

But dōTERRA is also a classic 21st-century business: a fast-growing company intent on making the old new.

Screen Shot 2015-02-20 at 4.03.23 PMThe wellness advocate is dōTERRA’s version of the Avon Lady — a person, usually a woman, who throws parties to sell product. The company presently has 20,000 wellness advocates in the state to ply their oils, beauty aids and supplements. Like Avon, Amway or Herbalife, a wellness advocate’s success comes from her ability to recruit people to sell on her “team.”

These women then recruit others, who then recruit others, and so on and so on. The exponential growth of their teams can reach in the 10,000s.

For example, after six years with the company, Adams built five different teams based in Las Vegas, California and Portland, with a total of 21,000 people under her. This year she reached dōTERRA’s Diamond level, putting her annual earnings in the low six figures. Ingraham has 14,000 on her team and claims to enroll about 1,000 new members a month. She also reports six-figure annual earnings.

Former photographer and yoga instructor Aisha Harley has been using and selling dōTERRA for three years. Like Ingraham and Adams, Harley makes six figures. Like Ingraham and Adams, she is passionate about the product.

“I had health issues that I was treating with a doctor and asked to bring the oils into my protocol,” Portland-based Harley reports. The doctor approved, and while Harley won’t use the word “remission” to describe her Lyme disease, she claims the oils have “brought her body into balance.”

Harley was introduced to the oils by a co-worker at her yoga studio and was immediately attracted to them. She admits, however, to being put off by the company’s network-marketing strategy. “I had a couple of friends who were involved with other network-marketing companies, and they came at me like a fire hose. I just wasn’t interested,” she says.

But her draw to the product won out. Reluctantly, she asked her co-worker about the oils and sheepishly approached her husband about attending dōTERRA sales meetings in Utah. “He said, ‘you love those oils, go check it out.’” What she found was not a “get-rich-quick scheme but a company that stresses education and science, run by management with heart and integrity.”

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According to a 2013 IBIS market research report, the essential oils industry has been on an upward trajectory since 2010, fueled by demographic and market trends, including a focus on natural products and use of essential oils in the cosmetics, perfumes and food industries. Although no single essential oil company dominates market share, dōTERRA does rank as one of the top four players, with an estimated market share of 6%. Another big player is Young Living, a Utah company that in 2013 filed suit against former executives who left the company in 2007 to found dōTERRA. Much of the lawsuit was dismissed last fall.

Screen Shot 2015-02-20 at 4.07.20 PMLike many private companies, dōTERRA, which operates worldwide, declines to reveal revenues, although executives say they expect income to double in the next five years. The company also claims the essential-oils-as-a-health- supplement market in the U.S. is worth $4 billion to $5 billion in annual sales — a figure Dierking of Liberty Natural Products questions.

“On its face, $4 to $5 billion in what I would interpret as therapeutic aromatherapy seems extremely high,” he says. Dierking also questions the company’s ability to sustain that growth and whether they are creating an economic bubble, but declined to say more on the record. 

For his part, Seidel is pleased some of the alternative benefits of oils are working their way into the mainstream. It wasn’t long ago that the word aromatherapy would garner an exasperated eye roll, he says. “You can get a master’s degree in it today,” says Seidel of the program offered at the American College of Healthcare Sciences. Still, Seidel, like Dierking, doesn’t want his products to be associated with health claims. And like most of the established essential oil companies in Oregon, the two men follow a standard retail/wholesale business model to sell their products, mostly in a business-to-business atmosphere.

“My focus is on providing product information, certificates of analysis and GMP, Good Manufacturing Practice,” Dierking says.

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For the outsider, dōTERRA’s multilevel marketing, combined with the health claims, feels off, almost cultish. And yet: The company is not a pyramid scheme. Pyramid schemes demand their members invest a large amount of money up front and stress recruiting over selling product. According to dōTERRA’s website, 91% of the people who join do so to get the oils at a discount, leaving 9% who are interested in turning it into a business.

The company does require maintaining a $100 monthly minimum order for wellness advocates who want to take part in profit sharing. That’s not a problem for Harley. She consumes the products throughout the day, starting with the toothpaste and skin-care line, and moving to oils she ingests, diffuses or rubs on her body to aid everything from digestion to emotional balance and sleep. With 6,000 people on her team, she has clearly gotten over her distaste for network marketing.

0315 doterra08 250pxPetra never had misgivings. The 53-year-old German native asked not to use her last name because she didn’t want to alert anyone in her four other network-marketing circles who might take offense.

The Lake Oswego resident is new to dōTERRA but is a big believer in both alternative healing and multilevel marketing. She studied with a guru in India for 11 years trying to learn how to “ascend”; she owned a vegetarian restaurant in Roseburg, teaches Reiki and plans to self-publish a book. “Network marketing is a personal growth system with a compensation plan,” she says.

People prefer to learn about health and wellness products from people they know, says Wright, explaining why dōTERRA network markets its oils instead of selling them in retail outlets. “These oils are experiential,” she says. “You have to smell them, feel them, put them on to really understand what they do. It’s a personal and intimate process.”

There are other advantages. dōTERRA knows it cannot legally make health claims about its products. It writes articles and produces videos that explicitly outline dos and don’ts to protect itself and its sales force from FDA scrutiny. “We have an auditing department that goes through advocates’ websites to make sure that they are not making claims,” says Wright.

 Things still fall through the cracks. The company received a warning from the FDA in September because two wellness advocates were caught promoting the oils as a cure for a variety of medical conditions, including ebola, through social media. “We police websites as best we can,” says McKay Brown, senior director of corporate marketing. 

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 Jim Dierking, CEO of
Liberty Natural Products.

But they can’t police what’s said at sales/educational meetings. Back at the Hillsboro sales/educational gathering, Adams’ presentation never said the dōTERRA cleanse would cure or prevent autoimmune disease. And yet something was implied by offering the expensive treatment right after the slides. And when the 10 women in the room informally discussed the oil’s benefits, all kinds of claims were thrown around; the oil helped a physically delayed 1-year-old walk and could be used to treat autism, and the oil blend TerraShield, which the company promotes as a bug repellent, protects the wearer from other people’s energies, keeping nightmares at bay.

Viewed in this light, the products seem like a scam. But wellness advocates like Suzanne Fuoco are lending new credibility to the industry. The 55-year-old regularly employed oils as a labor and delivery nurse at Alta Bates Summit Medical Center in Berkeley, California. “We suggested lavender oil throughout the pregnancy to promote relaxation and sleep,” she says. “And after delivery, a few drops of peppermint or wintergreen in the toilet hat relaxes the urethra to ease urination after delivery.”

When she moved to Portland, the nurses at OHSU had never heard of such a protocol. “I was taken to task for suggesting them,” she says. Today Fuoco is a Portland Public Schools nurse, dividing her time between three different schools and spending about 10 to 20 hours a week building her dōTERRA business. At press time, she had 22 people on her team bringing in an extra $200 a month. She hopes to get to Silver rank and quit her day job within two years.

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Hillsboro wellness
advocate Katie Adams.
After six years, Adams reached 
dōTERRA’s Diamond level,
putting her annual earnings
in the low six figures.

It may happen yet. The Centers for Disease Control reports that in 2012 over 23.3% of adults in the Pacific region used nonvitamin, nonmineral supplements in the last 12 months. And the National Institutes of Health report that while people of all backgrounds use complementary and alternative medicine (CAM), it’s more prevalent among the wealthy and well educated.

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This group stays on top of health trends. This group holds a healthy skepticism toward big business and big pharma. This group is always striving to be their best selves and live their best, most natural lives. (Of course, that same smarter-than-the-mainstream attitude also fuels the antivaccine movement that has taken hold in the state — and in pockets around the country.)

Today in Oregon, there are thousands of wellness advocates to help this group achieve those antiestablishment goals — supported, ironically, by an out-of-state, multinational and privately held company. But even dōTERRA’s old-school, uncomfortable, multilevel marketing model looks new when seen through the lens of the sharing economy. How different is a wellness advocate from a person renting a room on Airbnb or driving for Uber? 

Essential oils have played a part in Oregon’s economy from the mint and lavender fields to small-and large-scale distillers for years. Now 20,000 independent businesswomen are in the game too.

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