Van Andel, Jay

(1924-)
Amway Corporation

Overview

Jay Van Andel, together with his lifelong friend Rich DeVos, founded Amway Corporation, a direct-selling organization that preaches the American dream of free enterprise. Van Andel and DeVos developed an international network of distributors and built Amway into a multibillion-dollar corporation. Along the way they amassed personal fortunes estimated at $4.5 billion each in the mid-1990s. They have been staunch supporters of the Republican Party and became known for their conservative political beliefs.

Personal Life

Jan Van Andel was born on June 3, 1924, in Grand Rapids, Michigan, where his father ran an automobile agency. His parents were Dutch immigrants. He attended local schools before going to nearby Calvin College for a year, then he joined the U.S. Army Air Corps in 1943. He spent another year at Calvin College after the war.

Van Andel met Rich DeVos, who was two years younger, when both were teenagers in 1940. Van Andel had access to a car through his father's dealership, and he drove DeVos to school every day. That summer they drove two used trucks to Montana for Van Andel's father, and the trip cemented their lifelong friendship.

In 1946 Van Andel started a business called Wolverine Air Service, when he and another partner bought a small Piper Cub airplane as college students. In 1947 Van Andel's partner sold his interest to DeVos; it was the beginning of a lifelong business partnership for Van Andel and DeVos. They built their air service, which included a flying school, into a successful business with 12 aircraft and 15 instructors. To fill in the slack time between flights, the two set up a hamburger stand at the airfield and took turns cooking and carhopping the food. They soon tired of both the hamburger and air charter business and sold out in 1948.

With the proceeds from the sale of their business, Van Andel and DeVos bought an old schooner and planned to cruise to the West Indies and South America. Not particularly experienced at sailing, they watched their boat sink near Cuba in 1949. While in the Caribbean, they conceived the idea of importing goods to the United States.

When they returned to Grand Rapids, they formed the Ja-Ri Corporation to distribute various goods. They hooked up with Carl Rehnborg, a cousin of Van Andel's and founder of Nutrilite Products. The Chicago-based Nutrilite marketed a nutritional supplement and was looking for distributors. At first Ja-Ri sold Nutrilite products through jobbers, wholesalers, and supermarket buyers. Then Van Andel and DeVos decided to try a new approach, which was direct sales to customers in their homes and offices. They established a network of distributors who sold Nutrilite in their own territories. By the mid-1950s, Ja-Ri's network counted some 5,000 independent salespeople. It was the forerunner and model for Amway's successful sales formula.

Over the years, Van Andel and DeVos have maintained close personal as well as business relationships. Both sons of Dutch immigrants, they both had four children, all of whom eventually served on committees overseeing the operations of Amway Corporation. They both married young women from Grand Rapids' Dutch community and moved into adjacent houses. They were both prominent members of the same local church, and both became leading members of and contributors to the Republican Party. The media has referred to them as the "Dutch Twins."

Career Details

After distributing Nutrilite products for about 10 years, Van Andel and DeVos began to look for new products to distribute. Management problems at Nutrilite caused Ja-Ri to end its association with the company in 1959. Early in 1959, Van Andel and DeVos formed the American Way Association as an umbrella organization for their distributors. They began distributing a variety of household products, including a liquid cleaner and a laundry compound. As these proved successful, Van Andel and DeVos formed the Amway Sales Corporation in November 1959 to obtain and warehouse products, sell them to affiliated distributors, and provide marketing and sales support.

One of the company's first products was called Frisk. It was a biodegradable soap that was purchased from a struggling Detroit chemist. With their proven sales methods and extensive network of distributors, Van Andel and DeVos sold so much soap that within two years they opened their own soap manufacturing plant outside of Grand Rapids.

In 1964 the company was streamlined and reorganized with various sales organizations being merged into Amway Corporation. Van Andel became chairman and DeVos handled the duties of president, which included recruiting and motivating salespeople. Amway grew rapidly in the 1960s, manufacturing products for its distributors to sell and entering into licensing agreements with other manufacturers. Cookware and cosmetics were added to the product line, and by the 1970s Amway was manufacturing about 150 different household products. The company expanded internationally in the 1970s, opening subsidiaries in Japan, Europe, and Australia. A Canadian subsidiary had been established early on in 1962.

Sales peaked in 1981 at $1.2 billion. Amway was truly international, with more than 300,000 distributors worldwide and 4,000 employees at the company's offices and manufacturing facilities. During the 1980s, sales began to slip, and the company experienced problems with some of its larger distributors. The success of Amway's distribution network had been built primarily on how many new distributors could be recruited by existing distributors. After all, each distributor was limited as to how much he or she could sell individually. What motivated Amway distributors was the profits they could realize by taking a percentage of the sales of every new distributor they could recruit. Some distributors, known in company circles as "Black Hats," developed their own networks and made as much as $200,000 or $300,000 annually. Some of the larger distributors were found to be abusing the system by forcing their recruits to purchase excessive amounts of Amway goods and selling them non-Amway motivational and self-improvement books and tapes. In 1985 the company hired William Nicholson, former appointments secretary to President Gerald Ford, to clean up the sales force. He introduced more traditional sales training, downplaying the evangelism and cultism that had characterized Amway's approach in the past.

Another problem that plagued Amway in the 1980s was a dispute with the Canadian government, which charged Amway with defrauding Canada by understating the value of goods it had imported into Canada. In 1983 Amway paid a $25 million fine to Canada to settle the case, although Canada claimed the company owed it another $105 million in unpaid duties. Amway eventually paid some $58 million to Canada to settle all of the charges.

Amway began to receive negative publicity in the early 1980s when a former distributor, Philip Kerns, published a damaging exposé called Fake It Till You Make It. The book caused both The Phil Donahue Show and 60 Minutes to run unflattering pieces on Amway. Another book critical of Amway's sales methods, Amway: The Cult of Free Enterprise, by Stephen Butterfield, was published in 1985. Sales plunged as much as 30 percent during this period.

In the 1990s, Amway's international expansion proved to be a lucrative investment. Retail sales for 1991 reached $3.1 billion and grew to $5.3 billion in 1994, an 18 percent increase over 1993. Approximately 70 percent of the company's sales were from overseas operations, as its distributorships proved especially popular in Asia. Two public offerings in 1993 and 1994 established strong market values for Amway Asia Pacific and Amway Japan. Shares sold to the public raised more than $1.6 billion for Hong Kong-based Amway Asia Pacific and about $5.1 billion for Amway Japan. Company officials expected overseas sales to account for an everincreasing share of overall sales. In 1995 corporate sales rose to $6.3 billion.

Social and Economic Impact

Amway's social impact was not so much in the household products it sold, rather in its championing of the American dream of free enterprise for its distributors. DeVos and Van Andel organized a unique distribution system and promoted dreams of vast wealth for those who sold the company's products. Two of the most successful distributors, Bill Britt of Chapel Hill, North Carolina, and Dexter Yager of Charlotte, North Carolina, ran networks of more than 100,000 distributors in the early 1990s and were believed to net more than $10 million a year.

For other distributors, especially those who fed their orders to other distributors, the dream could quickly become a nightmare. In 1991 Forbes estimated that the average Amway distributor sold about $1,700 worth of goods a year. Nearly half of the 1.8 million distributors who registered with Amway worldwide would drop out within a year. Forbes estimated that the average distributor in the United States would net about $780 a year but would consume more than $1,000 worth of Amway goods. Distributors were also pressured to purchase self-help and motivational books and tapes.

Chronology: Jay Van Andel

1924: Born.

1949: Established Ja-Ri Corporation with Rich DeVos.

1959: Formed American Way Association, then Amway Sales Corporation.

1962: Formed Amway of Canada Ltd.

1964: Various sales organizations merged into Amway Corporation.

1972: Established Free Enterprise Institute.

1979: Federal Trade Commission concluded that Amway did not practice pyramiding.

1981: Amway sales peaked at $1.2 billion.

1983: Amway paid $25 million fine to settle charges brought by the Canadian government.

1994: Ranked among top 10 wealthiest Americans by Forbes.

1995: Amway sales totaled $6.3 billion.

Amway's sales meetings were led by the charismatic Rich DeVos and had an evangelical character. He has been quoted as saying, "Amway is more than a company, it's a movement to help people help themselves." The object of the company's motivational meetings was to make Amway distributors feel bound by a set of shared beliefs and make their goals become identical with the company's goals. Forbes described Amway rallies as a mix between a rock concert and a religious revival meeting.

DeVos and Van Andel, both conservative Republicans, exerted tremendous influence on national politics in the 1980s. They were among the most generous supporters of Ronald Reagan in his presidential campaigns of 1980 and 1984. Van Andel was named head of the U.S. Chamber of Commerce, a private-sector organization, and remained good friends with Grand Rapids native former president Gerald Ford. Amway rallies often included campaign messages for conservative Republican candidates.

Sources of Information

Contact at: Amway Corporation
7575 Fulton St. E.
Ada, MI 49355-0001
Business Phone: (616)787-6000

Bibliography

Butterfield, Stephen. Amway: The Cult of Free Enterprise. Boston: South End Press, 1985.

Grant, Linda. "How Amway's Two Founders Cleaned Up: Strong Overseas Sales Helped Richard DeVos and Jay Van Andel Add Billions to Their Fortunes." Forbes, 31 October 1994, 77.

Ingham, John N., and Lynne B. Feldman. Contemporary American Business Leaders. Westport, CT: Greenwood Press, 1990, 124.

Klebnikov, Paul. "The Power of Positive Inspiration." Forbes, 9 December 1991, 244.

"Over $3,000,000,000: The Forbes Four Hundred." Forbes, 14 October 1996, 116.

Who's Who in America. 1998 ed. Wilmette, IL.: Marquis Who's Who, 1997.