Murdock Madaus Schwabe

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Murdock Madaus Schwabe

10 Mountain Springs Parkway
Springville, Utah 84663
U.S.A.
(801) 489-1500
(800) 962-8873
Fax: (801) 489-1700
Web site:http://www.naturesway.com

Private Company
Incorporated: 1969 as Nature’s Way Products Inc.
Employees: 200
Sales: $75 million (1997 est.)
SICs: 2833 Medicinnals & Botanicals

Murdock Madaus Schwabe is an international leader in the herbal or natural products industry. Used for foods or folk medicines for thousands of years, herbal products became more commercialized after World War II and increasing numbers of companies were created to produce and distribute herbal formulas. Originally a small family business, Murdock Madaus Schwabe has partnered with other companies to create a huge international business with hundreds of products. It has prospered by making its products available through retail stores, including health food stores, discount stores such as Wal-Mart, and grocery store chains.

Company Origins

In 1968, while President Lyndon Johnson struggled to lead the nation in the Vietnam War, Lalovi Murdock of Arizona faced her own crisis—a serious case of breast cancer. Weakened by chemotherapy and surgery, she told her husband, Tom Murdock, she could not handle another operation. Seeking an alternative to the medical establishment’s cancer therapies, Tom Murdock met a Navajo medicine man who reportedly had used steeped chaparral leaves to fight cancer. Tom then picked and prepared some leaves and convinced Lalovi to try the homemade chaparral drink.

Next Tom Murdock found a better way to prepare chaparral for human consumption. He took barrels of dried leaves of the common desert plant to California, where he used a friend’s milling and tableting devices to make chaparral tablets. His wife took the tablets and also began a strict diet of healthy fresh foods and a daily exercise routine. Soon she improved. However, she was reluctant to tell her doctors how it happened.

Tom Murdock began selling chaparral tablets to chiropractors, naturopaths, osteopaths, and health food stores. Company literature proclaimed that ‘ Tom Murdock was the first to sell commercially encapsulated herbs to retail stores.” Thus Nature’s Way Products Inc. was born in 1969 as a family business in Phoenix, Arizona. Working out of their home, the Murdocks sold about $50,000 worth of chaparral tablets during their first year in business.

Early Expansion and Diversification

With the help of Lalovi Murdock, whose cancer went into remission, and sons George and Ken Murdock, who joined the firm in 1970, Nature’s Way doubled its sales to about $100,000 the second year in business. The firm bought an old Latter Day Saints (Mormon) church cannery and moved out of the Murdock home.

Nature’s Way’s second major product was Alfa-Con, a brand of alfalfa concentrate tablets. The company removed the indigestible parts of the alfalfa plant to produce tablets usable by humans. Advertising of that product led to huge orders, which were very difficult for the young company to meet.

Starting in 1971, the company benefited from the work of John R. Christopher, a leading naturopath and pioneer in the nation’s herbal renaissance. The author of several herbalism books and a well-known lecturer, Christopher granted Nature’s Way the exclusive right to use over 20 of his herbal formulas in 1975. His original B/P Formula, which combined cayenne, parsley, ginger root, golden seal root, garlic clove, and Siberian ginseng root, was among the products sold by Nature’s Way. Although Christopher died in 1983, his principles and contributions would continue to guide Nature’s Way in the 1990s.

In the early 1970s the Murdock family decided to diversify its business interests. In a profile on him and his success Geroge Murdock recalled, “We were beginning to see some of the problems of the health food industry, the persecution of the FDA, and the fact that we couldn’t make any claims for our herbal products.”

Thus the family started a food storage business called Rainy Day Foods in California. Mormon leaders for years had encouraged church members to maintain at least a year of food storage, and that demand helped fuel the expansion of Rainy Day Foods. In November 1973 Rainy Day Foods moved to Provo, Utah. By early 1974 Rainy Day Foods was booming, with over 100 employees, while Nature’s Way had only three or four workers. In March 1974 Nature’s Way moved from Phoenix to Provo to share facilities with the family’s food storage business.

Interestingly, several other herbal firms originated in Utah, including Nature’s Herbs, Nature’s Sunshine, Nu Skin, Sunrider, and USANA. This unusual concentration of herbal firms in Utah was due in part to the Mormons’ historic and contemporary use of herbs.

By 1976 Rainy Day Foods was still profitable, but the Murdock family began to feel that it was a risky business. So they developed another product called Weekenders, a compact can-in-a meal for campers. When that business failed, however, the family decided to focus on Nature’s Way again. The percentage of Americans using natural products had increased from just two or three percent in the late 1960s to at least ten percent by 1976. “We noticed that some of the little backyard companies that had started out like we had, were now multimillion-dollar corporations,” noted George Murdock, adding “We had missed out on this growth potential by not paying attention to what was happening in the health food industry.”

With the help of businessman Doug Snarr, the Small Business Administration, and Walker Bank, the Murdocks invested $1 million cash in Nature’s Way. Brothers Ken and George Murdock bought out their father’s share of the business, and the company began to expand its product line to several hundred products.

Nature’s Way also changed its distribution methods. Instead of selling herbal products directly to thousands of retail stores, the firm began selling through major jobbers or brokers. While the new middle marketers received their share of the profits, the firm’s increased sales made up for that loss.

After debuting the company’s new display rack featuring its main products at a trade show in Las Vegas in 1977, Nature’s Way sold over 100 of the $500 racks. George Murdock in his 1981 profile commented, “In just one year we became the largest supplier of herb products to health food stores in the world. In the process we established our own advertising company, a multilevel direct sales company, and a separate line of herbal products for doctors.” Nutrition Professionals was the new division formed to meet the needs of health professionals. Murdock International was created as a holding company over the various family businesses, including Nature’s Way, Rainy Day Foods, and Health Products International.

The multilevel marketing arm of the company was Natura-Life International, incorporated as a subsidiary on May 27, 1976. In 1979 K. Dean Black became president of NaturaLife. Black had been helped by the herbal formulas of Tei Fu Chen, a native of Taiwan who was working for NaturaLife. The two wanted to market Chinese herbal formulas, but Murdock officials disagreed, preferring to stay with American herbal products in the John Christopher tradition. So in 1982 NaturaLife began the process of breaking away from Murdock. The company’s name was changed to The Sunrider Corporation, with Chen as the founding chairman. Sunrider grew into a multinational firm that in 1987 moved its headquarters to Torrance, California.

Meanwhile, in 1984 Murdock moved into a new 107,000-square-foot plant in the Springville Industrial Park a few miles south of Provo. Designed for the production of pharmaceutical grade products, the facility was enlarged in 1988 and 1990.

Murdock International announced in 1987 that it was creating Murdock Pharmaceuticals, Inc. to make and distribute over-the-counter (OTC) products, including the Efamol PMS Program, Efamol Evening Primrose Oil, and other items. Murdock aggressively marketed the Efamol PMS Program through national magazines and a referral system. “The response to our national advertising for the Efamol PMS has been overwhelming,” reported Candace Jacobson, Murdock International’s customer service manager, in the September 23, 1987 Provo Community Journal. “There are so many women who now realize they are suffering from PMS [premenstrual syndrome], who are looking for relief.... This product is unique in that it treats the source of the problem rather than temporarily masking the symptoms.”

New Products and Distribution Methods in the 1990s

Company Perspectives:

Mission Statement: To benefit the quality of human health and promote positive health care choices by developing, manufacturing, and marketing preventative, curative and nutritive health care products of primarily natural origin.

In July 1992 Murdock began shipping its new homeopathic “Medicine from Nature” product line. In the October 26, 1992 Brandweek, Murdock’s Vice-President of Marketing Jeff Hilton commented on promoting herbal and homeopathic products: “We did focus groups in Boston and Los Angeles and found a strong interest in self-care. People are frustrated with a medical system based on crises rather than on wellness and prevention.... The homeopathic medicines traditionally sold here have come in small vials and might have been sort of scary-looking to the novice. Ours look very commercial by design.... We wanted the package to invite rather than intimidate.... In our research we found little overlap—people use either homeopathy or herbs. We’re hoping we can encourage some cross-pollination, that customers who have used our herbal products will try homeopathy.”

Seven new homeopathic formulas, for motion sickness, nervous stress, sore throat, bronchial congestion, child fever and restlessness, and water retention, were designed by Dana Ull-man, M.P.H., as over-the-counter products. The author of Discovering Homeopathy and three other books on the subject, Ullman directed the Homeopathic Educational Services in Berkeley, California, and served as Murdock’s homeopathic spokesman. He also authored a well-received booklet called A Guide to Homeopathic Medicine for Pharmacists that was published in 1993 by Murdock as part of its marketing program.

The company promoted its homeopathic and other products through such national magazines as New Age Journal and Vegetarian Times, radio programs, and TV shows such as Jeopardy, Geraldo, and the Rush Limbaugh Show.

Homeopathy had been founded in the late 1700s in Europe and remained popular until the early 1900s, when orthodox medicine increased its dominance of the healthcare system. However, it rebounded by the 1980s as more people sought alternatives to drugs promoted by MDs and the pharmaceutical industry. In spite of critics, homeopathic formulas found increasing popularity through chain stores such as Wal-Mart, natural food stores, and independent pharmacies.

By the early 1990s some health food stores, which sold products made by Murdock and other firms, were expanding and using modern advertising methods. According to Jeff Hilton, the health food industry experienced a “true transformation.” Hilton explained: “Instead of the traditional mom-and-pop kind of store, we’re seeing natural-food grocery stores that sell organic produce, natural cereals and supplements, including vitamins, minerals and herbs.... While these health-food superstores are still a small percentage of health-food outlets, they’re accounting for a larger percentage of sales.” Moreover, Hilton observed, “Health-food stores used to be intimidating places: dark, often cramped, with shelf after shelf of mysterious bottles. Today the industry has gotten smarter, shedding its counterculture image and sharpening its merchandising, packaging and advertising. Our company has grown along with the industry. We’re currently in about 1,750 health-food stores across the country, including 1,200 General Nutrition Centers.... Baby boomers are our core customers. Today’s 30-50-year-olds are educated customers who make health a priority in their lives.”

In 1994 Murdock created a new division called NaturaLife to market its supplements to the growing mass market of drug, food, and discount stores, while Nature’s Way products continued to be reserved for health food stores.

By 1998 the Nature’s Way brand encompassed seven product lines. First, its over 70 Herbal Singles products included Aloe Vera, St. John’s Wort, Kava Root, Kelp, and Ginger Root. Second, Herbal Formulas featured combinations of herbs aimed at treating Digestion, Blood Sugar, and Heart ailments. Third, the firm sold Standardized Extracts such as Black Cohosh, Korean Ginseng, Green Tea, and Valerian. The company’s fourth line, World Select Brands, included Slim & Trim (a weight loss drink mix), Thisilyn (milk thistle extract), and Ginkgold (Ginkgo biloba extract). Its Vitamin supplements line contained single vitamins or minerals, multivitamins, and other items such as Antioxidant Formula, Cod Liver Oil, and Lactase Enzyme. Thirty products were found in the Medicine From Nature Homeopathics line, and the company’s seventh type of product was its Fastactives Liquids, which included over 30 herbs in either alcohol- or glycerine-based formulas.

Other Developments in the 1990s

In 1990 Loren D. Israelsen was chosen as the president of Murdock HealthCare Corporation to replace Ken Murdock, who remained board chairman. A San Francisco native and graduate of the Brigham Young University Law School, Israel-sen had joined the firm eight years earlier.

In the summer of 1992 the Food and Drug Administration, in cooperation with the Utah Department of Agriculture, stopped Nature’s Way from shipping nearly five million capsules of evening primrose oil. According to the July 2, 1992 Deseret News, John Scharmann, the director of the FDA’s Denver District, said that “no scientific data exists that establishes the safety of the substance” and that the FDA’s decision was based on two cases in the U.S. Ninth Circuit Court of Appeals.

Nature’s Way’s Loren Israelsen argued that the court cases only banned the sale of evening primrose oil when it was “so misbranded or adulterated that it presents a health risk.” He maintained that“We sell it only as a single dietary supplement, and it’s not added to any other product.... It’s been approved for use in 40 other countries.... And we think we’ve got scientific evidence that proves it’s safe.” Nature’s Way would later begin selling evening primrose oil again as one of its Standardized Extracts.

Like many companies, Murdock formed joint ventures or partnerships with other firms in the 1990s. In 1992 its articles of incorporation were amended to include not only Ken Murdock and Loren Israelsen as executives, but also men from two German companies, Madaus AG in Cologne and Dr. Willmar Schwabe GMBH & Co. in Karlsruhe. With over 70 years of experience with medicinal plants, Madaus had established a reputation as a leading firm in the botanical pharmaceutical industry, especially from two standardized extracts, Echina-Guard and Thisilyn. The Dr. Willmar Schwabe company was well-known for studying the benefits of herbal products; it conducted over 280 studies showing the usefulness of Gink-gold, a standardized extract from the leaves of the Ginkgo biloba tree. Marketed in the United States only by Nature’s Way, Ginkgold outsold all other Ginkgo products combined.

On December 10, 1993, Murdock International shareholders voted to change the company name to MMS America Corporation. At the same time the Murdock Holding Group changed its name to the MMS Holding Company. According to Utah Corporation Division records, Derek Hall was the president of both MMS America Corp. and MMS Holding Company in 1993. The following year MMS America Corp. was listed as the parent name, with a business name of Murdock Madaus Schwabe.

Murdock in the 1990s continued partnerships started in 1985 with two other foreign companies. The first was London-based Efamol Ltd., a world leader in researching essential fatty acids. Efamol conducted much of its work at a research center in Nova Scotia. The Montreal, Canada, firm of Institut Rosell, Inc. also partnered with Murdock by making the Utah firm its sole distributor of its acidophilus products in the United States and overseas. Institut Rosell created its trademarked Primadophilus supplement in four potencies to help users repopulate their intestines with normal bacteria needed for digestion.

In 1994 the Nature’s Way brand celebrated its 25th anniversary. Derek Hall, Nature’s Way president and CEO, in his anniversary address in the company newsletter, commented on the challenges facing the natural products industry: “One important freedom we hope to celebrate this year is a continuation of our freedom of choice—especially as it relates to our freedom to choose what kind of health care products we want to use, manufacture and sell.... These rights are a very emotional issue for nearly 100 million Americans who take dietary supplements.... Our industry is experiencing rapid growth.... Unfortunately, it has attracted those who would risk our industry’s integrity for a fast buck.... We must never underestimate our value as an industry in the ongoing debate on an affordable, quality health care system.”

In 1995 Murdock expanded its Springville base of operations. It spent $6 million to double the size of its production, distribution, and office facilities to a total of over 230,000 square feet. The project included a two-level production system with the ability to have the same equipment on both floors. It also featured state-of-the-art clean rooms to prevent any dust or contamination of its products. Hall said in the August 9, 1995 Deseret News that because there was room to add another 120,000 square feet: “This plant should last us through the turn of the century.... We’re the leading and the largest herbal manufacturer in the U.S.”

In 1996 Murdock Madaus Schwabe chose Gary Hume as its new president and CEO with the responsibility to manage 326 international employees. Before joining Murdock Madaus Schwabe, Hume was president of Tree of Life South West, a large distributor of natural products.

Environmental and Educational Programs in the 1990s

“Murdock Healthcare views its support of rain forests and environmental causes as an urgent part of our corporate mission and social responsibility,” wrote Loren Israelsen, Murdock Madaus Schwabe’s president, in a January 18, 1990 Deseret News article on the firm’s creation of a special account to accomplish those goals. Specifically, every time a Nature’s Way product was purchased, part of the price was placed in the account, which then could be used to purchase threatened rain forest lands, back university researchers, or underwrite other related projects. For example, Murdock financially sponsored an international environmental symposium held in New York City in January 1992, as well as the March 1998 International Symposium on St. John’s Wort in Anaheim, California.

Murdock Madaus Schwabe also backed the nonprofit Seacology Foundation based in Springville. Founded and chaired by Dr. Paul Cox, a Brigham Young University botany professor, Seacology’s resources were used to preserve Samoa’s rain forest and build schools, hospitals, and other facilities to help the Samoan people, who were feeling pressure to sell their forests to outside logging companies. This was a prime example of the Seacology Foundation goal of “saving the world one village at a time,” according to the April 14, 1997 Deseret News. Ken Murdock served as Seacology’s president.

Murdock Madaus Schwabe also supported educational institutions, including Phoenix’s Southwest College of Naturopathic Medicine, Portland’s National College of Naturopathic Medicine, the Texas Chiropractic College, Seattle’s John Bastyr University of Naturopathic Medicine, and such professional groups as the American Botanical Council and the Herb Research Foundation.

The company participated in the nonprofit Utah Natural Products Alliance, headed by Loren Israelsen, Murdock Madaus Schwabe’s former president. The alliance represented Utah firms selling herbal and natural medicines, dietary supplements, and exercise equipment. After the FDA seizure of Murdock’s evening primrose oil, the company spent at least $250,000 to lobby Congress and to support the Utah Natural Products Alliance in promoting the 1994 Dietary Supplement Health and Education Act sponsored by Utah Senator Orrin Hatch. Nicknamed the “health freedom act,” it was passed to protect vitamin/health foods producers from overregulation by the FDA.

This was just one example of how Murdock Madaus Schwabe and other firms have supported the alliance in various state and federal public policy issues concerning the natural products industry. The alliance in 1998 claimed that Utah’s natural products industry, with $2.3 billion in annual sales, was larger than the state’s mining, skiing, agriculture, banking, and insurance industries.

Increased Demand for the Natural Products Industry

Murdock Madaus Schwabe enjoyed increasing consumer demand for its products and growing recognition by experts on the importance of herbalism and alternative healing. In 1990, according to one report, Americans visited alternative healers, such as herbalists or chiropractors, more often than family doctors and internists. According to the January 28, 1993 New England Journal of Medicine, a nationwide survey of 1,539 adults found that 34 percent reported using alternative health methods.

In addition, Harvey Hartman, the president of Hartman & New Hope, a firm that researched the natural foods industry, said in the June 28, 1998 Deseret News that the industry was “going mainstream.” His firm’s survey of 43,000 American households found that 68 percent had used at least one natural product and 38 percent had used at least seven.

The Natural Foods Merchandiser magazine reported that in 1997 retail sales alone of natural products exceeded $14 billion in the United States. Those figures omitted items sold through multilevel marketing, used by many Murdock Madaus Schwabe competitors, including Nature’s Sunshine, Nu Skin, USANA, Morinda, Neways, Enrich International, and E’ola.

Tom Murdock in 1969 had little idea what his pioneering herbalism work would lead to. In 1998 Ken Murdock, in cooperation with foreign partners, followed in his father’s footsteps as Murdock Madaus Schwabe remained a leader in an industry that was expected to expand even more in the years ahead.