Tuesday is get-rich-quick night in Northern Virginia.
Each week, promoters of a new product called Meadow Fresh hold a meeting at the Marriott Hotel in Tysons Corner to seek recruits for a marketing plan that offers big bucks in a hurry to go-getters who sell the product through networks of distributors.
Instead of selling the product in stores, the company has set up a nationwide network of sales teams, each headed by an "ambassador," to sell it to friends, neighbors and co-workers.
The pot at the end of this rainbow is filled with powdered imitation milk. Literally, Meadow Fresh is made mostly from whey, a milk byproduct produced in cheese making. In the company's words, it is "a delicious, nutritious, new and exciting product . . . while the flavor and nutrient value of Meadow Fresh are not exactly the same as milk, Meadow Fresh sure is good, and many like it better."
The lure--dangled orally by some participants at the promotional meetings, though not in the company's brochures--is spectacular: Within as few as eight weeks, an individual can be making up to $8,640 a month by building an organization of retailers, receiving commissions on the sales of everyone in his team, and also on any sales by new recruits enlisted by his team members. As the team grows and branches out, the profits and bonuses of the one who started it multiply.
To Meadow Fresh promoters, the sky is the limit, attainable by anyone with time to spare and the vision to make an early commitment. "If your dreams don't scare you when you go to bed at night," says a promotional booklet distributed at one of the Tysons Corner meetings, "they aren't big enough."
"We've got a company here that is going to make us all rich," one enthusiast told a recent gathering. "I'm going into this full time. I'm 39 and I expect to retire on this at 42." He said he expects to make "a quarter-million dollars on Meadow Fresh this year."
What he didn't say is that Meadow Fresh has had a series of battles with state law enforcement agencies over the the legality of its marketing system and the quality of its product.
Several states have taken the company to court, alleging that its distribution plan is an illegal pyramid scheme--a sort of corporate chain letter prohibited by most states. Arizona charged that Meadow Fresh's system is "deceptive in nature because the available market will become saturated and those distributors entering late in the program will make little, if any, profits and only a small percentage of those entering the system" will make the kind of money Meadow Fresh promotes.
Other states, and the U.S. Department of Agriculture, have challenged the nutritional value of Meadow Fresh. Wyoming, for example, warned consumers that it contains only half as much calcium as real milk and twice the sodium, and prohibited its use in school lunches.
Meadow Fresh, attributing its legal difficulties to rapid, undermanaged growth, says it has amended its distribution system to comply with the legal requirements of every state and to control the unsupported claims made by unsupervised local enthusiasts. On the dietary issue, the company ascribes criticism to opposition from the dairy industry and says it will fight, as margarine makers fought to win acceptance of their product 35 years ago.
The amended marketing system was installed on Thursday, after months of skirmishing between Meadow Fresh and state regulators. Founder and Board Chairman Larry Brog told distributors that "recent events of a legal nature" made it necessary to amend the marketing program, shake up the company and establish tighter control over the claims made by down-line operatives.
In an effort to show that it is not a pyramid, the company now emphasizes that no members of its distribution chain "will receive any compensation solely for sponsoring" new distributors but must make some retail sales. An "ambassador" who makes at least four retail sales a month will continue to receive commissions on the sales of his entire network, under the new plan.
Meadow Fresh disavows the specific claims of potential earnings made orally by its boostersand says it will fill no orders unless 70 percent of what was previously ordered has been sold, a standard set by the Federal Trade Commission in an earlier "multi-level marketing" case.
The National Association of State Attorneys General has designated the attorney general of New Mexico to keep an eye on Meadow Fresh operations and coordinate the regulatory efforts of the 50 states. Patricia Maslinoff, an assistant attorney general in Virginia, said the state was compiling information on Meadow Fresh to feed to New Mexico. She said nothing to indicate that Virginia officials believe Meadow Fresh has violated the state's anti-pyramid law.
Meadow Fresh, a year-old company based in Salt Lake City, says it now has about 90,000 distributors of its product, which is made from whey, coconut oil, corn syrup solids, sodium caseinate and other ingredients.
The company likens itself to Amway and other large corporations that sell through individuals. But the industry trade group, the Direct Selling Association, has declined to admit Meadow Fresh because of fears that its practices might reflect unfavorably on other direct-selling firms, according to Robert Levering, an attorney for the association.
Meadow Fresh's revised program and its new promotional literature stresses the need for distributors to avoid the major abuses associated with pyramid schemes: the sale of memberships, specific and exaggerated earnings projections, the opportunity to make money without selling anything to consumers and the requirement to enlist new members to receive any payments. It is possible, Meadow Fresh says, to make money just by selling the product--the wholesale price is $47 for 25 pounds, and the suggested retail price is $65.
The amended marketing program sent out by Brog emphasizes in strong language the responsibility of distributors to avoid unfounded claims, report violations by other distributors, and avoid any labeling or promotional materials that violate any law. It also outlines special conditions required by Maryland and six other states, saying that distributors will not claim any specific amount of money can be made or that networks are easy to set up, and specifying that unsold products can be returned to the company.
"We have a new Meadow Fresh," Brog said of the changes. "We have reorganized the company with some new faces, new systems, new programs and new enthusiasm . . . now is a time for renewal, a time for rededication. We want you to be a part of this with us. It can be for you as it is for us--a new beginning."
But the emphasis in the company's literature and in the promotional meetings remains on setting up a chain of distributors, which multiplies itself as newcomers set up their own chains, so that those at the top receive bonuses and percentages of the sales made by those below them.
"This is where the real money is," Toby Jarman, a middle-level Meadow Fresh distributor, told a group of about 40 prospective retailers at a recent meeting. "I can't think of a better way to make money. You may not make it, but the potential is there.
"Don't let it pass you by," added Jarman, a government auditor who lives in Burke.
The company's chart of its "compensation plan" shows a steady escalation of income from sales, bonuses, rebates, and a percentage of the money earned by down-line sellers as each participant's network grows. At the summit are "ambassadors," who receive as bonuses a percentage of the total sales made by the networks of other ambassadors whom they originally sponsored.
Admittedly stung by unfavorable publicity in the West, Meadow Fresh has imposed a requirement that members of its sales force may not distribute any literature that is not approved by headquarters, apparently in an effort to limit exaggerated or unsupported claims made in the past.
Among the materials formerly distributed in Meadow Fresh's name was a highly enthusiastic report by Kent Ponder, a former Spanish teacher at the U.S. Naval Academy who now lives in Albuquerque and describes himself as an expert on "multi-level marketing."Reporting how impressed he was on visiting the Salt Lake City plant to see the parking lot full and the telephone operators busy, he said he was "confident that Meadow Fresh's sales volume has surpassed any other company's volume for the crucial first six-month period. . . . I am impressed by the way problems are solved, the way priorities are established. Meadow Fresh is headed by a skilled management team that constantly improves through top-talent hiring. Numerous people will UNQUESTIONABLY become wealthy as Meadow Fresh farms distributors."
What that report did not disclose was that Ponder was a Meadow Fresh distributor when he wrote it, and had recently received a check from the firm for $18,647.40 for his work as a distributor.
Ponder said in a telephone interview that he was making money on Meadow Fresh at the time he wrote his glowing report, but he insisted his assessment was still valid. Meadow Fresh, he said, grew too fast and made mistakes, but had righted itself by making management and program changes.
"People who stay with it are well advised to hang in there," he said. "In my opinion, this will stand on its merits. These people are well intentioned, honorable, and serious in intent."
Ponder said Brog had instructed "down-line" distributors to stop giving out his report.
Meadow Fresh still is using another piece of promotional material that also has been troublesome.
That is an article by Kurt A. Oster, a Connecticut cardiologist, saying that an enzyme found in cow's milk may cause arteriosclerosis. The article says nothing about Meadow Fresh, but Meadow Fresh promoters point out that the enzyme is absent in their product.
"Those people are obnoxious," Oster said. "They have called me from every state in the union trying to get an endorsement. I have made it quite clear, I don't endorse anything I don't know."
While Meadow Fresh--which comes in plain, chocolate and orange flavors--does taste pleasant, it has not established itself as an acceptable alternative to--or substitute for--milk, in the opinion of state and federal nutrition experts.
Dr. Vaughn Mendenhall, a food scientist at Utah State University, said tests he coordinated showed that Meadow Fresh has "about one third the calcium of instant nonfat dry milk. We found higher levels of sodium, and of course the less sodium in your diet the better." At his urging, Utah became one of several states to challenge Meadow Fresh's nutritional claims, forcing the company to stop recommending it be given to babies and to stop calling it a "milk substitute."
Terry Schmitz, Meadow Fresh spokesman, said the company had been "taking a terrible beating" because of the Mendenhall report, which she called "old and outdated." She said the company was preparing a "nutritional packet" to answer the questions raised among consumers and potential distributors by the unfavorable publicity.