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AdvoCare

From Wikipedia - Reading time: 10 min
Not to be confused with Advocare, the Medicare Advantage plan from Security Health Plan of Wisconsin.
AdvoCare International
Company typePrivate
IndustryDietary supplements
Founded1993; 31 years ago (1993) in Carrollton, Texas
FounderCharles E. Ragus
Headquarters
Richardson, Texas
,
United States
Area served
United States
Key people
Christina Helwig (CEO)
ProductsDietary supplements, personal care
RevenueUS$ 400 million (est.) (2013)[1]
Number of employees
247 (est.) (2013)[2]
Websitewww.advocare.com

33°00′38″N 96°40′37″W / 33.01053°N 96.676928°W / 33.01053; -96.676928

AdvoCare International, LLC is an American dietary supplement company. They are a direct sales company and a former multi-level marketing company that was charged with operating a pyramid scheme.[3][4] The company, headquartered in Richardson, TX,[5] was founded in 1993 by Charles Ragus.

History

[edit]

Charles Ragus founded AdvoCare in 1993 as a multi-level marketing (MLM) company to distribute dietary supplement products.[6][7] The name AdvoCare is short for "Advocates Who Care".[8] Before founding AdvoCare, Ragus worked as a regional vice president for Fidelity Union Insurance, and as a MLM distributor for Herbalife. He had initially founded the MLM company Omnitrition International in 1989. Ragus was in training camp with the National Football League's Kansas City Chiefs in the 1960s.[8][9] He died in 2001 at the age of 58.[10][11]

In May 2007, Richard H. Wright became president and CEO of AdvoCare. He had previously served as Chief of Staff for US Representative Jim McCrery.[6][12]

In October 2019, the FTC ruled that Advocare had operated as an illegal pyramid scheme. AdvoCare did not admit to or deny allegations but did agree to change how they did business.[13] According to the FTC, AdvoCare rewarded distributors for recruiting other distributors to spend large sums of money pursuing the business opportunity. The majority of distributors either made no money or lost money. AdvoCare and its former chief executive agreed to pay $150 million to compensate some distributors and buy back unsold inventory from distributors who chose to leave. They also agreed to a ban from all multi-level marketing.[14][15] Two of AdvoCare’s top promoters also settled with the FTC for $4 million, most of which was suspended, based upon their inability to pay, and were also banned from multi-level marketing.[3][16][17] In a statement, former CEO Patrick Wright denied the company had operated as a pyramid scheme.[17] Prior to the settlement, Advocare voluntarily moved from a multi-level marketing model to a single-level distribution or direct sales model.[14]

In May 2024, Christina Helwig was appointed CEO of AdvoCare.[18]

Business

[edit]

AdvoCare sells dietary supplements and related products, such as an energy drink. AdvoCare also sells products under the brand names Trim, Active, Well, Performance Elite, Fit, and 24 Day Challenge.[19]

In March 2016, Advocare was the subject of an article in ESPN The Magazine. The article argued that the company and a small number of distributors made most of their money from the signing-up of new distributors rather than sales of the product. It also argued that these individuals exaggerated the likelihood of financial success of distributors, and created an atmosphere of not questioning the company's claims. The article noted that some people in the company focused on religious affiliation as part of its business model, with more devout members of the organization using it to gain and hold power in the organization and over its members.[8]

Prior to July 2019, AdvoCare was determined to be a multi-level marketing company.[20][21] The FTC defines multilevel marketing as a “form of direct sales in which a distributor sells products or services through a network of independent salespeople.”[22] However, after July 2019, citing closed-door discussions with the Federal Trade Commission, AdvoCare voluntarily ceased operating the multi-level aspect of its business,[14] and instead began only compensating distributors for sales of products to consumers.[23][24]

As of October 2019, AdvoCare is a member of the U.S. Direct Selling Association (DSA).[25]

In 2019, it sold its Plano office to Opex Corp.[26]

Sponsorships and endorsements

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According to the U.S. Federal Trade Commission, Advocare used endorsements from professional athletes, title sponsorship of professional sporting events, conferences, podcasts, and more to pitch what it called a life-changing business opportunity, but that the FTC alleged was a pyramid scheme.[3][27]

Trevor Bayne's AdvoCare-branded Ford Mustang in NASCAR competition

AdvoCare's contracted celebrity endorsers have included soccer player Carli Lloyd; Major League Baseball pitcher Doug Fister; CrossFit champion Rich Froning; NFL players Andy Dalton, Philip Rivers, Alex Smith, Sam Bradford, Wes Welker, and New Orleans Saints quarterback Drew Brees, who was described by ESPN as the face of the company.[8] ESPN The Magazine described celebrity endorsers as central to "the Bulletproof Shield," a sales and recruitment technique used by the company to deflect questions about the product. In this technique, distributors place themselves at the center of a chart illustrating the company's endorsements and members of its scientific and medical advisory board, and deflects questions about the company by replying, "Well, I don't know about (X), but what I do know is" that particular athletes or doctors have endorsed AdvoCare.[8]

AdvoCare ceased offering KickStart Spark, targeted to youth age 4–11, after pediatricians had expressed concerns about the product containing 60 mg of caffeine.[28] AdvoCare was also the subject of criticism for its marketing at youth athletic events. In 2005, the company paid $5,000 to sponsor a high school wrestling tournament in Sacramento but after negative publicity, AdvoCare officials said they would not sponsor any more school events.[28]

From 2009 until 2013, AdvoCare was the title sponsor of the Independence Bowl in Shreveport, Louisiana. The 2013 game was known as the AdvoCare V100 Bowl.[29][30][31] In 2012, AdvoCare partnered with the Major League Soccer team FC Dallas and became its jersey sponsor.[32] In 2020, the company switched to become the team’s sleeve sponsor.[33]

In 2014, AdvoCare purchased the naming rights of a professional sports practice facility located at The Greenbrier in West Virginia.[34] The facility was named the AdvoCare Sports Performance Center and hosted the 2014 training camp for the New Orleans Saints.[35][36][37] AdvoCare also became the title sponsor of the 2014 Texas Bowl.[38] In 2016, AdvoCare was to sponsor the Texas Kickoff and Cowboys Classic games.[39][40]

From 2011 to 2016,[41][42] AdvoCare sponsored several NASCAR racing teams and drivers, including Trevor Bayne and Roush Fenway Racing in the NASCAR Sprint Cup Series and Xfinity Series,[8][43] as well as races at Atlanta Motor Speedway and Phoenix International Raceway.[41][42]

Tainted products claim

[edit]

In July 2008, Olympic swimmer Jessica Hardy tested positive for the banned breathing enhancer, clenbuterol. Hardy said she had never heard of the substance, attributing the positive result to either a tainted supplement or sabotage.[44][45] At the time, Hardy had been taking the supplement Arginine Extreme, which she had received for free from AdvoCare in exchange for making product testimonials,[46][47] and she claimed in a subsequent lawsuit that the company's product was tainted.[48] AdvoCare sued Hardy for making false claims.[49] An arbitration hearing reduced Hardy's suspension after a scientific expert testified that the AdvoCare product was tainted. AdvoCare disputed the panel's findings, citing the fact that two independent laboratories had not found any evidence of Clenbuterol in the supplements.[50] Hardy was cleared to compete again in 2010.[51]

Deceptive practices lawsuit

[edit]

In 2009, a Dallas County jury awarded $1.9 million in damages against AdvoCare after finding that the company had engaged in deceptive trade practices and unfairly canceled agreements with two of its distributors.[52] According to the lawsuit, litigants Bruce and Teresa Badgett of Arlington, Texas, had been active and profitable marketers of AdvoCare products for more than a dozen years before their distributorship was canceled by the company in 2006 "based upon vague and trumped-up charges." The jury found that AdvoCare engaged in false, misleading, or deceptive practices that damaged the Badgetts and that the termination provisions of the distributor contract with AdvoCare were unconscionable, according to court documents. AdvoCare disputed the ruling[52] and on April 30, 2010, filed to appeal the decision on the basis that the plaintiffs were not customers and therefore did not fit the statutory definition necessary to be covered under the Texas Deceptive Trade Practices Act.[53] The appeal was dismissed on March 13, 2012, and the company was ordered to reimburse the Badgett's for court costs related to their defense in the appeal case.[54]

See also

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References

[edit]
  1. ^ Barbara Seale (1 Sep 2013). "AdvoCare a two decade marathon". Direct Selling News. Archived from the original on 13 November 2013. Retrieved 13 Nov 2013.
  2. ^ / AdvoCare Profile
  3. ^ a b c "FTC: AdvoCare business model was pyramid scheme". FTC Consumer Information. 2019-10-02. Archived from the original on 2019-11-06. Retrieved 2019-10-04.
  4. ^ "Federal Trade Commission v. AdvoCare International, L.P. et al, No. 4:2019cv00715 - Document 52 (E.D. Tex. 2020)". Justia Law. Retrieved 2022-10-19.
  5. ^ "AdvoCare International, LLC | 2800 Telecom Parkway Richardson , TX 75082. (972) 665-5800". m.richardsonchamber.com. Retrieved 2022-08-17.
  6. ^ a b "Three CEOs Reinvent Themselves With Second Careers". D Magazine. August 2010. Archived from the original on 2011-06-19. Retrieved 2011-01-31.
  7. ^ Candace Carlisle (19 Oct 2012). "Richard Wright and his wife don't just run AdvoCare International, they're customers". Dallas Business Journal. Retrieved 18 Oct 2013.
  8. ^ a b c d e f Kimes, Mina (15 March 2016). "Drew Brees Has A Dream He'd Like To Sell You". ESPN The Magazine, Outside the Lines. Retrieved 3 April 2016.
  9. ^ "K.C. Has Bob McAdams And Send 3 Rookies Off". Lawrence Journal-World. Associated Press. August 28, 1965. Retrieved July 7, 2015.
  10. ^ Obituary Central Archive[usurped]
  11. ^ Gary Abbot (4 June 2001). "AdvoCare Founder Charles Ragus, 58, passed away on Friday June 1". the Mat. Archived from the original on 19 October 2013. Retrieved 18 Oct 2013.
  12. ^ Candace Carlisle (19 Oct 2012). "AdvoCare CEO shares his secrets to health, business success". Dallas Business Journal. Retrieved 18 Oct 2013.
  13. ^ DISTRICT OF TEXAS, FOR THE EASTERN (October 19, 2019). "STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AGAINST DEFENDANTS ADVOCARE INTERNATIONAL, L.P. AND BRIAN CONNOLLY" (PDF).
  14. ^ a b c Pritchard, Caroline. "North Texans Turn to Multi-Level Marketing Schemes and Scams to Get by in the Pandemic". Dallas Observer. Retrieved 2022-08-31.
  15. ^ FOR THE EASTERN DISTRICT OF TEXAS, UNITED STATES DISTRICT COURT (October 10, 2019). "STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AGAINST DEFENDANTS ADVOCARE INTERNATIONAL, L.P. AND BRIAN CONNOLLY" (PDF).
  16. ^ "AdvoCare fined $150 million as FTC calls it a pyramid scheme". www.cbsnews.com. 2 October 2019. Retrieved 2021-08-16.
  17. ^ a b "The FTC Says AdvoCare Is Actually An Illegal Pyramid Scheme". BuzzFeed News. 4 October 2019. Retrieved 2021-08-18.
  18. ^ "Executive Q&A with Christina Helwig, AdvoCare CEO - Direct Selling News". www.directsellingnews.com. 2024-05-16. Retrieved 2024-05-24.
  19. ^ "The Murky Nutrition Behind The Cult-Like Supplement Brand, Advocare". Men's Health. 2019-01-23. Retrieved 2023-02-01.
  20. ^ "Multi-level Marketing Or Pyramid Scheme? That's The Question". Valley News. Archived from the original on 6 November 2014. Retrieved 5 November 2014.
  21. ^ Brooks, Douglas M. "The Pyramid Scheme Industry: Examining Some Legal and Economic Aspects of Multi-Level Marketing" (PDF). Retrieved 5 November 2014.
  22. ^ "Is the FTC changing how it defines a pyramid scheme? This North Texas skin care firm thinks so". Dallas News. 2019-11-05. Retrieved 2022-10-05.
  23. ^ "AdvoCare to Revise Business Model" (PDF). facts.advocare.com (Press release). AdvoCare. 17 May 2019. Retrieved 26 September 2019.
  24. ^ "AdvoCare business changing". KELOLAND.com. NexStar. 20 May 2019. Retrieved 26 September 2019.
  25. ^ "The DSA Waffles Over AdvoCare". Truth In Advertising. 2019-10-10. Retrieved 2021-08-16.
  26. ^ "Automation firm expands to North Texas with Plano property buy". Dallas News. 2020-04-21. Retrieved 2021-10-25.
  27. ^ "Feds Returning $45 Million to Idaho and Washington Victims of AdvoCare Pyramid Scheme". Big Country News. 5 May 2022. Retrieved 2022-11-02.
  28. ^ a b "A Sports Drink for Children Is Jangling Some Nerves". New York Times. 2005-09-25. Retrieved 2010-11-14.
  29. ^ Roy Lang (28 Jan 2010). "AdvoCare Recommits to I-Bowl". Shreveport Times. Retrieved 5 Nov 2013.
  30. ^ Goins, Adria (21 August 2013). "Longtime bowl expected to lose Advocare sponsorship". KSLA 12. Retrieved 6 November 2013.
  31. ^ Dee, Chris (21 August 2013). "Advocare No Longer Title Sponsor For Annual Bowl Game". 1130am (Radio). Retrieved 6 November 2013.
  32. ^ Botta, Christopher (27 June 2012). "FC Dallas Signs Multiyear Deal With AdvoCare To Serve As Jersey Sponsor". Sports Business Daily. Retrieved 25 September 2014.
  33. ^ "MLS 2022 commercial guide: Every franchise, every sponsor, all the major TV deals". SportsPro. 2022-02-25. Retrieved 2022-09-20.
  34. ^ "AdvoCare secures naming rights for New Orleans pro football training facility". Plano Star Courier. 4 August 2014. Retrieved 25 September 2014.
  35. ^ McFarling, Aaron (25 July 2014). "New Orleans Saints open camp in West Virginia". The Roanoke Times. Retrieved 25 September 2014.
  36. ^ Johnson, Shauna (23 July 2014). "Saints receive big welcome in Greenbrier County". MetroNews. Retrieved 25 September 2014.
  37. ^ Vingle, Mitch (21 July 2014). "Greenbrier unveils Saints facility". The Charleston Gazette. Retrieved 25 September 2014.
  38. ^ Barron, David (11 February 2014). "Texas Bowl gets a new sponsor in AdvoCare International". Houston Chronicle. Retrieved 4 April 2014.
  39. ^ Berman, Mark (28 July 2014). "University of Houston expected to open 2016 college football season against Oklahoma". My Fox Houston. Archived from the original on 14 February 2015. Retrieved 25 September 2014.
  40. ^ Helman, David (16 July 2014). "Alabama, USC To Open 2016 Season At AT&T Stadium". Dallas Cowboys official site. Retrieved 25 September 2014.
  41. ^ a b Spencer, Lee (August 21, 2013). "Bayne to team with AdvoCare in '14". Fox Sports. Retrieved 27 November 2016.
  42. ^ a b "AdvoCare To Sponsor Leavine Family Racing's No.95 Ford". SpeedwayMedia.com. August 23, 2011. Retrieved 27 November 2016.
  43. ^ Spencer, Lee (November 3, 2016). "Bayne signs multi-year contract extension with Roush Fenway Racing". Motorsport.com. Retrieved 27 November 2016.
  44. ^ "Olympic swimmer Jessica Hardy: 'I'm innocent'". USA Today. 2008-07-26. Retrieved 2010-11-14.
  45. ^ "Hardy presses forward with tainted-supplement defense". Seattle Times. 2008-08-04. Archived from the original on October 12, 2008. Retrieved 2010-11-14.
  46. ^ Aschwanden, Christie (July 26, 2012). "Athletes, Stop Taking Supplements". Slate Magazine.
  47. ^ Futterman, Matthew. "Trials and Tribulations of the Angry Swimmer". The Wall Street Journal. Retrieved 5 Nov 2014.
  48. ^ "Swimmer Hardy blames company for failed drug test". USA Today. 2009-01-30. Retrieved 2010-11-14.
  49. ^ "U.S. swimmer, supplement firm countersue". UPI. 2009-02-16. Retrieved 2010-11-14.
  50. ^ "Supplement maker AdvoCare disputes Hardy panel findings". Seattle Times. 2009-05-05. Retrieved 2010-11-14.
  51. ^ "Jessica Hardy Cleared to Compete After WADA Appeal". SwimSwam. 2010-05-21. Retrieved 2021-10-25.
  52. ^ a b Tsai, Joyce (31 Aug 2009). "Jury returns verdict against AdvoCare". Dallas Business Journal. Retrieved 6 Nov 2014.
  53. ^ "Advocare International, L.P. (Appellant) V. Bruce Badgett and Teresa Badgett (Appellees): Case No.05-10-00917-CV" (PDF). Court of Appeals for the Fifth District of Texas. Archived from the original (PDF) on 2014-11-07. Retrieved 6 Nov 2014.
  54. ^ "AdvoCare International, L.P., v. Badgett, Bruce and Teresa Badgett". Justia.com. March 13, 2012. Retrieved 6 Nov 2014.
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