Nature’s Sunshine Review: Two comp plans?

Nature’s Sunshine started back in 1972, with founder Gene Hughes encapsulating capsicum in the family kitchen and then selling it.

According to the Nature’s Sunshine website, initially Hughes was ‘selling encapsulated cayenne and other herbs and supplements to health food stores’. Later however

the family soon realized they wanted to touch more lives with their products, and they found the perfect vehicle for making this happen—direct marketing.

I wasn’t able to find a concrete timeline as to when Nature’s Sunshine began their MLM opportunity, but needless to say it’s been around for a while.

Today Nature’s Sunshine Products (NSP) can be found in 30 countries, represented by nearly 600,000 distributors.

Present day Nature’s Sunshine is run by Gregory L. Probert (right), who serves as Chairman of the Board of Directors and CEO (appointed October 2013).

Previously, he was Chairman of the Board and Chief Executive Officer of Penta Water Company, President and Chief Operating Officer of Herbalife International of America, Chief Executive Officer of DMX Music and Executive Vice President of Worldwide Home Entertainment at the Walt Disney Company.

In addition to his position in Herbalife, Probert also served as an independent consultant to Nature’s Sunshine between October 2010 to June 2011.

On the corporate history side of things Nature’s Sunshine has had a relatively stable history. Of note though is a $600,000 SEC settlement reached back in 2009.

Wanting to crack into the Brazilian market in the late nineties, Nature’s Sunshine

paid more than $1 million in bribes to Brazil’s customs officials and government officials so it could circumvent import restrictions on products sold to its largest foreign market.

These payments continued into the 2000s, eventually catching the
attention of the SEC.

The SEC alleged that the nutritional supplements maker violated the Foreign Corrupt Practices Act when its Brazilian unit made a series of cash payments in 2000 and 2001 to Brazil’s customs brokers and government officials so it could import unregistered nutritional products into the country, and then falsified its books to hide the payments.

According to the suit, the Brazilian subsidiary wasn’t able to register many of Nature’s Sunshine’s products to legally sell them in Brazil because of regulatory changes that resulted in many of the company’s supplements being classified as medicines.

As a result, the company’s sales in Brazil dramatically declined, the suit said.

To circumvent the import restrictions, the Brazilian subsidiary made undocumented cash payments, which were typically booked in its accounting records as “importation advances,” the SEC complaint said.

The Brazilian unit allegedly characterized these cash payments as legitimate import expenses, and Nature’s Sunshine failed to disclose them in its filings with the SEC, the suit said.

The company also was accused of violating federal securities laws when it filed misleading Forms 10-Q for the quarters ended March 31, 2000; June 30, 2000; Sept. 31, 2000; March 31, 2001; June 30, 2001; and Sep. 31, 2001; and Forms 10-K for the fiscal years ended Dec. 31, 2000; and Dec. 31, 2001.

There was also a bit of a fallout with their then auditors, KPMG:

Under the settlement, Faggioli and Huff each agreed to pay a civil penalty of $25,000. Both men and the company settled without admitting or denying the SEC’s allegations.

Nature’s Sunshine disclosed in July 2007 that the SEC subpoenaed and the U.S. Department of Justice requested documents related to an internal investigation of its foreign operations by the company’s audit committee.

According to several Nature’s Sunshine shareholders in an ongoing lawsuit against the company over alleged insider trading and securities law violations, an investigation by its former auditor, KPMG LLC, found evidence showing that Faggioli knew of alleged fraud in his company’s international operations, and yet signed two letters to KPMG in March and August 2005 stating the contrary.

KPMG resigned in 2006 after it found that Nature’s Sunshine failed to take adequate remedial action, even after its investigation uncovered “control weaknesses” in its top management.

I’m unaware of any subsequent regulatory action against Nature’s Sunshine, so I’d suggest the above was largely the result of poor choices by executive management.

In anycase the SEC charges are related to the importation of product so, other than highlighting the failings of management at the time, I don’t think it’s of particular concern within the context of Nature’s Sunshine as an MLM opportunity today.

Read on for a full review of the Nature’s Sunshine MLM business opportunity.

The Nature’s Sunshine Product Line

Nature’s Sunshine retail “over 475 unique formulas”, containing

the right herbs and nutrients in special blends to maximize potency and ensure safety.

There are far too many Nature’s Sunshine products to list here individually (over 600!), however the company offers a full online catalogue and store on their website.

Product categories as per the Nature’s Sunshine website include

• Core Health – Nutrition
• Core Health – Cleansing
• Weight Management
• Energy and Fitness
• Health Topics
• Body Systems
• Essential Oils
• Home Products
• Flower Essences and
• Personal Care

From poking around the Nature’s Sunshine web store, I observed that most of their products seem to retail between $20 to $50.

The Nature’s Sunshine Compensation Plan

There are two compensation plans within the Nature’s Sunshine MLM business opportunity, Legacy (introduced June 2006) and Classic.

Nature’s Sunshine advises that “Legacy” is for “customers and networks”, whereas “Classic” is for “customers, health consultants and retailers”.

Specifically, Nature’s Sunshine recommend that people sign up under the legacy plan if they

• desire to sponsor others as NSP Members and create a business network or
• simply wish to be an NSP customer

Whereas the Classic plan is for people who

• simply would like to be an NSP customer
• wish to become a part- or full-time health consultant or
• desire to manage an herb shop or other retail operation

The major differences between Nature’s Sunshine’s two plans lie in the Smart Start bonus, unilevel residual commissions, affiliate membership rank qualification criteria and rebate offered on an affiliate’s own product purchases.

Affiliate Membership Ranks

There are eleven affiliate membership ranks within both Nature’s Sunshine’s compensation plans. Along with their respective qualification criteria, they are as follows.

Classic:

• Member – sign up as a Nature’s Sunshine affiliate
• Manager – no qualification criteria provided
• Star – personally recruit at least one Manager affiliate
• District – personally recruit at least two Manager affiliates
• Area – personally recruit at least five Manager affiliates
• Regional – personally recruit at least 10 Manager affiliates and have at least 15 Manager affiliates in your downline
• Divisional – personally recruit at least 15 Manager affiliates and have at least 40 Manager affiliates in your downline
• Senior Divisional – personally recruit at least 20 Manager affiliates and have at least 70 Manager affiliates in your downline
• National – personally recruit at least 22 Manager affiliates and have at least 100 Manager affiliates in your downline
• Senior National – personally recruit at least 25 Manager affiliates and have at least 200 Manager affiliates in your downline
• Global Elite – as above for Senior National, with three personally recruited Managers required to be internationally based and at least 50 Managers in the downline from at least five different “international markets”

Legacy:

• Member – sign up as a Nature’s Sunshine affiliate
• Manager – no qualification criteria provided
• Star – personally recruit at least one Manager affiliate
• District – personally recruit at least two Manager affiliates
• Area – personally recruit at least 4 Manager affiliates and have at least 5 Manager affiliates in your downline
• Regional – personally recruit at least 6 Manager affiliates and have at least 15 Manager affiliates in your downline
• Divisional – personally recruit at least 8 Manager affiliates and have at least 40 Manager affiliates in your downline
• Senior Divisional – personally recruit at least 10 Manager affiliates and have at least 70 Manager affiliates in your downline
• National – personally recruit at least 12 Manager affiliates and have at least 100 Manager affiliates in your downline
• Senior National – personally recruit at least 15 Manager affiliates and have at least 200 Manager affiliates in your downline
• Global Elite – as above, with three personally recruited Managers being required to come from three international countries and fifty Managers from at least five “international markets”

Note that downline Manager affiliates must be within an affiliates first five levels of recruitment. This applies to both compensation plans. International Managers at the Global Elite affiliate rank refers to affiliates not based in the same country as the affiliate who recruited them.

Affiliate Purchase Rebates

Nature’s Sunshine offers a rebate on an affiliate’s own orders. How much of a rebate is offered depends on how much product an affiliate orders (calculated by qualifying volume (QV)).

Classic Plan:

• 0-99 QV order  – no rebate
• 100-299 QV order = 10%
• 300-599 QV order = 12%
• 600-999 QV order = 18%
• 1000-2999 QV order = 27%
• 3000+ QV order = 30%

Legacy:

• 0-99 QV = 0%
• 100-499 QV = 10%
• 500-999 QV = 15%
• 1000+ QV – 20%

The difference between the two is that the Classic plan extends the rebate beyond 1000 QV at a higher rate than the Legacy plan does.

This equates to a maximum rebate of 30% on personal purchases at 3000 QV in Classic versus 20% on any order over 1000 QV in Legacy.

Smart Start Bonus

The Smart Start Bonus is available on newly recruit affiliate orders that generate at least 100 QV.

Classic plan affiliates can earn “up to 30%” on these first orders, with their direct Manager or higher ranked upline earning a 10% commission. Two additional Manager or higher ranked upline levels are also paid out a 5% bonus.

The Legacy plan raises the recruiting affiliate’s commission to “up to 40%”, with the upline commissions remaining the same.

No qualification criteria on how either the “up to” 30% or 40% bonus paid to the recruiting affiliate are provided in Nature’s Sunshine’s compensation plan material.

Note that the Smart Start Bonus is only made available to US affiliates and orders placed by new US affiliates.

Unilevel Commissions

Nature’s Sunshine pays out residual commissions via a unilevel compensation structure.

A unilevel compensation structure places an affiliate at the top of a unilevel team, with every personally recruited affiliate placed directly under them (level 1).

If any of these level 1 affiliates go on to recruit new affiliates of their own, they are placed on level 2 of the original affiliate’s unilevel team. If any level 2 affiliates recruit new affiliates they are placed on level 3 and so on and so forth down a theoretical infinite number of levels.

Commissions are paid out as a percentage of the sales volume generated by affiliates in an affiliate’s unilevel team. This percentage, along with how many levels an affiliate is paid out on, is determined by an affiliate’s membership rank.

Classic:

• Star – 12% on level 1
• District – 12% on level 1 and 4% on level 2
• Area – 12% on level 1, 4% on level 2 and 2% on level 3
• Regional – 12% on level 1, 4% on level 2 and 2% on level 3
• Divisional – 12% on level 1, 4% on level 2, 2% on level 3 and 0.5% on level 4
• Senior Divisional – 12% on level 1, 4% on level 2, 2% on level 3 and 1% on level 4
• National – 12% on level 1, 4% on level 2, 2% on level 3, 1.5% on level 4 and 0.5% on level 5
• Senior National and Global Elite – 12% on level 1, 4% on level 2, 2% on levels 3 and 4 and 1% on level 5

Note that affiliates can qualify beyond the 5th level at the Global Elite level if they have “100 International Managers” in their downline. No specifics are provided on the percentage offered beyond level 5  (1% continued?).

Legacy:

• Star – 10% on level 1
• District – 10% on level 1 and 7% on level 2
• Area – 10% on level 1, 7% on level 2 and 4% on level 3
• Regional – 10% on level 1, 7% on level 2 and 6% on level 3
• Divisional – 10% on level 1, 7% on level 2, 6% on level 3 and 3% on level 4
• Senior Divisional – 10% on level 1, 7% on level 2, 6% on level 3 and 5% on level 4
• National – 10% on level 1, 7% on level 2, 6% on level 3, 5% on level 4 and 3% on level 5
• Senior National – 10% on level 1, 7% on level 2, 6% on level 3, 5% on levels 4 and 5
• Global Elite – 10% on level 1, 7% on level 2, 6% on level 3, 5% on levels 4 to 6 and 1% on level 7 and beyond

Note that in order to qualify for commissions beyond level 6 at the Global Elite rank, affiliates must have at least “100 international Managers” in their downline.

Additional Bonuses

Offered in both the Legacy and Classic compensation plans is a monthly Car Bonus, paid out according to an affiliate’s membership rank:

• Regional – $250
• Divisional – $400
• Senior Divisional – $550
• National – $700
• Senior National – $850
• Global Elite – $1000

Nature’s Sunshine also holds annual summits and conferences for its higher ranked affiliates.

Joining Nature’s Sunshine

Affiliate membership to Nature’s Sunshine is free for a year when a minimum $40 product order is placed at the time of enrolment.

If no products are purchased when signing up, new affiliates must pay a $40 signup fee.

The $40 affiliate membership fee appears to be an annually recurring.

Conclusion

I was quite skeptical when I first discovered Nature’s Sunshine ran two compensation plans side by side. When I saw they were named “legacy” and “classic”, I pretty much ran screaming.

I’ve found older MLM compensation plans to be a notoriously lengthy process for me to break down and I didn’t really feel like tackling two within the one company.

As such I’ve battled through analysis of Nature’s Sunshine’s plans over the past week, having finished breaking them down today.

The bottom line is that from an MLM perspective Legacy is definitely more network marketing orientated, and is probably going to be the option the vast majority of affiliates sign up with.

Classic offers a bit more upfront, but if Nature’s Sunshine was wanting to focus on that market I don’t see why they don’t just offer a straight up affiliate program (with a wholesale discount tied to volume sold).

My guess is, given that Legacy was only introduced in 2006, that at the time the company had a significant number of affiliates on the Classic plan that didn’t want to switch over to a deeper network marketing plan (less up front, more residually).

For those running retail storefronts, the rebates on personal orders are significantly higher than in the Legacy plan. Retail is the same across both plans, however it’s absence from the Nature’s Sunshine compensation plan (other than mention of “high retail margins”) leads me to believe it isn’t a contributing factor.

All in all analyzing Nature’s Sunshine as an MLM opportunity is much simpler if one only considers the Legacy plan. Personally I’d prefer to see a single plan that’s a balance between the two.

It took me a week little by little to compare the plans (more out of dread the plans and how they differ would be hugely complicated), so I’m not entirely convinced those entertaining the Nature’s Sunshine opportunity are going to thoroughly go over and evaluate both plans.

In that sense perhaps a more detailed list of comparison between the two plans might be of use on the company-end, rather than just suggestions about who should sign up for which plan.

As far as the Legacy plan goes, you’ve got your rebates on your own purchases, a Fast Start Bonus (Smart Start) that pays out on product orders made by your recruited affiliates and residuals via a unilevel, extendable down an infinite amount of levels in the upper level of the comp plan.

Looks good to me and, assuming the retail commission margins are indeed “high”, should provide affiliates with enough incentive to work both ends of the business (retail and a downline).

One thing I wasn’t sure about is the $40 product joining fee, which affiliates can opt not to go for and just pay a $40 membership fee. Seems a bit silly to offer both if either way an affiliate is going to pay $40 to join, why not just offer the product option?

Surely the purchase of $40 in product provides more value to the affiliate then just paying the same amount for membership?

The Elite Global affiliate rank qualifications were also a bit excessive I thought. It’s not the easiest thing to build an internationally based downline, let alone one that spans five different countries. Still, given the reward (infinite level unilevel commissions) and the fact that it’s the top-level of the compensation plan, I suppose it’s not entirely unreasonable.

The recruitment qualification criteria at the other affiliate membership rank levels were a bit iffy, but there’s no volume requirements so I imagine autoship stacking isn’t an issue.

At the end of the day I’d probably initially just ignore the Classic compensation plan and just focus on the Legacy side of things. Do take the time to eventually go over it though so that the difference between the two plans can be explained if required).

Definitely try out some of Nature’s Sunshine’s products (no shortage of choice) and if you think you can find a viable market to sell them in, go for it.

Good luck!