Xango Review: Mangosteen juice & autoship concerns

Xango launched in 2002, making it eleven years old at the time of this review. The company is based out of the US state of Utah, and operates in the health and nutrition MLM niche.

On their company website, Xango list five founders: Gary Hollister, Aaron Garrity, Joe Morton, Gorden Morton and Kent Wood.

Gary Hollister served as the original CEO of Xango between 2002 and to 2006 and appears to have begun his involvement in the MLM industry after being appointed CEO of Enrich International (now Unicity International) in 1997.

Aaron Garrity, Joe and Gordon Morton were also in Enrich International during the time Hollister served as CEO, and is where the business relationship formed between the group that would later result in the launch of Xango.

Today Aaron Garrity (above, being held bythe rest of Xango’s original co-founders) serves as Xango’s CEO, Chairman and President.

Having been around for just over a decade, Xango has courted its fair share of MLM controversy and drama.

In 2003 Xango was sued by Tahiti Noni International (now Morinda). Tahiti Noni International alleged ‘that Xango executives stole TNI’s concept for a mangosteen-based supplement while they were employed by TNI’s parent-company‘.

Xango counter-sued and both cases wound up being settled out of court. Details of the settlement were not made public.

Xango primarily market a mangosteen-based juice, with the company’s affiliates landing Xango in hot water with the FDA in 2006.

Xango’s affiliates

used marketing materials to promote mangosteen juice claiming more than 20 human health benefits, including “anti-inflammatory,” “anti-microbial,” “anti-fungal,” “anti-viral,” “anti-cancer,” “anti-ulcer,” “anti-hepatotoxic,” “anti-rhinoviral,” and “anti-allergic” effects.

In 2007 Xango was sued by Angel Investors LLC who at the time held a roughly 1% stake in the company. Angel Investors LLC accused Xango management of

corporate looting and mismanagement of millions of dollars by the company’s founders for their personal expenses including luxury cars and performance-enhancing medical treatments.

XanGo’s founders took millions of dollars in personal loans from the company and paid themselves excessive salaries while wasting corporate assets.

The group cited such expenditures as $6,000 monthly auto allowances, family vacations and, in one case, $20,000 worth of home furnishings.

The suit was initially dismissed by a 4th District Court but then overturned in 2009 by the Utah Supreme Court. Rather than take the case to trial however, Xango settled with Angel Investors ‘for an undisclosed amount of money‘. Once again the exact terms of the settlement were not publicly disclosed.

More recently, in May of this year Xango’s sixth founder Bryan Davis (not credited on the Xango website) filed suit against the company,

accusing his partners of spying, threatening employees, falsifying distributor positions to siphon off funds, defrauding on XanGo taxes and their personal taxes, falsifying records, changing credit card statements, charging as business expenses to purchase grand pianos, vacations, home renovations, landscaping, electronics, expensive bicycles, scooters, and for CEO Aaron Garrity, an open expense account for one mistress.

According to the lawsuit, Garrity embezzled hundreds of thousands of dollars in assets from the company, writing off clothing, medical enhancements, jewelry, event tickets, bicycles, electronics and chartered planes and vacations as business expenses.

CFO Nate Brown set up secret founder accounts for Garrity and others to allow them to improperly spend XanGo assets.

Davis also alleges in the lawsuit that Garrity’s assistant, Andrea Waterfall, with whom he was in a relationship, had a company credit card that she used for personal expenses, and that Garrity sent in fraudulent expense reports.

Other allegations include Garrity using power and influence as a founder to threaten XanGo employees into turning a blind eye to his theft and instituting what he termed a “culture of giving” at XanGo meaning that founders and employees Garrity determined were in his good graces could unlimitedly use XanGo assets for their personal benefit.

The lawsuit further reports founders are alleged to have used XanGo employment and forced qualified distributor positions to siphon XanGo assets to family members and friends.

Davis alleges the founders conspired to give themselves illicit distributions through a tax fraud scheme and that the founders also formed various competing companies with XanGo assets.

He is also claiming that the founders took steps to freeze him out of the company — ignoring Davis’ objections to wrongful conduct, falsifying board minutes to reflect unanimous consent to actions to which he had voiced objections, XanGo employees were told not to talk to Davis under penalty of termination, that founders also falsely claimed to XanGo employees that he had resigned his position at XanGo and disparaged him.

As a result, Davis said XanGo withheld bonus/distribution payments to Davis as well as discontinuing employee benefits.

The lawsuit further states that Garrity has also misused XanGo’s security department to retaliate against Davis, Angel, leaders and founders of competing MLMs and XanGo distributors and employee, according to the suit; Garrity allegedly asked Justin Barrett to use his access to law enforcement databases to find information on these individuals that was not on public record, which information Garrity could then use to his advantage.

He also requested that the XanGo Security Department obtain non-traceable wireless accounts for him for the purpose of online corporate intelligence gathering, dissemination of information and posting defamatory comments about competitors, distributors, employees and others.

A bogus account was illegally created under the fictitious name “John Gable.”

Xango initially responded to Davis’ lawsuit by claiming ‘the accusations are fabricated because Davis is attempting to extract an inflated buyout from them for his shares in the company‘.

This refute was then backed by the filing of a lawsuit against Davis of their own, in which the company claims ‘Davis was negligent in his duties‘.

As at the time of publication the resolution of both lawsuits is pending.

Just before launching their new venture Xalo, Xango also axed 20 percent of its global workforce.

Dave Webb, XanGo’s vice president of communications, said the cuts were not “performance-based,” but rather strategically motivated.

The company is looking for “the best return on investments and allocation of resources” to help it prosper over the long haul, he said.

Xalo launched in October of 2013 as a separate division of Xango, complete with its own company name and compensation plan.

For the purpose of this review I’ve only touched briefly on the history of the company, for a more detailed history of Xango readers are encouraged to read up on Wikipedia’s Xango entry.

Read on for a full review of the Xango MLM business opportunity.

The Xango Product Line

Xango’s flagship product is what the company calls “Xango juice”, which they claim is ‘the best way to get your daily dose of xanthones‘.

(Xanthones) are what’s making your respiratory health, immune health, intestinal health, joint health—and just overall health—better every day.

Xango claim ‘there are 40 different types of xanthones found in the mangosteen‘, which is the key ingredient in Xango juice.

A 750ml bottle of Xango juice retails at$37.50.

In addition to Xango juice, the company also markets

• Xango Reserve – same beverage as Xango juice but with a “higher mangosteen concentration“
• Favao – a mangosteen-based health program (body cleanse, fiber, metabolism and protein)
• Favao Pro – “all natural forumlas” that target performance and energy (single serve sachets)
• Glimpse – a personal skincare range with “naturally biofermented mangosteen”
• 3Sixty5 – vitamin supplements
• Precis – supplement range that targets ‘ment’s health, Omega 3, bone health and a rest & renew sleep aid‘
• Eleviv – energy capsules that boost energy at the cellular level
• Juni – hair and body personal care range

Unfortunately Xango do not provide retail prices for any of their products on their website (an affiliate referral ID is required to enter the online store).

The Xango Compensation Plan

The Xango compensation plan is easy to understand and well presented. The company pays out upfront retail commissions with residual commissions paid out via a unilevel compensation structure.

Additional bonuses are also made available to Xango affiliates, paying out on recruited affiliate’s first orders and two quarterly bonus pools.

Xango Affiliate Membership Ranks

There are eleven affiliate membership ranks within the Xango compensation plan and, along with their respective qualification criteria they are as follows:

• Representative – generate at least 100 PV in sales (includes self purchases)
• Preferred Representative – have a 100 PV a month autoship order
• 1k – have a 100 PV a month autoship order, have a downline generating a total of 1000 monthly GV and recruit/enrol at least three Preferred Affiliates or Preferred Customers
• 5k – have a 100 PV a month autoship order, have a downline generating a total of 5000 monthly GV and recruit at least three 1k ranked affiliates
• 20k – have a 200 PV a month autoship order, have a downline generating a total of 20,000 monthly GV and personally recruit at least three 5k ranked affiliates
• Premier – have a 200 PV a month autoship order, have a downline generating a total of 50,000 monthly GV, receive at least $2500 in Global Bonus Pool commissions and personally recruit at least one 5k ranked affiliate and two 20k ranked affiliates
• Premier 100k – have a 200 PV a month autoship order, have a downline generating a total of 100,000 monthly GV, receive at least $5000 in Global Bonus Pool commissions and personally recruit at least one 5k ranked affiliate and three 20k ranked affiliates
• Premier 200k – have a 200 PV a month autoship order, have a downline generating a total of 200,000 monthly GV, receive at least $10,000 in Global Bonus Pool commissions and personally recruit at least one 20k ranked affiliate and three Premier ranked affiliates
• Premier 500k – have a 200 PV a month autoship order, have a downline generating a total of 500,000 monthly GV, receive at least $10,000 in Global Bonus Pool commissions and personally recruit at least two Premier ranked affiliates, two 100k affiliates and one 100k affiliate
• Quantum Premier – have a 200 PV a month autoship order, have a downline generating a total of 750,000 monthly GV, receive at least $10,000 in Global Bonus Pool commissions and personally recruit at least three Premier ranked affiliates, one 100k affiliates, 1 200k affiliate and one 500k affiliate
• Premier X1 – have a 200 PV a month autoship order, have a downline generating a total of 1,000,000 monthly GV, receive at least $10,000 in Global Bonus Pool commissions and personally recruit at least four Premier ranked affiliates, two 200k affiliates and one 500k affiliate

Note that PV stands for “Personal Volume” and includes sales volume generated by an affiliate’s own purchases.

GV stands for “Group Volume” and includes the sales volume generated by an affiliate’s downline.

Retail Commissions

Xango define retail commissions as ‘the difference between the wholesale and retail pricing’.

No examples are provided in the Xango compensation plan.

PowerStart Commissions

When a newly recruited Xango affiliates joins the company and places their first order, the affiliate who recruited them (and their upline) receive a PowerStart commission on the first 1000 points of business volume the order generates.

In addition to meeting the minimum PV requirement to qualify for the commission, how much of a percentage the recruiting affiliate earns on this first order depends on whether or not they have an active autoship order.

• PowerStart Basic (recruiting affiliate has 100 PV but no autoship) – 2o%
• PowerStart Plus (recruiting affiliate has 100 PV via a 100 PV a month autoship order) – 30%

In the two scenarios above the recruiting affiliate’s upline can also qualify for a commission, providing they themselves have a 200 PV a month autoship order. If this qualification criteria is met the recruiting affiliate’s upline earns the following PowerStart commission:

• PowerStart Basic – 25%
• PowerStart Plus – 15%

Unilevel Commissions

Monthly residual commissions in Xango are paid out using 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 recruited 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 go on to recruit new affiliates they are placed on level 3 of the original affiliate’s unilevel team and so on and so forth down a theoretically infinite number of levels.

Xango cap unilevel commission down nine levels of recruitment, with how many levels an affiliate is paid out on determined by their affiliate membership rank. Note that the commission percentages below are paid out of the product sales generated by an affiliate’s downline, including both retail and recruited affiliate orders:

• Rep – 5% on levels 1 and 2
• Preferred Rep – 5% on levels 1 and 2 and 10% on level 3
• 1k – 5% on levels 1 and 2, 10% on level 3 and 5% on level 4
• 5k – 5% on levels 1 and 2, 10% on level 3 and 5% on levels 4 and 5
• 20k – 5% on levels 1 and 2, 10% on level 3 and 5% on levels 4 to 7
• Premier or higher – 5% on levels 1 and 2, 10% on level 3, 5% on levels 4 to 8 and 2% on level 9

Affiliate Rank Bonus

Both the Quantum Premier and Premier X1 affiliate ranks trigger an affiliate rank bonus:

• Quantum Premier – $750,000
• Premier X1 – $1,000,000

Bonus Pools

Xango’s Bonus Pools are paid quarterly and consist of a “Global Bonus Pool” and “500K Bonus Pool”.

The Global Bonus Pool consists of 3% of Xango’s global commissionable sales volume, split equally amongst all Premier or higher ranked affiliates.

The 500K Bonus Pool consists of 2% of Xango’s global commissionable sales volume, split between all 500K or higher ranked affiliates.

Joining Xango

Xango do not provide the cost of affiliate membership to the company on their website.

Further research revealed affiliates marketing Xango affiliate membership at $35. I couldn’t ascertain whether this is an annual or once-off fee.

In addition to this most of the Xango compensation plan requires an affiliate to have an autoship order placed with the company. This is an extra $120 or $240 a month.

Conclusion

Despite having a solidly retailable product line, unfortunately retail doesn’t seem to make a whole lot of sense within the Xango MLM business opportunity.

Infact some affiliates even advise against buying Xango at retail, suggesting that the retail side of the business is not really feasible:

This is re-enforced in Xango’s official compensation plan material, with the company dedicating one sole line of text to explaining retail commissions:

1. RETAIL SALES

Buy Wholesale and Sell Retail

No mention of online retail (signing up customers via a replicated storefront) is mentioned in the compensation plan so I’m not even sure if it’s possible.

A significant contributing factor to the lack of focus on retail sales within Xango stems, I believe, from the mandatory autoship the company forces onto its affiliates.

The monthly minimum “qualifies you for commissions” affiliate autoship comes in at $120 a month which, when divided by four (autoship is “crates” of four bottles of Xango juice), comes to $30 a bottle. This is $7.95 cheaper than retail per bottle, or a saving of 21%.

On its own there’s nothing inherently wrong with Xango’s wholesale price structuring, however when one adds the mandatory autoship to the mix, all of a sudden you’ve got affiliates purchasing product each month they might not necessarily need.

This culture starts with the PowerStart Bonus which whilst totally optional, pays a significant commission to the affiliate doing the recruiting.

To think there wouldn’t be some pressure applied to inflate a newly recruited affiliate’s first order to as close as possible as that 1000 BV cutoff would be naive.

The kicker is that the PowerStart Bonus jumps from 20% to 30%, provided of course the recruiting affiliate has that $120 a month autoship order placed.

And if the recruiting affiliate’s upline wants to earn their portion of the PowerStart Bonus, a $240 a month autoship order is mandatory.

From this foundation is clear that the rest of Xango’s plan has been built around signing up new affiliates and getting them to order either one or two crates of autoship product a month.

The only difference between the first baseline affiliate rank “Representative” and the second “Preferred Representative”?

Yep, you guessed it – signing up for a $120 a month autoship order.

From there it isn’t long before affiliates have to have appropriately ranked affiliates in their downline, and that’s of course not happening unless they’re paying a monthly autoship fee too.

Then at the 20k affiliate rank the autoship jumps up to a mandatory $240 order each month, for no apparent reason that to double the generated sales volume each 20k or higher ranked affiliates contributes to Xango’s bottom line each month (oh and the money that flows into the unilevel and quarterly bonus pool).

I couldn’t find any official figures on the Xango website but I’d be surprised to see any significant retail activity taking place at Xango. By and large, due to the way the company has set up their compensation plan, I suspect the overwhelming majority of revenue being pumped into Xango is from the company’s affiliates.

Most of which are probably monthly autoship orders.

Whilst its true these orders are product orders and legitimate sales in and of themselves, from an MLM standpoint this business model is problematic in that the motive behind the monthly autoship orders is called into question.

Would affiliates pay $120/$240 a month for Xango’s mangosteen juice without the attached income opportunity?

Xango themselves will naturally tell you yes and so too will the company’s affiliates (provided they can keep earning commissions off of said autoship orders).

The reality however is that it’s simply not provable without a clear-cut revenue generation comparison between Xango’s affiliates and preferred customers.

I didn’t even see preferred customers explained in Xango’s compensation plan, so any guesses as to the emphasis placed on this option is within the business?

What I will give Xango points for however was the manner of ease the simplistic way the  compensation was presented. I thought that was very well done. The global bonus payout requirement was interesting too, as I imagine for those affiliates trying to qualify it’s a good way to encourage global growth within the company (bonus pool revenue is taken from global sales).

Unfortunately however the aforementioned autoship concerns vastly diminish these two positive aspects of Xango’s compensation plan and business model.

As a prospective Xango affiliate I’d be enquiring as to how much volume your potential upline makes from their personally recruited affiliates each month, versus that of retail/preferred customers.

There’s the possibility a less than honest affiliate might erroneously try to include affiliates who haven’t recruited anyone as preferred customers, so be on the look out for that.

What you’re comparing is revenue generated from end-consumers who don’t have access to the compensation plan versus those that do.

If possible, it wouldn’t hurt to request these figures from your potential upline’s upline too.

Any hesitation on their part and you can pretty much guess what you’ll be doing in your Xango business – recruiting new affiliates and getting them to sign up for autoship.

Oh and try to keep a tab on how those two major 2013 lawsuits are going. Corporate management, founders no less, suing the crap out of eachother is usually indicative of something being not quite right at the top of a company.

 

Update 26th November 2013 – Well the Bryan Davis lawsuit against Xango has been “resolved”.

Unfortunately that’s all that’s been made public:

According to a Xango Executive the case is resolved:

“XANGO, Xango Defendants and Davis are pleased to announce that they have fully resolved all of the disputes and litigation between them.

The terms of the settlement are strictly confidential. The parties are glad that they have been able to reach a satisfactory resolution and they look forward to moving on with their respective interests.”

I wonder what it took for allegations of ‘spying, threatening employees, falsifying distributor positions to siphon off funds, defrauding on XanGo taxes and their personal taxes, falsifying records, changing credit card statements, charging as business expenses to purchase grand pianos, vacations, home renovations, landscaping, electronics, expensive bicycles, scooters, and for CEO Aaron Garrity, an open expense account for one mistress’ go away…?

 

Update 10th May 2017 – On May 8th Xango announced it had been acquired by Zija International.