Vemma: A deeper look into MLM practices.

Vemma has taken Newport and the country by storm. The Scottsdale, Ariz.-based company’s energy drink, “Verve,” has been touted as an all-natural alternative to mainstays like Monster or Red Bull. Founder and CEO BK Boreyko was recently awarded a Silver Stevie Award for Executive of the Year. Vemma’s revenues stood at $116 million worldwide last year, and $66.1 million in the first four months of 2013. 

The company operates on a multi-level marketing model, or MLM – a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. Rather than spending money on expensive advertising campaigns, Vemma’s marketing focuses on word-of-mouth promtion and the recruiting efforts of its members. Last month alone, Vemma claimed to have brought on board 28,000 new members worldwide. In this promotional video (http://tinyurl.com/mboo2xt), members – most of them young and in their twenties – can be seen gleefully exiting private jets, surrounded by luxury cars being driven by bikini-clad models and other images that are typically associated with “high living.” 

Like many MLM companies, participation in Vemma involves a start-up fee: the initial package, including shipping and packaging fees, will set you back about $500, and continued participation includes a monthly fee of $160 in products. A closer look reveals that the personal payback for participants is less than substantial. Members can achieve different levels, beginning with the “Member” level, which is achieved by 29.88% of all members. At this level, the average annual income generated is $421.18 – just over $35 a month. That’s not a misprint! Going up a few notches to the esteemed “Diamond Leader” level, one’s annual income jumps to $11,645.84 – a level that is achieved by 4.81% of Vemma’s members. Put differently, 96.43% of Vemma’s members make under $11,645 per year. 

I want to be very clear: Vemma is NOT a pyramid scheme. This company offers a real product, and you do make money – albeit a negligible amount. But giving people false hopes of wealth and financial independence is misleading, and – some would argue – flat-out deceitful. Given the realities of the business model, filling starry-eyed twenty-somethings of such unattainable dreams and aspirations is blatantly wrong.

Opponents of my position would argue that Vemma is providing individuals with a legitimate business opportunity. And, like any business, very few make it and go on to be successful. While that may be true, few businesses push the message of financial independence to the lengths MLM companies do. These tactics are essential in order for the people at the top of the pyramid to make their high incomes, while the vast majority of the members struggle and lose money. In order to actually “make money,” the minimum monthly purchase is $160, or $1,920 a year. According to the figures below, that falls below the “Silver” level, which ends up being 72.88% of all of Vemma’s members. In short, more than 70% of Vemma’s members end up losing money.

Another sign that Vemma’s promises are too good to be true is the company’s BMW/Mercedes promotion, which offers Diamond Leaders the opportunity to drive away with a luxury car. Keep in mind that Diamond Leaders earn $11,645 per year on average. What this promotional video doesn’t tell you about the luxury car bonus giveaway (http://tinyurl.com/n3r4kel) is that it’s a bonus of $450 paid monthly to you – contingent upon you maintaining “Diamond Leader” levels of sales. The reality is that if you want to lease a $50,000 BMW or Benz, you’ll probably have to cough up an additional $200-$250 per month out of your own pocket – and that doesn’t include other expenses, such as insurance or repairs. If you choose not to lease the car, you will instead receive a 50% cash payout. Imagine applying for an entry-level job that offers you a meager annual salary of $15,000 – but they sweeten the deal with a “free BMW.” I think most people can agree that there’s something very irresponsible and even misleading about this type of message. The reality is that Vemma is attempting to reinforce its alluring messages of financial freedom with luxury car giveaways for members who are barely making any money in order to draw in more members. Is that illegal? No. But as to whether it’s ethical, I leave that up to you to decide.

MLM companies have been around since the 1930’s, from Amway to Herbalife to Pampered Chef – and now, Vemma. The company doesn’t market itself as an organization that will provide you with a nominal side income; that would the right thing to do, but it probably wouldn’t attract as many members. Instead, it showers you with promotional images of private jets, luxury cars, and beautiful models, hoping to lure you into its trap. There is simply something very disturbing about all of this.