The Melaleuca Partnership: A Powerful Business Model

President's Message By
Frank L. VanderSloot
President & CEO

June 2005

I want you to know that as President and CEO of Melaleuca I'm committed to the future of this business and I am committed to our mission of
enhancing lives by helping people reach their goals. Over the past 20 years we have never wavered from that mission. In the process, we have prospered. And those who have thrown in with us have prospered. There would be no joy, and in my opinion, no true reward in prospering by oneself.

I love the idea of helping those who have struggled financially over the years to turn their lives around and reawaken their hopes and dreams and turn those dreams into reality. That's why in the beginning we established our mission statement of helping people reach their goals, so we would never lose sight of that.

About six years ago, some businessmen who were very familiar with Melaleuca and with our history approached me to buy the company. Their starting offer to me was $100 million for my share. I knew they would offer more if I were to show interest or asked them to, but that was never a temptation. I had grown up in a poor family. I had never dreamed of being wealthy, nor of being a millionaire. I watched my father work hard his whole life, but he had always been poor and I suspected I would never be wealthy, either. But that never worried me. I just never thought much about it because early on in life I learned that happiness didn't really have much to do with having money. Later on I learned that, in our world, freedom does have something to do with being financially healthy, but the hundred-million-dollar offer never tempted me because I really had no interest in having a hundred million dollars. I also felt, and still feel, that letting Melaleuca fall into the hands of those who think that Melaleuca is about making shareholders wealthy would be a betrayal of our Marketing Executives who I consider my friends and family- and ultimately a betrayal of myself.

Forbes magazine now estimates that Melaleuca is worth over $1.4 billion. That is quite an endorsement from such a prominent group of business experts, but clearly not a temptation. Just for the record, I promise I will never allow the company to go public and endure the pressure of making the shareholders more money. And I will never sell out. I'm here to stay. As president and CEO of this great organization I'm committed to the mission of enhancing lives. That mission is what drives me. It's what gets me up in the morning. The process is extremely fun for me! I love the concept of helping families compete with the big guys like Procter & Gamble and Johnson & Johnson and Walgreens and Wal-Mart. And we are winning on all fronts. Our future looks extremely bright! We are very well positioned to be a major force for good over the years to come.

At the January Business Launch I commented on the observation that the large companies like Procter & Gamble and others are losing their method of delivering their message into the households of North America, which they have traditionally done through national television ads.With the invention of the remote control, hardly anyone watches commercials anymore. And now there is new technology that will allow the bypassing of commercials altogether. The major firms are now scrambling to find a way to get their message to the consumer. And of course the largest company in the world,Wal- Mart, is continuing to grow and put pressure on all its suppliers like Procter & Gamble and others to lower their prices. Wal-Mart is all about lower prices, not about quality.

Having lost its method of advertising and with continuing pressure from Wal-Mart to lower prices, the major consumer product companies of the world have almost no option but to yield to the pressure and reduce quality so they can continue to show their shareholders high profits at these lower prices. If you were a CEO and wanted to keep your job isn't that what you would do? You would have no choice! And neither do they.

That is where Melaleuca has an extreme advantage. Our message and our commitment is more effective, higher-quality wellness products. When you are talking about wellness, there can be no shortcuts. And over the years we have perfected the way to get our message into the home of our customers. We use our customers to find other customers.Who would have thought of that? Using your customers to get your message into the home of their friends and neighbors! The only way a company's customers would do that is if the products were so much better that they notice a distinct difference. Our method of marketing requires us to produce a much better product. And it gets our powerful message right into the home of our potential customers.

There is a good reason we are the only company that partners with our customers to market our products. The public companies owe their loyalty to their shareholders, not their customers. The job of a public company's CEO is to produce profit for the company's shareholders. The shareholders demand it! If the CEO doesn't do it, the shareholders replace the CEO. And they have the power to do it. Now you know why we would never go public. It would ruin our mission. Shareholders of a public company would demand that I give THEM the profits and not share the profits with our customers.

There are two advantages that customers have in doing business with us: much higher quality products AND we share our revenue with our customers who refer other customers. It's a great partnership! And it's a powerful business model!

Sincerely,

Frank L. VanderSloot

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